'Amazon Sales Tax' Law is Unconstitutional, Says Illinois High Court

'Amazon Sales Tax' Law is Unconstitutional, Says Illinois High CourtThe controversy over online sales taxes just got murkier as the Illinois Supreme Court Friday ruled that the state’s 2011 so-called “Amazon” law is unconstitutional.
The law required out-of-state Internet sellers with affiliates in Illinois to collect Illinois sales taxes on deliveries to the state’s residents.
The Illinois law is similar to one New York enacted in 2008, which was upheld by the New York Court of Appeals, in a 4-1 decision in March.
Amazon.com and Overstock.com have petitioned the U.S. Supreme Court to review the New York decision.
The disparity between the two state rulings creates a greater likelihood that the U.S. Supreme Court will decide to review the heated issue of Internet sales taxes.
Consumers are poised to save money through online purchases, depending how the U.S. high court rules, if it takes up the issue.
Consumers who live in sales-tax states, such as Illinois, owe state sales tax on their Internet purchases, whether they pay it during virtual checkout or when they file their state income tax returns.
But few pay unless tax is collected at the online checkout. That essentially makes online purchases cheaper than those at “bricks-and-mortar” stores.
Currently, a decades-long precedent rules the day on the issue, leaving many small online sellers with the task of figuring out how to manage collecting and remitting sales taxes to nearly every state — a big point of contention for eBay and others that oppose an “Amazon sales tax.”
A 1992 Supreme Court case ruled that states could only require businesses to collect sales tax if the business had a physical presence in the state, such as a store or warehouse.
Out-of-state retailers — back then with no Internet it fell on mostly catalogs — did not have to collect sales tax because it was deemed too cumbersome for them to track and fulfill so many different tax jurisdictions and rules.
The U.S. Senate’s passage of the Marketplace Fairness Act in May, supported by Amazon and opposed by eBay, grants states the authority to collect sales or use taxes from remote retailers. But the legislation’s prospects remain uncertain, both politically and substantively.
The Marketplace Fairness Act would require charging a sales tax on Internet purchases with most retailers (only those with less than $1 million in revenue are exempt).

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