The Chicagoist will be launching later but in the meantime please enjoy our archives.

Judge Rules 'Amazon Tax' Unconstitutional

By Prescott Carlson in News on Apr 26, 2012 4:40PM

2011_3_11_amazon_large.jpg A judge has struck down a law intended to increase taxes collected from out-of-state online retailers.

House Bill 3659, colloquially referred to as the "Amazon Tax," was passed in March of last year which broadened the scope of which companies would be required to collect use tax from its customers. Traditionally, a company needed to have a physical presence within Illinois such as retail stores, a warehouse, or a distribution center in order to meet the requirement with online or mail order sales to state residents. But the bill added that if the retailer had any sort of affiliate program in the state, where independent websites link to products in exchange for a small commission, then that met the criteria.

Unsurprisingly, large online retailers such as and took their ball and went home instead, terminating its relationship with all Illinois affiliates. And after crunching some numbers before and after the law went into effect, it's debatable whether or not it made any difference at all.

Now according to Crain's, Cook County Circuit Judge Robert Lopez Cepero ruled that the state overstepped its bounds with the law, and that it doesn't pass constitutional muster. Not only that, but Cepero said the law was currently unenforceable, because it was trumped by the federal Internet Tax Nondiscrimination Act, which prohibits taxes on electronic commerce until towards the end of 2014.

CouponCabin was one of the Chicago companies affected by the law, and found itself forced to move to Whiting, Ind., in order to stay in business. Founder and CEO Scott Kluth said in a statement:

"CouponCabin is thrilled to hear the news about the affiliate tax being declared invalid in Illinois. 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... CouponCabin continues to strongly support a federal solution to the taxation of all online transactions."

The celebration may be premature, as companies like have not yet officially welcomed former Illinois affiliates back into the fold, as they are likely awaiting to see if the matter gets moved up to a higher court. Indeed, a spokesperson for the Illinois Department of Revenue told Crain's that they are speaking with the attorney general's office about appeal options.

The spokesperson added, "We need to recoup some of the estimated $153 million that was not paid by online merchants prior to the law being implemented."