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Amazon ended affiliate program in Illinois.

Right on schedule.

By: Moe Lane (Diary)  |  March 18th, 2011 at 10:00 PM  | 

RESIZE: AAA

It got overshadowed by recent events both foreign and domestic, but last week Governor Pat Quinn (D, IL) signed legislation declaring that in-state affiliates for online sellers count as ‘a physical presence’ in Illinois, thus theoretically allowing the state to require those online sellers to collect sales tax information.  This is usually called the ‘Amazon tax*,’ as it is largely aimed at Amazon.com**. This is a long-standing dispute (H/T: Instapundit), and usually ends with the companies in question ending their affiliate programs: Illinois businesses and individuals were however assured (by groups like the Illinois Retail Merchants Association) that there was no chance that Amazon.com would dare end its affiliate program for Illinois***.

Turns out that this was incorrect: as usual in these cases, Amazon.com (and Overstock.com) immediately closed down its affiliate program for Illinois (beginning April 15), thus making the issue moot.  This means that no Illinois resident or company will receive a commission for sales – which means lost revenue, which means less taxable revenue for the state of Illinois (Amazon.com requires its affiliates to fill out 1099 forms, and the money that affiliates generate is subject to income tax).  It does not mean that Amazon.com itself is forbidden to Illinois: Illinois residents may continue to purchase products from the company – and given its current market share, the lack of affiliate linkage will probably not have any effect on the company’s sales at all.  In other words, the state of Illinois has just reduced its annual tax revenue and absolved Amazon.com of the necessity of paying out 4% to 15% commissions on any product indirectly sold on its behalf by a citizen of Illinois.

Brilliant move there, Governor Quinn.

Moe Lane (crosspost)

*Let me repeat what I wrote on the basic controversy, back when it was Colorado that was shooting itself in the fiscal foot:

‘Amazon tax laws,’ for those who are wondering, represent attempts to get around a Supreme Court ruling regarding out-of-state transactions.  Residents of states who have a sales tax are theoretically expected to pay sales tax on all transactions, not just ones that take place in-state: however, vendors with out-of-state customers have long taken the position that trying to keep track of every jurisdiction’s sales tax rules is an undue burden upon them.  The Supreme Court agreed, ruling that vendors are only required to track and collect sales tax on transactions for states where they had a physical presence.  This effectively means that online retailers such as Amazon.com are effectively released from the burden of collecting sales tax information.  Various Democratic state legislators – blanching at the very idea of trying to enforce individual residents from reporting their online transactions for taxation purposes – have attempted to make an end run around this ruling by writing legislation declaring in-state affiliates of online retailers as counting in terms of ‘physical location:’ Amazon’s typical response is to immediately cancel all affiliate programs in the targeted state, thus eliminating any need for them to collect sales tax information.

**Full disclosure: I am an Amazon.com Affiliate for Maryland.

***Listening to IRMA Vice President Rob Karr trying to… ah, ‘scaremonger’ works in this case… Illinois consumers into voluntarily going through all their online purchases for the last six years and calculating their owed sales tax is, by the way, hysterical.  But not as funny as listening to Karr pooh-poohing the idea that Illinois’ Amazon tax law was simply too big to fail.

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  • america1st

    for certification as a “progressive” is a complete lack of common sense and little or no comprehension of how the ‘real world’ functions. It seems quinn has developed an advanced stage of this mental illness.

  • msctex

    They either have no comprehension of or refuse to acknowledge Newtonian physics. They ignore the fact that for every action, there is an equal and opposite reaction.

    It is so bad that one really has to wonder if they can actually be so stupid, and are not rather intentionally trying to crater the State’s economy.

    Ignorance or Malevolence.

  • victrola

    It seems like companies more often than not fold under the slightest pressure from liberals, whether it’s environmental nonsense or politically correct bullying.

    I love seeing these in-your-face, “Atlas Shrugged” type moves, it’s a “teachable moment” for Liberals.

  • congressworksforus

    I am sure Governor Quinn can convince his friends in D.C. to assess a penalty on Amazon for refusing to participate in commerce with affiliates in Illinois…

  • alaskahome1959

    The argument that “… trying to keep track of every jurisdiction?s sales tax rules is an undue burden upon [businesses]” is the wrong issue and ultimately, a loosing argument. The real issue is that when Amazon.com (or some other similar business) is not resident in a state, they are not within the legal jurisdiction of that state, therefore the laws of that state (including the tax laws) do not apply to those businesses.

    Additionally, the sales tax is not a tax on the business, it is a tax on transactions which occur within the state. When a transaction takes place out of state (as is actually the case when doing business with an out-of-state mail order company), at best the tax does not technically apply at all, at worst, the in-state customer is the only party which falls under the jurisdiction of the law, which again reinforces the argument that the responsibility falls the customerto pay the sales tax , not the out-of-state business to collect the tax.

  • acat

    He thinks he’s the smartest person in the room .. when he’s actually a typical Dem apparachik ..

    He thinks he can raise taxes high enough to get out of the disaster that is the State of Illinois budget…

    Mew

  • rmiddle

    Moe Lane,

    I wouldn’t count on getting money from Amazon for much longer you know the State of Maryland. They haven’t met a tax they don’t like.

    Thanks
    Robert

  • rickbull

    of the dog with his bone in his mouth crossing the log over the river. Looking down, he sees his own reflection and thinks it is another dog with a bigger, better bone. In trying to take the better bone from the dog in the reflection, he loses his own bone in the river, and goes away sadly with no bone.

    As a child, I felt sorry for the dog because I did not understand the meaning of the story at that time. As I matured, I understood the story, and I still pitied the poor dog for a different reason: his greed led him to lose a prized possession.

    Governor Quinn is the dog that, in losing his own bone in the river, has also deprived hundreds (if not thousands) of other dogs their bones, as well, for NO GOOD REASON AT ALL EXCEPT GREED.

    Enjoy what’s left of your kibble, Gov. Quinn; you’ve dropped everyone’s bones in the river, including your own.

    WOOF!

  • rickbull

    Moe needs to crosspost this to the other 49 state governors’ e-mail boxes.

    Quinn’s “smart” governing is the kind of meddling that has driven so many of our blue collar (and white collar) jobs to China and India.

    Quinn is a job-killer, and needs to be told that to his face.

    Anyone up for a road trip to Springfield?

  • rickbull
  • rickbull

    is make Illinois look like a super-sized version of Detroit.

  • Adjoran

    And I believe this is in fact the law in most states. Certainly many states already “require” retail businesses who collect sales tax to also report their own out-of-state purchases for use in the business and pay the sales tax on them.

    The only reason consumers aren’t required to do this, too (actually many states do require it, but don’t enforce it) is because it is quite impossible to enforce. Only if you make a purchase you cannot avoid reporting, like a motor vehicle bought out of state which you must register, do they have any way to collect the “use” tax.

  • http://teapartisan.wordpress.com Loren Heal

    Overregulated, overtaxed economic activity leads to recession.Unregulated, untaxed economic activity rescues us from recession and creates economic prosperity.

    Internet business could lead us out of the current quagmire, but the progressives are hungering after every dime anyone is making.

    In addition, Illinois is run by a coalition of Democrats and Republican business owners who like things the way they are. The mindset seems to be that no outside company should be able to sell stuff without being microregulated and brutally taxed the way the rest of us are.

    And so we have the economic miracle that is Illinois.

  • audax
  • http://moelane.com/ Moe Lane

    It died in committee, looks like; at least, it hasn’t moved since March 2010. Nothing on the current calendar, either, so I’m not immediately worried.

  • http://moelane.com/ Moe Lane

    Who has a rather specific job description.

  • http://impudent.edublogs.org/ kyle8

    don’t tell anyone!

  • jimmyg

    Texas is currently trying to collect over $250,000,000.00in back state sales taxes from Amazon as a result of their presense in the state. Amazon has a distribution center owned by a related company in Texas. Forcing Internet retailers to collect state sales tax is being pushed by the big box retailers, Wal Mart, Sears, Best Buy etc in an effort to level the playing field. http://online.wsj.com/article/SB20001424052748704396504576204791377862836.html
    States are willing to go this route in order to close the gaps in their budgets.

  • maddog

    April 15- tax day. A good reminder to people about the over taxation imposed by government.

  • Thomas_Hauber

    A similar proposal is also in the works in the California legislature.

    As if 12% unemployment wasn’t enough in this state.

    How many states have to have their affiliate programs cancelled before these dim wit politicians realize that Amazon does have another option?!?

  • visitingmdliberal

    It is likely that Amazon issued forms 1099 to the affiliates rather than for the affiliates to fill out 1099; the affiliates would be likely to fill out form W-9.

  • http://www.scragged.com petrarch

    Sooner or later, when every state has passed the law, Amazon will have to decide if it wants an affiliate program at all.

    Unless Amazon, all its facilities, and all its affiliates can move to New Hampshire, Montana, Alaska, or Oregon, which have no sales tax or its functional equivalent and thus the issue is moot? That would be really interesting to see.