Amazon will begin collecting and remitting sales tax in Illinois beginning February 1 as part of a deal the online retailer struck with state officials in October 2014.
Under the plan, Amazon has promised to create more than 1,000 full-time jobs in Illinois and to invest more than $75 million in the state, according to media reports. At the time the deal was announced in October, state officials said that the expectation was that Amazon will be receiving tax credits from the state, though, as of press time, no details of any tax incentives have been reported.
Including Illinois, Amazon now collects sales tax from 74 percent of U.S. consumers and from 24 states, Internet Retailer reported this week. This figure does not include Michigan, however, where Gov. Rick Snyder recently signed an affiliate nexus bill into law.
“Given Congress’ failure to seriously address the current sales tax inequity, states are again taking the lead in leveling the playing field for Main Street Businesses,” said American Booksellers Association CEO Oren Teicher. “While we applaud Illinois for passing this e-fairness law, we hope officials will reconsider providing Amazon with any tax incentive in exchange for the promise of jobs and collecting sales tax. It would seem obvious that a physical distribution facility in the state represents nexus, meaning that Amazon is obligated to collect sales tax. They should not be rewarded for following the law, something that Main Street retailers do on a daily basis. Moreover, in-state retailers and their employees should not be forced to help subsidize their biggest competitor in setting up shop in the state.”
Amazon, like many other remote retailers in Illinois, is now obligated to collect and remit sales tax under an e-fairness state law that was signed into law in August 2014. The law, which revises an affiliate nexus law that had been struck down by the Supreme Court of the State of Illinois, requires remote retailers with any kind of in-state referral system — including online affiliates — to collect and remit sales tax.
Technically, the sales tax law went into effect on January 1, 2015, but the Department of Revenue usually provides merchants that are new to collecting in the state some leeway regarding when they begin collection, Hofer told BTW in October. “Starting right in January can be problematic for retailers,” she said, noting that merchants rarely have time to put new tax collection systems into place over the busy holiday season.
With every state that levels the playing field, it becomes clearer that equitable sales tax collection affects consumers’ buying decisions. In states that require Amazon to collect and remit sales tax, the online retailer generally sees a decline of about 10 percent, according to Itzhak Ben-David, an associate professor of finance at Ohio State University, as reported by the Chicago Tribune. Meanwhile, brick-and-mortar stores in those states have seen a two percent increase in sales, a not insignificant number in the world of retail.
“The decline [in buying from Amazon] was most dramatic for large purchases," Ben-David told the Tribune. “These results suggest that sales tax is an important factor in the eyes of consumers.”