A circuit court judge last week declared unconstitutional a 2011 Illinois law requiring out-of-state companies to collect online sales taxes.
The state adopted the Main Street Fairness Act — dubbed the Amazon tax, after online retailer Amazon.com Inc. — in March 2011.
Previously, online retailers that did not have a physical presence in Illinois were not required to collect the sales tax. The law extended the meaning of a physical presence to include third-party affiliates. Amazon promptly dumped its Illinois affiliates.
A trade group filed the lawsuit against the state challenging the law. Last week, Cook County Circuit Judge Robert Lopez Cepero said the state overreached its powers because the law violated the commerce clause of the U.S. Constitution and conflicted with the federal Internet Tax Freedom Act, which prohibits some types of Internet-related taxes.
The Illinois Department of Revenue said it was reviewing its appeal options. The state anticipates that it loses more than $150 million in annual revenue from the affected sales.
