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Survive and Advance – The Amazon Tax Battle Plays out One State at a Time

by Judd Ballard

The recent Illinois Supreme Court decision means a victory for bargain shoppers gathering up heavily discounted watches (myself), books (also myself) and early Christmas presents online.  With little to no means of use tax enforcement from the states, loyal Amazon shoppers will enjoy at least one more holiday shopping season in Illinois and many other states without having to pay sales tax at the time of “checkout”.

The Illinois decision goes in the exact opposite direction of New York (who started this proverbial mess 5 years ago) and determined remote sellers with mere web-linking contacts in the state are not required to collect Illinois sales tax on sales to Illinois customers.  The fact the Illinois Supreme Court did not let the state’s tax gap (i.e. taxes owed vs. taxes collected) blur its vision makes this all the more intriguing.

What does Amazon think about being the center of just about every sales tax and online retailers discussion?  Nothing.  Of course they support it…they’ve played their hand.  Successfully too, I might add, cutting a deal with every state threatening some type of collection action.  Other online retailers may not be so accepting.  (Has Amazon commented on the Illinois case?)

Surprisingly, every Target, Office Max, Wal-Mart, Kohl’s, etc. peppered across the US (i.e. the brick and mortar stores) are on board with the online tax.  With their “discount” for not having to charge sales tax, the online retailers lacking physical presence have enjoyed a competitive advantage brought on by internet shopping.  While the discount only exists to those who flub their personal tax return, you’d have to believe the end of that discount is coming, right?  I personally still think the online tax is too good to be true, but it sure would be convenient not having to answer that question on my Ohio return every year…

Further complicating this mess is The Supreme Court of the United States’ lack of interest in stepping in the ring anytime soon.

1992, Quill, i.e. twenty-one years ago.  Still relevant in today’s environment?  Hardly.  For all the hype the Marketplace Fairness Act getting through the Senate has created, it still feels like a broken record and who knows what its chances are in the House.  Why do we continue to get our hopes up for clear guidance in this area?

It is worth noting Illinois becomes the first large state to say the Amazon tax is unfair per the Internet Tax Freedom Act of 2000.  Could this decision further highlight the need for the House or Supreme Court to act, and act fast?  The bigger more relevant question to Illinois customers is, what happens in 2014 when the ITFA expires?

Keeping a $1 million minimum sales threshold in play certainly helps the chances of the Act passed by the Senate going somewhere, even if that minimum still needs more clearly defined.  But don’t get too comfortable, here come the small retailers with their administrative burden argument…

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