Illinois Internet Sales Tax: Expected Consequences Come Home

On Thursday, March 10, 2011 Illinois Governor Pat Quinn signed into law a bill that prescribes collection of an Internet sales tax (6.25%) from retailers who have more than $10,000 in annual  online sales in the state of Illinois [more on it here].

The law also applies to sales driven for merchants through their Illinois-based affiliate marketing partners, or online affiliates.

On the day the bill was signed Chicago Tribune predicted:

The move is expected to have little effect on consumers but deals a blow to small Web businesses that count Internet retail giant Amazon and other online merchants as a major source of ad revenue.

The above is a very accurate prediction. Yes, the “businesses that count Internet retail giant Amazon and other online merchants as a major source of ad revenue” (read: affiliates who get paid a commission of each sale they refer to online merchants) will (and, in fact, already do) suffer from this decision. Several major online retailers — e.g. Amazon, Overstock, Zappos, etc — have already terminated relationships with Illinois-based affiliates. Essentially, a law like this puts thousands of them out of business, “cutting jobs” by killing numerous Illinois-based value-added websites (e.g. comparison shopping platforms, coupon- and rebate-oriented websites, niche/thematic sites that monetize through affiliate links, etc).

Additionally, as larger online retailers terminate their relationships with Illinois affiliates, the chances of collecting considerable amounts (into state budget) with this new Internet sales tax law also become very slim. Yes, “these affiliate laws could capture additional income from Internet sales” but with the $10,000 threshold level “they affect mainly large Internet retailers like Amazon and” [source] who have already made their stance clear.

8 thoughts on “Illinois Internet Sales Tax: Expected Consequences Come Home”

  1. UndergroundInIllinois

    First, thanks Geno for publishing this. As an Illinois affiliate marketer I have to say that I’m just overwhelmingly disgusted by this whole debacle.

    I reached out to the governor and legislators with emails and phone calls. None, not one, would hear my side. I’m appalled, perplexed, and angry.

    Considering from published reports that Illinois only stands to receive 11-12 million in tax revenue (if they can actually collect) from this job killing tax, the dent that it would make in Illinois’ 13 billion dollar deficit is laughable. Essentially, governor Quinn has decided that online entrepreneurship in Illinois should be eradicated.

    I became an affiliate marketer in Illinois when I lost my job as a graphic designer. Illinois’ crippling unemployment rate led me to take personal action, relying on myself rather than an employer.

    I became successful promoting Amazon, Overstock, among others with affiliate links. I did not make a fortune. I made a reasonable income working harder than I have ever worked in my life. And I loved it. I was even considering hiring an employee, creating a job for a fellow Illinois citizen. But the politicians decided to go after middle class entrepreneurs with this tax, yet they still refuse to tax billion dollar corporations within our state.

    My situation borders on comedy. Overnight, I was an affiliate that was making money from sales of scented candles, relaxation products, and other banal items…but now I’m on the verge of becoming a criminal in Illinois.

    Myself and other local affiliates are looking into how to do business in other states (at least on paper). Our inquiries have led to meetings with some questionable characters that are hiding money for others in Illinois.

    Honestly, it’s been an adventure, and it’s led me to begin writing the beginning chapters of a novel. Overnight, I went from promoting normal household items to meeting with questionable characters in dark corners to discuss how we can get around this tax. Let’s just say that me and a fellow work at home mom met with a golden capped gentlemen in a disreputable business to learn how they are protecting their money.

    It’s ridiculous. I have no idea how this can be reversed or corrected. Additionally, I want to be clear that I don’t hold all of my contempt for governor Quinn. Amazon and others deserve a big middle finger for simply abandoning money making affiliates. They could have provided tools while championing the reversal of this asinine legislation.

    Anyway, thanks for letting me vent. And a big thank you to you for covering this!

    For others, take heed in protecting your state from this steaming pile of B.S.

  2. UndergroundInIllinois

    Geno, by the way, sorry I had to post the previous comment anonymously. But, considering that I’m currently looking into action that would make me a criminal in Illinois I hope you understand.

  3. Thank you for sharing your thoughts. I am sincerely sorry about your situation, and I agree: while this legislation is less-than-desirable, there are tools out there that help merchants collect state sales tax, and kicking out Illinois-based affiliates is not a good move either… Yes, they do want to make the point to the state, but, ultimately, it’s not the state, but people like you (and small businesses like yours) that suffer.

    1. Yes, I’ve seen someone tweet about FatWallet’s plans to move to Wisconsin. Sad, but natural (after all, with all merchants who have decided to terminate IL affiliates, staying in the state makes little business sense for larger affiliate marketers), consequence which won’t translate into tax money for IL.

  4. I reside in Illinois and lost all my affiliate income from Amazon as well. It’s a sad situation because in the end, no one wins. It solves nothing. Makes me mad as hell. Is this going to eventually spread to all states? I was just watching the local news and it showed the footage of Fat Wallet moving their office equipment and heading to downtown Beloit, Wisconsin.

    I am fairly new to affiliate marketing, I really feel for the ones that have put many years of hard work into and this is the result – leaving their homes.

  5. Most states face significant budget deficits. Hence, such attempts to remedy the situations… Yes, FatWallet is indeed moving to Wisconsin “as a direct result of the recent tax legislation passed in that state last month” [source], and Governor Walker welcomed FatWallet assuring they “are not going to raise taxes as it would drive jobs out”. Depending on how far physically a business is from WI, this may be a solution in some cases. With Amazon, Overstock, Zappos, and multiple other merchants terminating Illinois affiliates, many IL-based affiliates choose between “leaving their homes” or facing financial shortfalls (or even problems).

  6. If you are an affiliate in the USA who is facing being cut off by online retailers there is a solution. I am based in the UK, and if you are interested I could help you out by acting on your behalf, i.e. receiving your commission under my name and UK address and the passing it back to you. If you are interested call my UK mobile 0044 786 167 9819.

    PS: I am an affiliate by myself using affiliate networks and receive many cheques monthly in US dollars as well, so I understand the whole procedure how to handle these issues.
    You are also welcome to come over to UK for a visit to discuss this matter personally.



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