After two-months of fence-sitting, Illinois Governor Pat Quinn today signed controversial legislation requiring Internet retailers like Amazon.com and Overstock.com to collect Illinois’ 6.25% sales tax if they have affiliate sellers in the state. House Bill 3659, the Mainstreet Fairness Bill, was passed by the state’s lame duck legislature in early January. Since then, the bill has been the subject of fierce lobbying by traditional bricks and mortar retailers, who supported it, and Illinois-based Internet-only businesses, who warned that if Quinn didn’t veto it some of them would flee the state. Had Quinn done nothing, the bill would have become law tomorrow without his signature.
Fallout has been swift:
Amazon has already said it will terminate its Illinois affiliates, just as it has said it will drop 10,000 California based “associates” if similar legislation pending in that state becomes law. Affiliates are paid a fee by Amazon and other retailers for sales brought in through advertisements and links on the affiliates’ web sites.
In a statement, Scott Kluth, founder and CEO of Chicago-based CouponCabin.com called the Governor’s approval of the bill “deeply disappointing” and said he is “actively exploring” moving his seven year-old business to Indiana. Kluth, a long time resident of Chicago, had previously threatened such a move, telling Forbes, “I can see Indiana form the roof of our business.”
According to Amazon spokeswoman Mary Osako, the retailer has now sent an e-mail to its thousands of Illinois associates stating Quinn’s signing of the law “compels” it to terminate them. The message reads in part:
“We had opposed this new tax law because it is unconstitutional and counterproductive. It was supported by national retailing chains, most of which are based outside Illinois, that seek to harm the affiliate advertising programs of their competitors. Similar legislation in other states has led to job and income losses, and little, if any, new tax revenue. We deeply regret that its enactment forces this action.
Amazon’s e-mail also invites the Illinois associates to apply for reinstatement should they relocate from the state.
One obvious relocation option for besieged Illinois businesses is Wisconsin, whose business climate is much more hospitable to private sector companies. Stay tuned to the Tipsheet for some important information on the ongoing political fight raging just to Illinois' north...