Stifling Innovation in Illinois

This past spring, Illinois lawmakers passed a job-crippling law known as the affiliate nexus tax. This tax hurts an already struggling economy in Illinois by pushing small businesses out of Illinois or shutting them down altogether.

From the Illinois Policy Institute's recent paper on the topic:

The misguided affiliate nexus law attempts to offer a backdoor “solution” to the thorny issue of online sales tax collections. In 1992, the U.S. Supreme Court ruled that out-of-state retailers who do not have “nexus” – a significant physical presence in a given state – are not required to collect sales tax on purchases made by consumers in that state.

Illinois sidestepped this decision by legislating that an advertising relationship with an Illinois-based online affiliate marketer creates enough of a physical presence to compel tax collection from an out-of-state retailer. Online affiliate marketers are individuals, start-ups, established small businesses or nonprofit organizations. These affiliate marketers direct traffic to retailers through a link or coupon website in exchange for a small portion of resulting sales.

The following video explains the issue and how it impacts people.

For the full report, click here.