Illinois has joined several other states by enacting a controversial law that will now force out-of-state online retailers to charge customers state sales tax. Many feel this move will cost the state substantial jobs and revenue.

The internet tax law, signed into law by the Illinois’ governor, Pat Quinn, on March 10, will now force out-of-state online retailers with business operations in Illinois, or that conduct business with companies that have a presence in Illinois, to charge state taxes on all purchases made. This includes online retailers that advertise on the websites of affiliates based in the state.

The new law, called HB 3659, essentially takes aim at companies engaged in affiliate marketing—a practice under which one business rewards another business (or, an affiliate) when the latter pulls in customers. To date, 12 states that have rejected similar proposals regarding internet tax laws, according to technology trade organization TechAmerica. Ohio, Rhode Island and Colorado are working to repeal their internet tax laws, according to Ed Longanecker, Executive Director and Regional Vice President of the organization.

Internet sales tax laws were first introduced to the public in 1992, when the Supreme Court ruled that out-of-state retailers with a physical presence in a customer’s state must charge such tax. Former Rep. Bill Delahunt (D-Mass.) last year introduced legislation that would require all retailers to charge sales tax regardless of the whether or not they have a physical presence in the state.

The state of Illinois currently ranks eighth amongst U.S. States with the highest sales tax, according to the Tax Foundation.

Read: Top 5 States and Cities With the Highest Sales Tax Rates

Opponents of Internet Tax Law React:

The bill has drawn heavy fire from various affiliates like and e-commerce facilitation company, which have both argued that the new law will result in job losses and will harm the state’s economy.

“The only result of this law is that high-growth businesses like CouponCabin will be driven out of Illinois to maintain their relationships with out-of-state merchants” said’s CEO Scott Kluth in statement, adding that the new law would result in significant job loss for the state by the elimination of businesses that rely on the relationships with online merchants.

“Due to the fact that out-of-state online retailers (any and all retailers and not just the one target that everyone is mentioning) can simply terminate their affiliate programs in Illinois, thus removing themselves from this bill’s grasp, no revenue will be collected. That means no revenue, lost contracts for Illinois businesses, and loss of jobs in Illinois,” said’s founder and CEO Brian Littleton in a statement.

Amazon, which reportedly called the new Illinois law “unconstitutional,” has already decided to close its Illinois affiliates.

“We had opposed this new tax law because it is unconstitutional and counterproductive. We deeply regret that its enactment forces this action,” Amazon said in a message to its Illinois-based affiliates was able to obtain a copy of.

On the other side of the fence are legislators and trade organizations such as the National Retail Federation, which feel that internet tax laws are necessary. The main issue with respect to internet sales tax, according to Maureen Riehl of the NRF, is not whether or not it should be collected but rather the best way of collecting such taxes constitutionally.

“No one state can force that tax obligation outside their borders,” Riehl told “That requires an act of Congress.”

Do you think that internet tax laws are fair? Let us know in the comments section.

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  • Feed up small business owner

    The Illinois law is unfair and essentially closes doors of many small and family owned businesses who rely on internet sales to feed ther families. With unemployment at an all time high people are just trying to keep families together “by any means necessary”. This law, and Amazon’s move has cost our business 40% of our sales. How can any business survive such loss? The money that is earned is spend in ILLINOIS, how is the state losing? Greed seems to be the motive. We shop and support this state, until now it has been our home. To be competive in this market we can not afford to add 6% to our selling price and it’s unfair to pay taxes to a state that you don’t live in, I wouldn’t do it, so I can’t expect my customers to do. Someone has to listen to the voice of the people!! Stopping crippling our economy!

  • brianlittleton

    First let me start by saying that I do believe in “fairness” and would love to see a level playing field for our local retailers who are very important pieces of the economy.

    However, and this is really the key part: This bill did not accomplish the goal of fairness.

    As of this morning, only a few days after the bill was signed and with the bill still not in effect until July 1, ShareASale has received 30 termination notices. That is 30 advertising programs on our network alone that are now not open to marketers in Illinois. This number will only continue to go up as people are made aware of the new law in Illinois.

    In other words, for those 30 along with the host of others running on our competitors – there is no level playing field. They’ve completely removed themselves from the grasp of this bill. They no longer have nexus (as claimed by Illinois) and thus will not collect the sales tax.

    These are the realities of the bill. We can talk fairness all we want, but at the end of the day a law has to accomplish what it was set out to do, otherwise it never should have been passed in the first place.

    Governor Quinn and his staff in Illinois, Senate President Cullerton, and a multitude of other lawmakers in Illinois were fully aware of these dangers – we discussed it with them at length and told them of the futile nature of the bill.

    We offered other solutions to help local retailers, we offered help with a federal solution, and we offered assistance going forward with the writing of other bills.

    All of this help was ultimately rejected – and Illinois instead went ahead with a bill that is fundamentally flawed (doesn’t do its job), and unfortunately one that greatly harms what was a very large and growing industry of over 9,500 affiliate marketers in Illinois.

    If you live in Illinois – go ahead and test it out. Try to apply for an affiliate marketing program for an online-only retailer….see what happens. (examples, Amazon, Overstock) Then go shopping at an online-only retailers… check to see if that tax is being collected. You don’t have to take my word for it.

    When a bill fails to do its job, and also harms Illinois businesses – that is called a “lose-lose” for Illinois.

  • Alive111

    I feel that a national sales tax on non food items (all food should be tax exempt) would be a fair tax on all .If your a large spender you’ll pay more and if your a little guy yo’ll pay less. a rate equally collected lik a half of one percent (.05%) would be a fair amount to be given bcak equally to all the states. No formulas as to which state gets more for spending more but a simple equall share of the pool given back to the states to be used for education or roads etc. Never given in a way the polticans get a undesirved raise and thier favotrite pcak pocket projects get the $$. The problem with all our tax structure is its to coplicated and has to many regulations and loopholes written in such a way that you need a law degree and a cpa to decode it.

  • alive111

    il IS IN A TAX HUNT AND THIS IS THE MOST UNFAIR TAX YET . Most people in IL do not want his but we were never allowed the chance to vote it down. Taxes collect lopsided like this does hurt all of the citzines of our state and all of the buisnesses doing buisness in IL. I hope that enough citizens of IL wake up and force the repeal of this tax . If not I hope large companys band togehter and challenge this tax in COURT.