Amazon Closes Affiliates in Illinois Over Tax Law, But Is Running Out of Places to Hide

Illinois Gov. Pat Quinn had barely finishing curving the last "n" of his signature on new online-retailer tax legislation before Amazon sent out a message to all its Prairie State affiliates that they would no longer be getting paid. That makes four states that have passed laws requiring individual Amazon associates to start collecting sales taxes and four states where Amazon has either ditched its affiliated blogs and websites or threatened to. But with more states soon to follow, the company and its ilk may be running out of places to hide.

The Wall Street Journal reports today that Amazon has some 9,000 retail affiliates in Illinois, all of which will be affected. Rebecca Madigan, a trade group representative of one of the sites, claims that the satellite retailers brought in $611 million in advertising revenue in 2009, translating into $18 million in tax revenue for the state. She says that Amazon's pulling out will be "devastating" to the state's economy.

Quinn, for his part, says he's just trying to "put Illinois-based businesses on a level playing field."

That is to say, an equal playing field mainly with big-box stores like Walmart, Target, and Costco. Large brick-and-mortar stores have strongly cheerleaded the tax laws in Illinois and elsewhere saying that Amazon,, and others have an unfair advantage in not having to collect sales taxes.

But the question remains whether the law is constitutional. Previous Supreme Court rulings have stated that states can require sales taxes from businesses when the "nexus" of their operation is in the state. Affiliates spread in huge numbers across the country hardly qualify as a "nexus." But they are selling a product without having to collect and pay sales taxes on it.

And everyone knows the bit about "death and taxes."

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