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Amazon Sales Tax Unconstitutional, Illinois Judge Rules

2 May, 2012 By: Jackie Jones


CHICAGO – In a victory for online retailers and marketers, an Illinois judge ruled last week in favor of the Performance Marketing Alliance (PMA) that the state cannot require online companies such as Amazon to collect sales tax from customers.

Cook County Circuit Judge Robert Lopez Cepero ruled that a 2011 law requiring out-of-state retailers work with in-state affiliates to collect sales tax was unconstitutional and violated the Commerce Clause of the U.S. Constitution, according to the PMA.

“We are thrilled with the outcome of (the) preceding and believe it paves the way for Internet marketing affiliates to get back in business in Illinois,” said Rebecca Madigan, executive director of the PMA. “We commend Judge Cepero for his timely and thoughtful decision.”

Many affiliate marketers in Illinois applauded the decision.

“CouponCabin is thrilled to hear the news about the affiliate tax being declared invalid in Illinois,” Scott Kluth, CEO and founder of CouponCabin (which moved out of state to avoid cutting ties with Amazon and other online retailers), said in an official statement. “We are relieved that the 9,000 affiliates that were based in Illinois may now have the opportunity to operate in Illinois without jeopardizing their business relationships with online retailers. This ruling places the responsibility for a solution back where it belongs: in Congress.”

Amazon has long been against consumers paying sales tax on product purchased online. In November, it joined the National Retail Federation (NRF) in support of the Marketplace Fairness Act, which would restore each state’s right to enforce state and local sales and use tax laws, as well as exempt online retailers with less than $500,000 in annual revenue from collecting and remitting sales or use tax (Response This Week, Nov. 15, 2011).

This isn’t the first time a so-called Amazon tax has popped up in the news. The state of Arizona served Amazon a tax bill for $53 million in uncollected sales tax, according to documents the online company filed with the Securities and Exchange Commission (SEC).
According to Arizona, Amazon should have collected transaction tax similar to sales tax on multiple transactions from March 1, 2006 though Dec. 31, 2010. Though the online company has so far refused to comment publicly to the media, it did dispute the issue in its briefing with the SEC (Response This Week, Feb. 8).
“We believe that the assessment is without merit and intend to vigorously defend ourselves in this matter,” Amazon stated in its 10-K form. “Depending on the amount and the timing, an unfavorable resolution of this matter could materially affect our business, results of operations, financial position or cash flows.”
In 2010, Texas also sent the online company one for $269 million, and North Carolina was involved in a lawsuit with the E-commerce giant over the release of customer names and addresses in an attempt to collect sales tax money the state said it was owed.


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