Governor Pritzker recently signed a new law dubbed the Leveling the Playing Field for Illinois Retail Act. This mandate expands the reach of the Illinois Department of Revenue (IDOR) to collect sales taxes from out-of-state retailers.
This means that if you purchase something on the internet from a shipping location outside of Illinois, you may now be forced to pay sales tax on the transaction.
When the Supreme Court handed down the Wayfair Decision back in 2018, it began allowing individual states to pass their own laws on the collection of sales tax from retailers who don’t have a presence, or what we call nexus, inside the individual state. This has caused an absurd amount of confusion, because the laws aren’t uniform throughout all 50 states, on either their limits, requirements, or enforcement.
The new Illinois law requires remote retailers, or sellers of tangible only goods without nexus inside our state, to collect and remit Illinois Sales Tax if the following criteria are met.
1 – $100,000 or more in cumulative gross sales are completed inside Illinois over the past year
2 – 200 or more transactions for the sale of tangible personal property are consummated inside Illinois
3 – The sales tax rate to be collected will be based on the end point or delivery address.
3 – The law was passed retroactively and begins with a sales transaction date of 1/1/2021.
How that last part can be done legally is beyond me. The way I read the law, it says that if you met the threshold at any date going back to the beginning of 2021, you must now remit sales taxes to Illinois on sales where no sales tax was collected in the first place.
If I were a betting man, I’d see a major legal challenge to this legislation in the near future.
Let me leave you with this.
The Supreme Court’s actions in allowing states to do whatever they want has created a hodgepodge of laws that are almost impossible to comprehend.
In some states, when a remote retailer delivers to a consumer in their state, they rely on their Use Taxes to collect an appropriate sales tax on the transaction. Also, please remember there are five states that don’t have sales taxes in the first place.
Other states use a set of circumstances in order to create nexus. Iowa just handed down a decision from their Supreme Court. In the case, a liquor distributor located in Illinois, sent a beer truck across the Mississippi River every Tuesday to service a few of their customers in Iowa.
The decision reasoned that because the distributor had employees inside the state on a regular basis (every Tuesday) that this act constituted nexus. Ridiculous.
States like Illinois now have a threshold. Idaho, as an example, has a threshold of $100,000 in sales to begin remitting sales tax.
Other states like New York, California, and Texas don’t have any threshold at all. If you’re a remote retailer and deliver anything inside any of those states, they want your money whether you collect any sales tax or not.
Welcome to my world.
If you have questions in this regard, or would like to have an accountant who actually keeps up on the latest tax news and regulations, please give me a call.
We’re all going to get through this. Let’s get through it together.
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