January 7, 2011
The Internet Tax Bill (HB 3659) was passed in the Illinois Senate on January 5, by the House of Representatives on January 6 and brought to the Governor, who may sign it into a law as early as Friday, January 7.
The tax legislation relates to out-of-state merchants like Amazon.com and Overstock.com that do not have a physical presence in Illinois but have relationships with Illinois advertisers and publishers like CouponCabin.com. By this law, these merchants are deemed to have a presence (nexus) in Illinois and are therefore required to collect Illinois sales tax.
The goal of this is to increase tax revenue for the state, but what has happened in the four states that have passed similar laws (New York, Colorado, North Carolina and Rhode Island) is that instead of collecting sales tax, these merchants have severed their relationships with publishers in that state. Twelve other states have rejected similar legislation.
Statement from Scott Kluth, Founder and President of CouponCabin.com:
“Needless to say, we are disappointed by the passing of the legislation today. It was disheartening that both Houses passed this bill in 30 hours without a full and fair opportunity for the voice of Illinois small businesses to be heard. CouponCabin has been rapidly growing for the past several years; in fact, in November, we were only 12% behind Groupon’s monthly traffic. For the third straight year, our staff has doubled in size and has already grown by 12% in the first week of 2011. Unfortunately, this bill will do significant harm to our growth by cutting our business by nearly one-third. Chicago has been an amazing home for CouponCabin for more than seven years. We are grounded in the community with our business and our charitable work and have no plans to leave. We hope the State will see that this bill will fail to achieve its revenue-raising goal, and instead cause drastic hardship for small businesses like ours. We know from other states’ experience that the tax revenue does not materialize. Should this bill become a law, Internet affiliate jobs will be lost with no increase in state revenue. The other states that have passed this are moving to repeal it for this exact reason. We hope consideration will be given to the impact on small businesses before this bill becomes a law.”