New Illinois Internet Tax Will End or Reduce All Internet Commission Programs Starting With Amazon

Jan 06 2011

Illinois today passed a bill requiring all Internet retailers with sales over $10,000 to start collecting a 6.25% tax from Illinois residents who make a purchase on the Internet.  A move the would essentially eliminate the Amazon Associates plan and many others and reduce commissions rates for all Illinois residents . All purchases made by Illinois residents would be assessed a 6.5% tax that the sellers would be required to collect.  Your websites and your domains are included.  Here is the letter I received this evening from Amazon.

Greetings from the Amazon Associates Program:
We regret to inform you that the Illinois state legislature has passed an unconstitutional tax collection scheme that, if signed by Governor Quinn, would leave Amazon.com little choice but to end its relationships with Illinois-based Associates. You are receiving this email because our records indicate that you are a resident of Illinois. If our records are incorrect, you can manage the details of your Associates account here.

Please note that this not an immediate termination notice and you are still a valued participant in the Amazon Associates Program. But if the governor signs this bill, we will need to terminate the participation of all Illinois residents in the Associates Program. After that point, we will no longer pay any advertising fees for sales referred to amazon.com, endless.com and smallparts.com nor will we accept new applications for the Associates Program from Illinois residents.

The unfortunate consequences of this legislation on Illinois residents like you were explained to the legislature, including Senate and House leadership, as well as to the governor’s staff.

Over a dozen other states have considered essentially identical legislation but have rejected these proposals largely because of the adverse impact on their states’ residents.

Governor Quinn’s office may be reached here.

We thank you for being part of the Amazon Associates Program, and wish you continued success in the future.

Sincerely,

Amazon.com

In an effort to make up for their shoddy mismanagement of tax dollars, the lawmakers of Illinois are trying to tax their residents even more.  Illinois is trying to levy taxes on Internet purchases under a bill that won final General Assembly approval today with an 88-29-0 vote in the state House. The law would make Illinois the latest state to try to squeeze revenue from online retail purchases. Other states have faced court challenges and the threat of lawsuits after trying to collect taxes from web sales. And some online retailers have simply cut off affiliates in states that have passed similar laws. Amazon looks like they are going to take this approach. This would impact domain investors and web driven businesses that are based in the state. All my domain purchases and drop shipped sales would be taxed.  I have not talked to Adam Strong but he is the first person that came to mind that would be affected.  Essentially, any Illinois resident with websites based on Amazon affiliates and eventually all affiliate programs will be affected. That 6.5% is certainly not going to be taken off the bottom line, it will be taken off the commission.  The implications of this bill are far greater than just Illinois.  If it actually works and they collect large amounts of revenue.  Every cash strapped state in the country is going to do the same thing.

Lawmakers have 30 days to send it to him, and he then has 60 days to act. The tax would start on July 1.  I haven’t talked to my uncle to see how he voted but I am hoping that he voted like a Republican should vote and voted against it.  I am certainly going to be writing the governor and would hope that all Illinois residents that make purchases on the Internet would do the same.  In case you didn’t know, Illinois already requires residents to voluntarily pay a tax on their purchases but it hasn’t been very successful.  They’re hoping that by requiring businesses to collect it that they’ll actually receive some cash.  I hope it fails miserably.

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Outsmarting the Dumb, Outworking the Smart

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22 comments

  1. Mike Sullivan

    “In an effort to make up for their shoddy mismanagement of tax dollars…” is plain truth. In a state where the government owes the schools million because of corruption and mismanagement, this is not the solution.

  2. You Know Me

    It’s enough to make a Democrat turn Republican, which I bet it’s doing now that it is starting to affect many Democrat’s pocketbooks.

    Still though, hard as hell these days to find a real Republican that acts like a Republican and not a Democrat, so how does anyone win?

  3. JS

    Not sure i understand why amazon would drop ill. affiliates? Can’t they just sell stuff to out of state customers ?


    1. Post author
      ShaneCultra

      I am trying to figure this out as well. It made sense originally but then I got to thinking that it would affect all affiliates as they may not pay commissions on products sold to Illinois residents to make up for the 6.5% tax. I need to do a little more homework now

  4. George Kirikos

    It’s rather simple, JS/Shane. If the law is enacted, internet sellers with affiliates resident in that state would need to charge the tax on sales to that state. So, by eliminating all the affiliates resident in Illinois, they can get around the law, and continue to not charge consumers the proposed sales tax.

  5. Rich

    This can be looked at from various points of view:

    1) Yes. Illinois is corrupt and has been wasting hundreds of millions of dollars of years (both Democrats and Republicans) and now the bill is coming due. It is a disgrace. But the U.S. Federal Government makes Illinois look thrifty.

    2) Amazon has had a unfair advantage over local merchants for years. Merchants basically provide a preview of the merchandise and customers then go on Amazon to buy it. Merchants became the retail showrooms for Amazon. This is also quite unfair and has put many local merchants out of business which is very bad for all communities – state and local.

    3) Amazon pays out almost nothing to affiliates while they rake in the money. So we have become free salespeople while merchants are free showrooms. I’ll save my tears for the people who really need the money – the the government, not Amazon, but the average American household.

  6. JS

    Thanks George.
    So basically the seller needs to have some sort of a connection with the state of Illinois for the sales tax to apply… I would have thought that sales tax applied regardless of that, as long as the goods were shipped to an address in the state where the tax was levied.

  7. Robin Ong

    Once upon a time, the USA was known to be a land so fertile that it is laden with honey and gold. Now, sigh…it’s just about tax. I can’t imagine why there are still people waiting in line wanting to migrate over??

  8. Dean

    This sucks for Illinois. The little guy keeps getting squeezed out, if it’s not apparent already (which it should be by now) large corporations like the US Government will continue to put the clamp on the entrepreneurs. This my friends is the trend, so better start preparing yourself now, because just like PPC, those relying solely on Affiliate income are doomed.

    Btw, this is not something that Illinois just enacted, Amazon pulled out of Colorado, and New York, over a year ago for the same reason, at least a 1/2 dozen other states are now also considering a similar tax bill. And… this will not only affect Amazon affiliates, but other affiliates such as Overstock.com, Blue Nile, etc,.

    Time to grab on to your balls and start getting creative…

    🙂

  9. Paul Brin

    I’m lost here, please explain to me how this affects associate commissions.
    If customers in Illinois have to pay sales tax on their internet purchases that’s just money collected by retailers on behalf of the state, just like at the brick and mortars.
    The commission would only be on the sale price itself and not the tax, just as I assume that no commission is paid on shipping fees.

  10. Pingback: Friday’s Daily Domain Drops and Auctions | Domain Shane

  11. Doc

    Colorado already got screwed last year and Amazon discontinued with the same letter, its only a matter of time before its in every state, whats the mighty amazon going to do then. The other affiliate people that deal with colorado just added the tax to the sales and disperses it to the state, amazon could do that but they dont while other affiliate channels do

  12. Adam

    Shane. I got that letter too. ugh
    There won’t be a direct effect from Amazon but there’s lots of other impacts here.
    Legislature is still around right ? Come on down . I’m free tomorrow for boozing up some politicians.

  13. steve

    Your politicians are as corrupt as the day is long,

    I bet theres a clause in there somewhere that they can claim something back, your politicians only.

    Sane in the UK every 1 of them is at it, claiming for £0.14 pens, that cost £2.00 to get sorted in time/resources.

    The whole system is F*cKeD

  14. Meyer

    If one makes enough ($xx,xxx) from affiliate sales then
    they should set up a corporation in Delaware if the commission
    justifies the corporate expense.

    States with no sales tax (yet).
    Delaware, Alaska, Montana, New Hampshire and Oregon.

  15. zoop

    I also just created a post about this – its complete bullshit – nothing more to say about it.

    This city is so corrupt that its a joke

  16. You Know Me

    @ Robin……immigrants are going back home to a large degree.

    I personally know tons that gave up here because prospects are better in their home country, and I am not talking about wealthier countries, but countries like Argentina, Mexico, Brazil and more.

    Things are shitty here while economies in many other countries are holding steady or improving substantially.

    Brazil had a 7% growth rate for 2010, better than China.

    The U.S. is taking it up the rear end. Our politiicians screwed us big-time.

    BTW…..this Amazon law went into effect in South Carolina last year also.

  17. whatever

    Every online company is required to charge and collect sales tax when the online company has a physical presence – typically an office or fulfillment warehouse – in that state. They are saying that by having affiliates in the state, they have a physical presence. By getting rid of the affiliates, it is Amazons contention that they no longer have a “physical presence” in the state and therefore do not have to charge and collect the tax.

  18. Paul Brin

    I pay tax on all the Amazon stuff I order online, because Amazon has a shipping center here in Kentucky, so what’s the big deal with duplicating their tax collecting model for each state?
    The company ought to be proactive and lead the way as they have been in so many other ways.

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