Sunday, January 09, 2011

States try to tax the Internet, the Internet leaves

It is no secret that State tax collectors hate the internet. For years, they have been furious that they have been denied the sales taxes for internet sales that they collect from brick-and-mortar stores. And the Supreme Court has ruled that states can only tax internet businesses that had a "physical presence" in the state wishing to tax them.

But the States are not giving up, and now Illinois is ready to pass a law to tax and other companies that do business in the state. The only problem? Companies are ready to abandon Illinois entirely rather than pay taxes there!

After the Illinois law was passed yesterday, Amazon immediately fired off an e-mail to Illinois members of it “associates program” threatening to boot them from the program, which pays them marketing and referral fees on sales, should Quinn sign the bill.

Meanwhile, Scott Kluth, Founder and President of Chicago-based, told Forbes today that he would move his seven-year-old business and his 48 employees across state lines if Quinn signs the bill.
It should be noted that this would not only take sales from affiliates, but it would also take jobs out of Illinois. Not the best way to serve the people of your state in the middle of a Recession.

1 comment:

shadowmom1 said...

This is really interesting. All the places I deal with online charge state sales tax if they do have the physical presence in my state. Even eBay sellers. For phone orders or mail orders, the states only collect sales taxes on the ones with a physical presence in their state. Online sales should fall under the same rules.