The Illinois Supreme Court Invalidates Illinois' "Click-Through" Nexus Law

Wednesday, October 23rd, 2013

 
 
Share
Link
Illinois
General

The Illinois Supreme Court recently held that the Illinois "click-through nexus" law violated federal law. The court found that the state law was preempted by the federal Internet Tax Freedom Act (ITFA).

Illinois enacted the click-through nexus law to require out-of-state retailers to collect and remit use tax. The term "nexus" means that a retailer has a connection to a particular state. Generally, that requires a retailer to have a physical presence in that state. In Illinois, a physical presence is established when a retailer maintains a place of business in the State. The click-through nexus law expanded the definition of "maintaining a place of business in the State" to include performance marketing. Performance marketing is when an out-of-state retailer has a contract with an in-state affiliate who directly, or indirectly, refers potential customers to the out-of-state retailer's Internet website by linking to it. If the performance marketing agreements generated over $10,000 per year, the out-of-state retailer was required to collect and remit use tax.

The court, in this case, found that the law was a violation of the ITFA. The ITFA prohibits discriminatory taxes on electronic commerce. The ITFA defines a discriminatory tax to be any tax (1) imposed by a State or political subdivision (2) on electronic commerce (3) that imposes a different obligation on persons or entities to collect or pay tax (4) than is required of transactions accomplished through other means for similar property, goods, services, or information.

The court held that the click-through nexus law imposed a collection obligation on online marketing that was not imposed on offline methods such as catalogs, magazines newspapers, and broadcasts on television and radio. While a similar requirement existed when offline methods were marketed to in-state consumers, the requirement was not imposed on offline marketing that was national or international in scope. Online marketing, the court found, is inherently national or international in scope because websites can be accessed globally. Therefore, the Illinois law imposed a requirement on online marketing that was not imposed on its offline counterparts.

The court held that this unequal treatment amounted to a discriminatory tax on electronic commerce. Therefore, the Illinois "click-through nexus" law violated the ITFA.

http://www.state.il.us/court/Opinions/SupremeCourt/2013/114496.pdf


About TTR

Transaction (buying or selling things), Tax (the tax on this activity), Resources (our people, our website, our support services) - TTR, Inc.

TTR has a website that companies subscribe to and use daily. This website provides a list of everything that can be bought or sold in the U.S. It provides simple answers to whether buying or selling these items is taxable (subject to a sales tax or other tax), and it provides all the legal authority to support these tax answers.

TTR likes to keep things simple and fun, which is why it has great people who provide help to clients on any support questions they have about transaction tax issues.

Please visit TTR on the web at www.ttrus.com or call 866.578.8193.

Georgia Exempts Supplies Used in Plying the High Seas

Friday, February 23rd, 2018 -The Georgia Department of Revenue recently released a ruling that consumable supplies used by a marine transpo...

Certain Purchases from Pawnbrokers Not Taxable in...

Thursday, February 22nd, 2018 -Certain Purchases from Pawnbrokers Not Taxable in California The California Department of Tax and Fee ...

Colorado Waives Penalties for Notice and Reporting...

Monday, February 19th, 2018 -The Colorado Department of Revenue (DOR) released a publication stating that it has agreed to waive penalties ...

Maryland Sales Tax Holiday for Energy Efficient...

Friday, February 16th, 2018 -The Maryland sales tax holiday for energy efficient appliances runs from Saturday, February 17, 2018, at 12:01...

Dental Prostheses Exempt in Michigan

Wednesday, February 14th, 2018 -The Michigan Department of Treasury recently released a publication describing the retroactive exemption for d...

Taxability of Amusement Devices and Video Games in...

Monday, February 12th, 2018 -The Wisconsin Department of Revenue has released guidance addressing the taxability of video games and amuseme...