Amazon is no fan of collecting state sales taxes, and it's ready to play hardball once again in its attempt to avoid the levy. An e-mail sent from the company to all of its Illinois affiliates this morning warns that, should Illinois Governor Pat Quinn sign a just-passed tax bill, Amazon is cutting off every affiliate in Illinois.
"We regret to inform you that the Illinois state legislature has passed an unconstitutional tax collection scheme that, if signed by Governor Quinn, would leave Amazon.com little choice but to end its relationships with Illinois-based Associates," said the e-mail.
Illinois wants Amazon to collect 6.25 percent sales tax and send it back to the state. Under current law, only companies with a physical presence in the state have to do this, but the new bill declares that even having affiliates in Illinois counts as "presence."
The change shouldn't affect tax revenue in Illinois, since residents who purchase from Amazon and other online, out-of-state vendors are required to pay a "use tax" each year that replaces the lost "sales tax." The bill simply shifts collection from the individual Illinois buyer to companies like Amazon.
But of course that's not what happens. Few Illinois residents actually pay the tax, and the state has no way of knowing how much any particular person should owe (other states like North Carolina have tried to force Amazon to turn over purchase records so they can check on the accuracy of these self-reported payments). In practice, then, buying from Amazon comes at a discount over buying from a local store.
The Chicago Tribune ran a nice article yesterday on how the move will affect some local businesses, like FatWallet, which make much of their revenue in affiliate referral payments from sites like Amazon. Several are threatening to leave the state altogether, though their total workforce is quite small.
Amazon helpfully included a link to Governor Quinn's office, and it wants its affiliates to make their assumed displeasure clear.
This has been a long-running fight for Amazon. Back in 2008, it challenged a similar New York state law in court, calling it an "unconstitutional" attack that singled out a particular company. Amazon's threats to kill its affiliate program haven't been idle, either; the company has closed the program in Colorado, Rhode Island, and North Carolina thanks to similar laws there.
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