Illinois Struggles to Collect Revenue From 'Amazon Tax'

By Samantha Abernethy in News on Sep 13, 2011 9:10PM

Since last winter, Illinois has been trying to find a way to collect sales tax on internet retail sales and, despite signing the "Amazon Tax" into law in March, the state isn't getting the revenue it had expected.

The state doesn't have a clear way to enforce the law. Plus, online retailers Amazon and Overstock decided to shutdown their affiliate programs in Illinois to avoid paying the tax. Crain's Chicago Business writes:

It tried the honor system, with a reminder on income tax forms to prod individual taxpayers to pay up. Though compliance doubled, just 4.6% of taxpayers did so, paying $10.2 million.

Getting Internet retailers to collect sales taxes from customers doesn't look any more promising. A pair of local websites that channel orders from Amazon.com Inc. and Overstock.com Inc. recently left the state, circumventing a new Illinois law that would have used them as a conduit to tax sales by the giant online retailers.

The state had expected the "Amazon Tax" to bring in $150 million this year. But our own Prescott Carlson wrote in January that the math behind the legislation was flawed. On top of that, as online retailers close down their affiliate programs in Illinois, the state no longer has future sales tax to collect.

Two more web retailers Crain's mentioned as leaving Illinois are CouponCabin and FatWallet, which left for Indiana and Wisconsin, respectively. If you want to make good on unpaid sales tax in the last seven years, you have until Oct. 15 to take advantage of the state amnesty program on unpaid sales tax.