SPRINGFIELD — Illinois’ online sales tax law may soon go national. U.S. Sen. Dick Durbin, D-Ill., says he’ll propose a federal law that would force online retailers to collect sales taxes on purchases made over the Internet at already existing state sales tax rates.

By Melissa Leu

SPRINGFIELD — Illinois’ online sales tax law may soon go national. U.S. Sen. Dick Durbin, D-Ill., says he’ll propose a federal law that would force online retailers to collect sales taxes on purchases made over the Internet at already existing state sales tax rates.

Durbin says the bill he’s calling the “Main Street Fairness Act” would benefit local bricks-and-mortar stores that face competition from online retailers that in many cases now don’t collect sales tax.

“It is not only a confusing situation, Internet sales are firmly established across the United States. States, counties, cities are losing substantial amounts of revenue because of the current system,” Durbin said.

Illinois sales tax rates are separated into three categories: food and prescriptions (1 percent), vehicles (6.25 percent) and other general merchandise (6.25 percent). Local communities also can create additional taxes.

Durbin estimates that states could be losing a total $37 billion every year on purchases made through online retailers, with Illinois losing about $153 million.

“It’s one of those things unreported. We’re not sure what we’re missing. I think it’s going to be a minimum of over $100 million a year,” Durbin said.

A 1992 Supreme Court case ruled that only retailers with a physical presence in the state had to collect sales tax.

In March, Gov. Pat Quinn signed Illinois’ first online sales tax law that extended a company’s physical presence to their online affiliates with offices in the state, thereby requiring them to collect sales tax and submit it to the state. As a result, major online retailers, such as Amazon.com, dropped their affiliates.

Brent Shelton, spokesman for Fat Wallet, an affiliate of Amazon.com and eBay.com, said the company moved to neighboring Wisconsin to avoid being dropped as an Amazon affiliate. He said the effect of the proposed federal law on Fat Wallet largely depended on how its partners react.

“It wouldn’t surprise me if some of the merchants aren’t exactly for (it),” Shelton said.

Fat Wallet offers coupons to shoppers through affiliate partnerships with online retailers such as Amazon and eBay.

Brian Bieron, a lobbyist at eBay, said it was unfair to pit giant retailers that have actual stores and already have to collect sales taxes against the smaller businesses that don’t.

“Forcing small businesses to take on the same costs and tax burdens as national retail businesses is unrealistic, unfair and will unbalance the playing field between giant retailers and small business retailers on the Internet,” Bieron said in a written statement.

Smaller, brick-and-mortar stores, however, say the new state law — and the proposed federal initiative — will make it easier to compete.

“We know it’s a competitive environment. We have to compete to be viable, but we should be on a level playing field with our online sellers,” said Bob Thompson, owner of BikeTek, a bicycle shop in Springfield.

Lam Sargis, owner of Springfield Running Center, an athletic apparel and shoe store in Springfield, said he’s had customers come into his store asking him to match prices they found online without the sales tax.

“Even though we give a little bit of a discount to locals, we cannot match the discounts given by the big companies that don’t have the bricks and mortar,” Sargis said.

But not all small business owners agree.

Brandi Tolley, who runs a men’s apparel eBay store, called the measure a “desperate” way for states to pull in revenue. Her store earns about $35,000 in sales annually, Tolley said.

“A lot of us are small businesses. We don’t have huge brick-and-mortar stores. We’re just tiny businesses trying to make it,” Tolley said.

“Is (being online) an advantage? Sure. But (stores) have that same opportunity. They could certainly shut down that brick-and-mortar and sell to people all over the world, just like the rest of us do,” Tolley added.

Illinois shoppers are required by law to self-report sales taxes for online purchases that aren’t collected by the retailer. The Illinois law and federal proposal would shift that responsibility from the customers to the retailers.

Self-reporting “creates a system which is very hard to administer across the United States, when it’s up to the consumer to voluntarily step forward and declare that they owe sales tax in a given place,” Durbin said.

Durbin said he expects to introduce the legislation by next month.

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  1. Dick Durbin

    Anything Dick Durbin says sickens me. His only ideas to solve problems involve more taxes. More taxes only hurt the very people you are attempting to help. I'm a liberal democrat but I'm really tired of the same old concepts that our Nation and our beloved City of Evanston seem now to summarily reject. Maybe the liberal democrat of JFK's time is today's conservative ?

    1. Durbin is right

      "Anything Dick Durbin says sickens me…I'm a liberal democrat"

      Yeah, sure you are a Democrat….like one of those fake '"Democrats" who pop up on Faux News and agree with everything Hannity says.

      How is this a "new" tax?   Enquiring minds want to know.

      "Illinois law already requires payment of the state's sales tax on Internet purchases, but it's up to the people buying the products to report the purchase and pay the tax directly to the state. Not surprisingly, few do."  (Source: here )

      If you are following the law, and I assume you are,  aren't you paying sales tax already?   You are reporting all of your internet purchases to the state of Illinois on your taxes, as required by law, right?

      The only people hurt by this would be those who are not paying their fair share…so honest people like you would be unaffected.

      Anyway, the idea of a national sales tax is conservative one....read this article from 2004 :

      "President Bush and House Speaker Dennis Hastert (search) have both said the idea of a national sales tax deserves a serious look. For many, the idea of a world without the Internal Revenue Service is very seductive."

      Or even more recently (2010), Ron Paul and Paul Ryan proposed a national sales tax.

      So there are very good arguments against sales taxes.  They tend to be regressive.  A progressive income tax is always preferable.   But let's not pretend that this is some 'liberal Democrat' idea…

      And allowing companies to avoid sales tax – giving them an unfair advantage over local merchants – distorts the marketplace and forces cities and states to find other revenue sources (income tax, property tax, etc. ) to make up for lost sales tax revenue.

      1. Fair Share and Hurting

        Please reconcile for me the fact that GE paid no taxes in 2010, the Obama green initiative and the cozy relationship with Imelt, CEO of GE.

        Please reconcile for me the concessions made to the Unions in the form of Health Care waivers, tax exemptions and the graceful deliver of two car companies to the UAW.

        Please reconcile for me the brown shirt style anti business stance this administration has.  It does not surprise me for a second that Durbin wants an Internet Tax.

        But maybe Durbin should clean his own party and administration's house first to guarantee "Fair Share".  Because there is no "Fair Share" occurring, and a lot of Hurting is in this country today.

        Hypocrisy at its finest.

    2. True conservatives do not

      True conservatives do not subscribe to the notion that all taxes are bad. That is utopian. Or libertarian. No, conservatives believe in downsizing govt, eliminating defined benefits, closing tax loopholes/favoritism, emphasizing consumption (ie sales) tax, and de-emphasizing both investment tax (capital gain) and earnings tax (income). Thats the tea party in a nutshell. Establishment (read: crony) republicans dont count. The same guys who had to be arm-twisted into banning earmarks. They arent true conservatives. Bottom line: internet sales have gotten a free ride long enough. To the detriment of state and local governments. Unless we can magically uncover a new and reliable funding source for these govts, hit e-tailers with an EU-style VAT(as part of an overall tax downsize). It is overdue.

  2. typical

    Another typical democrat. Raise taxes, give the people what we feel is good for them, and raise taxes!

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