Clarification on new affiliate tax bill

I’ve received a few questions in email and comments regarding yesterday’s post about the Illinois Senate Amendment 3 to HB 3659, which basically boil down to: “What’s the difference — aren’t they going to make Amazon (and Overstock, and other online retailers) collect sales tax in IL anyway?”

Answer: Nope.

Here’s where the confusion lies. Illinois is trying to make individual taxpayers cough up unpaid sales tax on purchases made at online merchants such as Amazon (back to 2004, thankyouverymuch!). There will be a line to this effect on our 2010 tax forms, and we’re supposed to estimate our back taxes and have up to October to pay without penalties. (No, I kid you not! back to 2004!)

However, Illinois does not have the power to make Amazon, or any other retailer without a physical presence in Illinois, collect Illinois sales tax. What the new amendment does is say that, if an Amazon sale is generated through an Illinois-based affiliate (blog or website), that this Illinois-based blog or website creates a “nexus” in Illinois. This virtual “nexus” is what theoretically allows the state to charge Illinois sales tax on purchases generated through these links — even though the Illinois-based blog or website is not actually selling you the item.

So, what happens then:

  • If this bill is signed into law, and you click on an affiliate link on Mashup Mom (or any other Illinois-based website or blog) that takes you to Amazon (or any other online retailer), then that retailer is now required to charge 6.25% IL state sales tax on products purchased through that link.
  • If this bill is signed into law, when you instead type Amazon.com into your web browser and make a purchase, Amazon is not required to charge you Illinois state sales tax, even if you live in Illinois. You are supposed to report that purchase and pay taxes on it on your own, what is called a “use tax.”

It currently costs you no more to purchase an item on Amazon.com (or any other Internet retailer) through a link on this site than it does to purchase it by going directly to Amazon.com. Should this bill pass, it will cost you 6.25% more to purchase an item through a link on this site to places that don’t currently charge Illinois state sales tax.

Retailers that have a physical presence in Illinois, such as JC Penney, Kohl’s, Sears, Best Buy, etc., already charge Illinois state sales tax, because that’s how the law works: Companies with a brick-and-mortar presence in a state are required to also charge sales tax on online purchases made on their websites.

The impact of this

Again, Amazon and other major affiliate sites have said that, rather than deal with this and/or in protest, they will simply drop all of their Illinois-based affiliates. This has already happened in Colorado after the passing of a similar law — they’re not bluffing here. So, not really a good potential revenue-maker for the state, since they don’t get sales tax on sales that are no longer happening. In addition, they will also no longer get income tax from the thousands of small and home-based internet businesses who were previously paying taxes on their affiliate income.

(And, even if they didn’t drop IL affiliates  — if you’re going to make an online purchase, what would you rather do: Go to someplace like Amazon directly, or click through me and pay 6.25% more? hmm.)

In related news

Didja see they’re also likely to hike the state income tax 75% next year?

And to clarify further, for the person who emailed thinking I’m “profiteering” off of you all…

My policy here has always been only to post links to things that are actually a deal, regardless of whether these are affiliate links or not. This site contains a mix of both. But, if I’m going to link to a deal, and an affiliate link is available, then I will use that affiliate link.

Affiliate links are part of what help pay for this site. Everything here is free to you, and no one ever has to buy anything from any of my links. (Trust me, most of you don’t! lol) However, running this site is not free to me — and since I spend several hours a day writing Mashup Mom, those are several hours a day I don’t have available to pursue other money-making activities. I’m not getting rich here, but it’s enough side income that Mashup Mom is my part-time job and home-based business. (And, one that I love! :) ) Thousands of other small IL blogs and websites are in the same boat.

Posts on Mashup Mom may contain affiliate links. Please see disclosure and disclaimer here

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Comments

  1. Kim (KC) says

    The bill passed from what I saw over on Jill’s site… BOO! I hope the Govenor doesn’t sign it with him being flooded with emails! So if you haven’t sent your email send it please!!!

  2. Melissa says

    Rachel, I hope you don’t take any of those haters’ comments to heart. They benefit from looking at your blog and you should be compensated for the traffic you direct if WE buy the product! Consider it commission on an already GREAT price.

    We love what you do, and these tax hikes will hurt us ALL. Simply delete any negative e-mails.

    • Heidi says

      I agree with Melissa, I hope you don’t get too many negative emails like that!!! You work hard and deserve to be compensated. And if you were constantly posting things that weren’t actually good deals just because it was an affiliate link I think we would notice!! :) Keep up the good work! I wrote my email this morning but am going to have my hubby do one too now!!

  3. Pam says

    Do you have any resources as to how we are supposed to calculate back 5 years what we might owe on sales tax? Who the heck keeps receipts back 5 years? Just curious if online retailers will report to the state of Illinois sales made to Illinois residents… and how is someone who no longer lives in this state (say they moved in 2008) going to pay the state back when they are not filing an Illinois tax form? Insane!

  4. Melinda says

    Rachel,
    Your site is a huge benefit to me and my family, furthermore, you DESERVE to be compensated for the time you spend and if an affiliate link helps you with that than you have every right and for that matter should use it. Anyone who thinks that you should spend all this time and work away from your family and receive nothing in return is unreasonable. Again, thank you for all that you do!

    Also, BOO to the new law!

  5. JULIE S says

    I love mashup mom! It’s one of my faves ! Sorry if this law may take away some of the revenue that will help you operate your site :( !

  6. Diana says

    I sent my e-mail! I can’t believe anyone would think you are “profiteering” off of the little bit you get back through Amazon Associates… Sometimes I think some people can be so closed-minded. Thank you for running this amazing free site and helping me to save lots of money for my family!! IL is really disappointing me lately!

  7. Fran says

    First, I want to thank you, and Jill for all you do. I’ve been couponing for only 4 months, but sites like yours have helped me enormously! I sent an email regarding both the sales tax bill and the income tax hike. In the emails, I wrote I have had enough of government spending sprees, and rather than dig deeper in our pockets, they need to find areas to cut their spending…just like we are forced to do when they raise taxes. And if these bills pass, I will be showing my disapproval at the ballot box, as will my family, friends and neighbors.

    Couponing certainly helps offset some of these tax hikes. But if sites like yours aren’t able to help us as much, the effect of these bills and tax hikes are going to have a much greater impact to us.

  8. Christa Miller says

    We live in the quad cities. And if this passes we will be looking for housing in IA. They are so desperate to get money…maybe they should try to not spend as much or stick to a budget…kind of like a couponer!

  9. Kristy says

    Our household sent three emails to the Governor today registering our opposition to the signing of this ridiculous bill into law. Whatever happens, though, your loyal couponers will be here to support you and others like you who allow us to save so much money by using your sites. It is so disappointing to see things like this happen and I sincerely hope the governor will see reason where this is concerned. Thanks, Rachel, for helping my family save so much money! :)

  10. Chrissy says

    Thanks so much for this explanation, as well as all the fabulous deals you have found. I truly appreciate it!

  11. Chrissy says

    I just went to the Amazon site and clicked on my orders. There is a drop down menu that allows you to pull up all your orders from 2004-now. I guess I can track down that info…wish I couldn’t have….Wasn’t the sales tax different back then?

  12. DealHunter says

    I think we all have “profited” off the use of the information that you provide on this site. I admire that you can generate income by helping all of us at the same time generate a bit of income of our own. Good job. Keep it up!

  13. says

    I’d just like to encourage everyone to not only email the Governor but also call his office. You’ll speak to an intern and just tell him you are opposed to this bill. It takes 2 minutes.

    This entire bill has my husband and I so frustrated we plan to move out of Illinois should this pass. Enough with the insane IL politics!

  14. Kristy says

    Remember when Quinn was running for Governor with a proposal of a 50% personal income tax hike? That was bad enough. Now they are going to scarf up all of the FICA reduction that Obama signed into law and then some. Nice. I feel very smug in having voted against him, even though I threw away my Governor’s vote.

  15. Katie says

    Rachel,
    Quite frankly, I don’t care whether or not you are profiteering from me. That is completely irrelevant to what you bring to the table, which is good deals. The deals you’ve written about have allowed me to save a lot of money. So what if that means you make some money off of that? Isn’t that what’s called a ‘win-win?’

    Thanks for the site, keep up the great work!

  16. Marie says

    Rachel

    You won’t be able to link to Amazon.com anyway should this pass. The article in the paper states Amazon will not longer use affiliates in IL.

    The simplest thing for you to do is to incorporate yourself in another state (try Delware). You will no longer be a nexus in IL.

    • says

      Hi Marie — right, that’s what I was saying — and also, even if they go back on that decision, it still wouldn’t help much, because why would people shop through affiliate links?

      And yes, I’m looking into options. It’s unclear at this point whether it will be sufficient to incorporate as a DE corp or if the law as written applies to anyone with a physical presence in IL. Larger organizations (like fatwallet) are talking about moving out of state (hey, way to preserve IL jobs!), but obviously that doesn’t work so well for me :)

  17. Eileen says

    Well said. You clarified what is going on. This whole political ploy is awful. More challenges for the small business owner. I have already written to the governor. It is a good idea to call as well.

  18. babs says

    I will be sorry if this comes to pass. I have long been aware that bloggers profit from affiliate links (Rachel has been extremely up front about this and provided extensive info re how the links work ) and I will often get to Amazon,etc. by first going to my favorite blogs and getting to Amazon thru the blog just so that the blogger will benefit. I figure it costs me nothing extra and serves as a little unspoken thank you to the bloggers. I am really disgusted by this whole situation.

  19. says

    “Profitteering”, HA! And I thought it was called capitalism. What a putz. I sure enjoy your site and hope you make as much money as you can, esp. for all the money you help other people save. As for the putz, there’s at least one in every crowd. Try not to let it bother you. I know, easier said than done…

    Coupon Hugs,
    MJ

  20. deb says

    Once I found out you got a few pennies for posting a link, I actually made a point to order through that if I was making a purchase. I think you DESERVE any amount (I realize it is only pennies:)) since you are the one who helped find the deal!

    Your work in saving us all money is amazing and I am forever grateful. I have changed my habits and become much more aware when I shop.

    Now, on to write or call the Governor’s office. Thanks for clarifying and helping us all understand what this is about.

  21. Kate says

    I just wanted to say how much I appreciate you and this site. I hope you make a little bit of money for yourself, especially since you help so many of us save so much money.

    Thank you!

  22. Terry says

    Very good explanation of the bill. I’ve called and emailed the Gov to express my voice. I live in IL as well and this will have a devastating effect on my income for our family. The truth is, this bill won’t work, just as it hasn’t in CO, NC, and RI.

    These idiots… aka, elected politicians, will do anything to get more money, rather than stepping up and doing what is right and reduce spending and make cuts, but the people keep sending them back into office. Most corrupt state in the nation and the beat just goes on.

  23. Alan says

    Cutting spending is a foreign concept to IL lawmakers and the governor. They all need to be voted out of office. Remember this come poll time.

    Use tax on interstate goods is an illegal sales tax and will likely be challenged in federal courts. I think most citizens think that amazon is trying to avoid taxes. In reality they are trying to avoid be forced to do tax collection for a state they don’t live in. The buyers pay all the taxes.

    Check out the facebook comments at this site about amazon

    http://www.enewspf.com/opinion/21098-governor-quinn-forget-amazoncom-sign-the-bill-raise-my-sales-tax.html

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