In a decision that could have far-reaching impact, an Illinois state court judge has ruled that the state’s Amazon law, passed to tax online sales of in-state affiliates, is unconstitutional.
The affiliates, who publish Web site content, are compensated by purchases made by “click-through” advertising. The decision found that the affiliate relationship did not constitute substantial nexus, and therefore violated the Commerce Clause of the Constitution.
“We were surprised, not that the court ruled in our favor, but that the decision was made so quickly,” said Rebecca Madigan, executive director of the Performance Marketing Association, the trade organization that brought the suit.
“Our goal is to allow the 9000 Internet affiliate marketers to get back into business as quickly as possible.”
Madigan estimates that about a third of the affiliates moved out of state when the law restricting their income was passed. “You can’t stay in business when you’re losing half your revenue,” she said. “By our estimates they earned $740 million in 2010, the year before the law passed, and paid $22 million in state income tax.”
The Illinois Department of Revenue is expected to appeal the decision.
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