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On affiliate nexus taxes, Illinois was ill-advised

There’s a fairy tale where a king who’s fallen on hard times is visited by a shadowy figure whispering advice in the king’s ear.  And before long, the King loses all the good things about his kingdom and the advisor takes control. 

We just watched this tale unfold in Illinois.  Like the king, Illinois’ treasury has fallen on hard times.  And just like the advisor, big box stores Snidely-whiplashwhispered of riches that would come if the state taxed out-of-state retailers who advertise on Illinois websites.

Before Illinois lawmakers knew what happened, they had passed an affiliate nexus bill that will cast out affiliate businesses while generating no new tax revenue.

For the past decade Illinois benefitted from jobs and taxes generated by start-up Internet companies like Groupon.  Affiliate advertisers — content publishers that show ads on behalf of retailers and others — flourished. Illinois attracted over 9,000 affiliates and represents the largest concentration of super-affiliates in the country.  Now, just for representing out-of-state retailers, these Illinois affiliates are to be banished from the kingdom.

Earlier we discussed the mirage effect of these affiliate nexus laws.  How over 200 merchants terminated affiliate programs in New York, North Carolina, and Rhode Island, when similar measures passed there.  And how Rhode Island seeks to repeal this job killing legislation.  And how studies like the one in New Mexico repeatedly find that the passage of affiliate nexus laws “will likely have negative effects on . . . business’s retail sales, and therefore, will have a negative impact on general fund revenues.”

We are already seeing the negative effects of this new Illinois law.   Amazon announced plans to terminate its affiliate program in Illinois, and companies like and Coupon Cabin are making plans to relocate out of state.

Maybe all the displaced employees of Illinois affiliate businesses will storm the castle in Springfield and demand a repeal of this law.     Or maybe they’ll just fade away, along with the promise of making Illinois a prosperous kingdom again.

-Carl Szabo