Consumer Alert: Sales Tax on Shipped Items



Amazon/Internet Sales Tax
·         State to redouble efforts to collect sales taxes from non-traditional businesses; Amazon to start collecting sales tax.  Under federal law, each state must fulfill certain legal conditions in order to enjoy the right to mandate that a business that is not physically located in Illinois must charge Illinois sales tax when physically selling something to an Illinois resident.  New administrative rules, which took effect on January 1, 2015, expand the definition of out-of-state retailers that fall under these conditions and are subject to these requirements.  This technical-sounding change in State law could lead to more demands for sales taxes popping up on Illinois residents’ video screens in future as we shop online for taxable goods and services.  The Associated Press has the story.

Illinois consumers already routinely pay sales taxes of 6.25 percent and up on goods purchased over a traditional sales counter and physically carried out of the store.  Goods purchased online and shipped by parcel delivery do not have a physical location that matches the traditional legal definition of where a State sales tax can be charged and collected.  Many of the 50 U.S. states have taken actions aimed at creating statutory laws, case laws, and administrative laws that will govern these online sales and legally enable sales taxes to be charged and collected.  The change in Illinois administrative law was pushed through by officials for the former Gov. Quinn administration.  It covers entities that sell $10,000 or more in taxable goods and services to Illinois residents in the prior year through catalog, mail-order, and Internet sales platforms.  Amazon.com has agreed to cooperate with Illinois’ new law and rules, and will start charging and collecting Illinois sales taxes on February 1, 2015 for deliveries made to addresses in Illinois.   

 The National Conference of State Legislatures, which is monitoring Internet and other out-of-state sales throughout the U.S., estimates that Illinois is failing to collect an estimated $1 billion in annual sales taxes that would be paid if the goods were to be purchased over a physical in-state sales counter.  However, a marketing association representing cross-state-line retailers expressed disagreement to an AP reporter with the legal status of the new Illinois administrative law.  It is possible that a legal challenge will be mounted against this new push from Springfield.