SPRINGFIELD – An effort to ensure online retailers are playing by the same rules as local brick-and-mortar retailers arrived in the House Tuesday after advancing out of the Senate this past week.
The measure requires out-of-state retailers that do business with Illinois customers to collect a use tax under two conditions: their cumulative gross receipts exceed $100,000 or they have more than 200 separate transactions with customers in Illinois.
State Sen. Andy Manar, D-Bunker Hill, is a chief cosponsor of the initiative, Senate Bill 2577. It passed the Senate 39-10 with bipartisan support.
He represents central Illinois communities that have been hard hit by job losses and declining sales tax revenue for road and sewer projects as long-standing brick-and-mortar retailers have shuttered because of online competition and changing consumer habits.
“Out-of-state corporations are gaming the system. It’s hurting the small and mid-size retailers our communities rely so deeply upon for goods, services, jobs and revenue,” Manar said. “Online shopping, while good and convenient for rural consumers, has contributed to a tidal wave of brick-and-mortar store closures, job losses and sales tax declines that have local mayors and county boards extremely concerned. I share their worries.”
Federal law requires retailers with a physical storefront to collect the sales tax required by the jurisdiction where the business is located. If the retailer has a physical presence in a state, it must collect applicable state and local sales tax from customers, regardless of where the sales originates.
However, if it does not have a presence in a particular state, it is not required to collect sales taxes.
As consumer shopping habits shift online, local governments are finding their sales tax collections – money often used for local infrastructure improvements – on the decline or stagnant.
Manar stressed that SB2577 is an effort to level the playing field, not a tax hike.
“As the economy and consumer habits change, it’s vital that state government is vigilant and changes with them,” Manar said. “If we don’t try to rectify this imbalance, I don’t want to imagine what some of our rural communities will look like in a few years.”