On March 28, 2013, Overstock and Amazon lost their challenge of a state tax on online sales in New York’s highest court. Further, the the Supreme Court of United States declined hearing the case, because the court determined that such a law did not violate the federal Commerce Clause. Following the Amazon decision, we expected the states to follow New York’s lead and enact its own click-through-nexus laws.
In 2011, Illinois did just that. Specifically, Illinois has a nexus law that required any company with a place of business in Illinois to collect and remit tax to Illinois. In 2011, Illinois enacted its so-called “Click Through” nexus law, which required a business to collect and remit tax if it has contact with a person or business in Illinois who referred customers to the business’s website for a commission. In this case, the trade group Read More
The Supreme Court of Illinois recently affirmed a lower court’s ruling that the state’s click-through nexus legislation was preempted by a federal law governing taxes placed on electronic commerce.
In 2011, the Illinois General Assembly enacted Public Act 96-1544,1 which added new click-through nexus legislation and sought to tax a common contractual arrangement known as “performance marketing.” In performance marketing, an online retailer contracts with an individual to place hyperlinks for a retailer’s website in consumer-targeted or high-volume areas, as a means for creating online presence and directing potential customers to the retailer’s website. Illinois’s legislation sought to establish nexus with retailers making more than $10,000 per year through performance marketing relationships.
The Performance Marketing Association, Inc. (“PMA”) filed a complaint against the representative for the Illinois Department of Revenue, seeking declaratory and injunctive relief from the click-through nexus element in Public Act 96-1544. The circuit court of Cook County sided with PMA, finding that the click-through nexus legislation was preempted by the Internet Tax Freedom Act (ITFA), 2 which prohibits “multiple discriminatory taxes on electronic commerce.” Accordingly, the circuit court granted PMA’s motion for summary judgment. Read More