January 27, 2015
Grace period is over, Illinois’s collecting taxes on Amazon purchases
by Kirsten Reach
Sure, there’s a giant blizzard on the East Coast today, blah, blah, blah. But in much more exciting news, guess what’s hitting the Midwest next week? More sales tax!
Amazon and other online merchants are now required to collect 6.25% sales tax in Illinois. This technically went into effect on January 1, but these businesses had a grace period until February 1 in case they were overwhelmed during the holiday season.
Quick history lesson in taxes for online retailers: In 1992, The U.S. Supreme Court ruled that online retailers had to have a presence in each state (frequently referred to a “nexus”) in order to be taxed there. Amazon struck with fifty-five mile per hour winds and boom, Illinois became the first state to reverse their state laws in order collect sales tax. In October 2013, the Illinois Supreme Court struck down what was known colloquially as the “Amazon tax” law, as we reported here.
Amazon is complying, but it doesn’t have much choice: the company announced last October that it is planning to open a new $75 million distribution center in Illinois in 2015. (There’s a nexus for you.) The company is planning to open other facilities in the state by 2017.
Sandra Guy of the Chicago Sun-Times reports than the state of Illinois could have collected an estimated $212 million from online purchases–JUST online purchases–in 2013 if these taxes had been in effect. Looks like the East Coast has a thing or two to learn from Chicago, beyond tips on clearing our sidewalks.
Kirsten Reach was an editor at Melville House.