As anticipated, the Governor of Illinois has decided to sign HB3659 and new nexus law will take effect on July 1, 2011. HB3659 is similar to the laws passed in other states. It will now require some out of state merchants (non-Illinois merchants) to collect and remit sales tax on purchases made by Illinois residents if the merchant has Illinois affiliates or publishers. Governor Pat Quinn is seeking to balance his state’s budget, level the playing field for in-state merchants and, improve collection of sales tax through improved enforcement of existing sales and use tax laws.
HB3659 says in part:
1.2. Beginning July 1, 2011, a retailer having a contract with a person located in this State under which:
A. the retailer sells the same or substantially similar line of products as the person located in this State and does so using an identical or substantially similar name, trade name, or trademark as the person located in this State; and
B. the retailer provides a commission or other consideration to the person located in this State based upon the sale of tangible personal property by the retailer. The provisions of this paragraph 1.2 shall apply only if the cumulative gross receipts from sales of tangible personal property by the retailer to customers in this State under all such contracts exceed $10,000 during the preceding 4 quarterly periods ending on the last day of March, June, September, and December.
As states struggle to balance their budgets we can expect similar legislation to progress in other states. Over a dozen states are actively working on similar bills. An equal number of states have also indicated that they are being more aggressive in monitoring the activities in their state by out of state merchants with affiliate programs.
Affiliates in Illinois can expect that some merchants will terminate the advertising relationship. Fortunately, there are many merchants to choose from. Seek out replacement merchants to minimize the impact.
As always, affiliate and merchants should be proactive. Affiliates (or publishers if you favor that title), should always have a back up plan and replacement merchants. Merchants should seek out qualified counsel for advice on this issue and to ensure compliance in all states.