Illinois Online Sales Tax Law Hits As Online Purchases Rise | Chicago News

Illinois tax revenue plummeted when COVID-19 hit, but according to the Illinois Department of Revenue it is rising again.

Tax revenue on sales and use is up 17% from January-September this year compared to the same period before the pandemic in 2019.

People may buy more, albeit in different ways.

Or it could be that retailers that didn’t receive sales taxes before are now, due to state laws implemented in 2020 and 2021 that aim to capture more sales taxes online.

“The question is, what is it? And the answer is both, ”said Carol Portman, president of the Taxpayer Federation of Illinois. “When you collect taxes and remit them, you don’t tell the Revenue Department, ‘This is the amount I wouldn’t have collected until you gave me. You just turned around, you say, ‘Here are our sales.’ And they (the state revenue department) know it, they’ve seen a slight increase in the number of new retailers in their system, new taxpayers from that point of view.

As purchases shifted from physical to online stores, logistical and legal issues kept states from catching up. Until 2018, U.S. Supreme Court rulings prevented states from requiring online sellers without a physical presence in the state to collect sales taxes for them.

The federal Wayfair decision opened the door for this requirement to be introduced for many online retailers, but even since then there have been holes.

This is tax policy – so there are caveats and complications depending on the details.

But overall, so-called market enablers – like Amazon, E-Bay, and Etsy, but also similar, smaller websites – were exempt from having to collect sales taxes in Illinois until when a law came into effect in 2020 that required them to charge state sales tax of 6.25. %.

“Even that was still frustrating for the municipalities that were not getting their share, and for some of the traditional retailers who were still collecting more than 10% in some places, and their virtual competitors were still collecting – the tax was now applied, but only at six and a quarter – whereas if you find yourself in a jurisdiction where the tax is greater than 10%, you are still at a competitive disadvantage, ”Portman said.

In other words, in Chicago – where municipal and regional taxes push the tax rate up to 10.25% – brick-and-mortar stores were still at a disadvantage compared to online businesses that only had the tax rate. 6.25% of the state.

The Leveling the Playing Field for Illinois Retail Act, implemented in 2021, changed that; now electronic marketplaces must also pay local sales taxes.

Since the laws came into effect on January 20 and 21 respectively, they were in effect at the same time as the pandemic increasingly pushed shoppers into online shopping carts.

“We would all have preferred not to have had a pandemic to prove a point, but good timing,” said Illinois Retail Merchants Association chief Rob Karr. “Isn’t it an exaggeration to say that retail has literally saved the budgets of state and local governments thanks to these laws? “

Follow Amanda Vinicky on Twitter: @AmandaVinicky

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David A. Albanese