Illinois House Bill 3659 Stomps on Small Businesses
On Friday, February 4th, a group of affiliate marketers and other concerned parties met with the Illinois Governorâ€™s office to discuss Illinois House Bill 3659 (â€œHB3659â€).Â The focus was an amendment to HB3659, dubbed the â€œAmazon Taxâ€, Â introduced by Senator John J. Cullerton (D) which forces out- of-state retailers to collect Illinois state sales tax for Internet sales, based on the premise that affiliate marketers create nexus in Illinois.
While having passed both Houses and awaiting Governor Pat Quinnâ€™s signature, the bill is still fervently debated. Recently, Illinois has emerged as a hotbed for technology businesses and is now considered the single largest state for the Affiliate Marketing Industry, thanks in no small part to the positive business environment created by Governor Quinn.Â TheÂ industry was represented by several high-profile Illinois affiliates, the Performance Marketing Association, and TechAmerica. Attendees strongly urged the Governor not to sign what is an ineffective and ultimately flawed bill pointing out that it would cause massive cuts in revenue for Illinois businesses and significant job loss.
Searching for a Solution
The dialogue was cordial, filled with great questions and possible solutions for the challenges facing Illinois, both in terms of creating a level playing field for businesses as well as collecting tax due the State.
Several solutions were presented during the meeting, including the option of allowing the â€œTax Amnestyâ€ program to run its course in Illinois.Â (The â€œTax Amnestyâ€ program presents Illinois residents with a line on their tax returns, enabling them to estimate the amount of sales/use tax they must pay and provides amnesty for past yearsâ€™ payments.)
Other solutions presented included willingness from the Illinois Tech Community in aiding the Governor by providing assistance to the booksellers and other advocates of the HB3659 in arriving at a level playing field with online retailers; this is the billâ€™s major justification.
It is critical to note that the Affiliate Marketing Industry is not against the booksellers and merchants that are looking for the same advantages online retailers have. Â In fact, itâ€™s quite the opposite.Â Â Weâ€™d love to see a federal solution which actually addresses this crucial issue and we welcome the opportunity to work with the businesses and state government to find a fair solution that will not cause job loss.
The affiliate marketers did however, indicate their support for the lesser known â€œsecond partâ€ of HB3659 aimed at collecting tax revenue from businesses which operate physical stores in Illinois but simultaneously operate online in attempt to circumvent sales tax collection.
Why HB3659 is Misguided
The unfortunate reality of HB3659, as it stands, is that it is simply a red herring.Â Â It will not create a level playing field for booksellers or other retailers in Illinois and will not bring in the anticipated levels of tax dollar generated revenue that Illinois is seeking.
While the billâ€™s goal is to create a an equal opportunity for brick and mortar retailers, the fact is that an uneven playing field is still an option for online retailers, negating the essence of what the bill will attempt to accomplish.
By terminating their affiliate marketing contracts in Illinois, online retailers can simply bypass the nexus requirement and using other advertising models circumnavigate collecting sales tax for Illinois.Â Amazon, a primary target of the bill, has already notified its affiliates that it plans to do this.Â In turn, this equates to zero tax revenue for the state and harms Illinois businesses that rely on affiliate marketing as a form of revenue causingÂ job loss and an increase in unemployment payouts â€“ a giant failure on all levels.
I urge Governor Quinn to veto this bill and show the Tech Community that Illinois continues to be a place to build businesses.Â This same community that has pledged ongoing support for finding a solution that can help Illinois collect due taxes to overcome budget deficits, and help create a level playing field so local retailers and booksellers can compete with online retailers.