Illinois Court Tosses "Amazon" Tax

CHICAGO — The Illinois Supreme Court last week overturned the state's two-year-old internet tax, finding it violated federal law.

The court overturned the law in a six-to-one vote. The tax had required out of state companies like Amazon to collect sales taxes on purchases when they use Illinois-based websites that are paid by the companies to advertise.

A trade association initially sued to block the law. The court's ruling upholds a Cook County Circuit Court ruling. The high court opinion found the law to be a discriminatory tax on electronic commerce that is not allowed because of federal laws which prohibit taxes on electronic commerce.

The state said it is considering its options which could include asking the state's high court to reconsider its ruling or seeking an amendment to the law to address the court's concerns. The state also could ask the U.S. Supreme Court to take the case.

The New York Supreme Court recently upheld the legality of a similar law there. The opinions issued by the New York and Illinois courts reviewed differing legal arguments to reach their conclusions. The New York court found that the tax didn't violate the U.S. Constitution's commerce clause while the Illinois court finding was based on the federal Internet Tax Freedom Act with the court concluding the federal law supersedes the Illinois law.

Federal legislation is pending that would allow states to impose sales taxes on now exempt Internet sales.

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