So, I live in the State of Illinois. And, I’m an Amazon Affiliate, even though I think in the 10 years or so since I’ve signed up… I’ve earned about $0.04… total. And, my political interests have waned… more due to apathy and more interesting things in the tech world.

However, today I got an email from Amazon, warning me about this new Internet Sales Tax that has passed the Illinois Legislature and may be signed by the Governor within the next 90 days.

On the surface, it looks like a sure money maker for the State, however I think if its signed into law it will do far more harm then good!

First of all, a Supreme Court decision from 1992 establishes a precedent that State’s don’t have the authority to collect sales taxes from entities from outside the state unless they have a business presence within the state. That single case has been one of the few things protecting us from having to pay additional taxes to buy things online. Thank you Quill! (and they are headquarted less then 10 miles from my home!)

So, being an Amazon affiliate, I received notice that if this were to go into effect, Amazon will be forced to terminate their affiliate agreements with me. That Supreme Court decision states that affiliates acting on behalf of the company represents a business presence. So, the first problem with this bill is the fact that the single largest Internet retailer that would no doubt makes up a large portion of the estimated $153 million in new tax revenues (PDF). That report states that the “missing” $153M represents merely 2.2% of the Illinois General Fund Sales Tax collections. The fact is, the State of Illinois won’t collect a dime in taxes from Amazon as all they have to do is terminate their affiliate agreements with those that live in Illinois and they are no longer compelled to collect state income taxes.

Furthermore, while I don’t fare all that well as an Amazon affiliate, I’m sure that there are some people that derive a large portion of their income from affiliate programs. A quick search found that there are certainly people who do quite well with Internet Marketing. Also, there’s bound to be many people who rely on that income to make ends meet. But even if that income isn’t vital to their survival, any extra income for residents is a Good Thing™, not only for them, but also for local businesses and even the State!

Yes, that’s right, even the State benefits from Amazon affiliates earning money. Not only are the payments from Amazon considered taxable as regular Income, but when they spend that money within the state of Illinois, those transactions are also subject to sales taxes. Take away the amazon affiliate program, and there’s less money coming into the state to be taxed.

So, how is it that this tax bill was able to sail through the legislature, passing the House today with a 88-29-0 vote? You’re talking away income streams from Illinois residents (losing State Income Tax revenues as well as Sale Tax receipts when that money is spent) and causing additional hardships for Illinois residents that are likely already struggling. And for what? I only hope that our faithful public servants in Springfield have simply bought into the idea that they will be able to collect 6.25% on every Amazon sale to Illinois, but Amazon has shown their hand (and has done the same in many other states as well) in that they will merely terminate their affiliate program in Illinois and sidestep the tax completely.

Where does that leave Illinois? Still in serious financial trouble, with reduced income and sales tax receipts, and potentially pushing more Illinois residents to needing aid from the State as at least a portion of their income is being removed by this legislation.

It doesn’t take a genius to see that this is a net loss to the state. Am I missing something? If you agree with me that is really a silly idea, it can’t hurt to contact the Governor’s office and express your opinion!