|New law enforces online sales tax|
|Written by Shelley Singler, Daily Vidette Reporter|
|Sunday, 20 March 2011 19:00|
Websites like Amazon and Overstock will no longer be able to avoid Illinois’ sales taxes with a new law. The law will not apply to all sales, but only to those made through Illinois affiliates.
According to the Associated Press, Gov. Pat Quinn signed a law on Thursday, March 10 that requires the state to collect state sales taxes from online retailers. Any company that sells products to Illinois residents will now have to collect and pay taxes.
“They will likely have to contract with third party companies to handle the collection and the costs of those contracts are relatively unknown at this time. Thus, it may cost more to collect with revenue than the benefit received, but there is no doubt that it will level the playing field,” Nancy Lind, professor in politics and government, said.
House Bill 3659 was introduced in the U.S. House of Representatives at the end of 2010 to tax all online purchases. The bill is part of the “Main Street Fairness Act,” which places the online retailer on the same level as retailers who are not online.
“By putting online in front of sales taxes, they are really just taxing sales online, so they would be the same taxes as [any other store] would have to collect, so that is why it is called leveling the playing field. So it’s just the regular sales tax that Illinois has,” Harlan Fuller, instructional assistant professor of accounting, said.
For online retailers that do not collect taxes online, purchases should be filed on a tax return through the customer.
“If you buy from out of state and don’t pay a sales tax, then you will have to pay a use tax where it is now part of an Illinois tax return. It’s been difficult to enforce, so people were unknowingly violating the tax codes,” Fuller said.
The use tax isn’t new, but requiring those purchases to be claimed on a tax return is new this year.
Fuller said that he has to ask people whether they made purchases online without taxes, but the problem is that few people make those claims or don’t keep track of estimating their tax debt.
However, taxpayers will be granted amnesty on purchases made between July 1, 2004 and Dec. 31, 2010.
The new law could improve “the playing field,” but critics are saying that this new law could cause smaller businesses to drop their affiliates in Illinois and move elsewhere.
“If a company is leaving because they have to collect sales taxes, then they were unfairly competing. So what the critics are saying is that the small companies that would do business with Amazon would sever their business with them,” Fuller said.
According to the IRS, if the Internet collected taxes, it would have generated $153 million for the state government if it were subject to the Illinois 6.25 percent sales tax.
“This is the state of Illinois in essence trying to collect additional revenue to offset the state’s massive deficit. The problem with both the state of Illinois and federal government is that many small businesses are not equipped to collect this revenue,” Lind said.