As explained by the court, the South Dakota law forecloses the retroactive application of the requirement and provided for the law to be stayed until the constitutionality of the law was clearly established.
So what does this mean for Illinois?
In anticipation of the Supreme Court's decision in
Wayfair
, as part of the budget implementation bill, the Illinois General Assembly amended the Illinois Use Tax and the Service Use Tax to include language that mirrors the nexus standard established by South Dakota.
P.A. 100-587
(The pertinent amendment begins on Page 457 of the public act.)
The Illinois law amends the nexus standards of the Use Tax Act and the Service Use Tax Act. It provides that beginning October 1, 2018, a retailer making sales of tangible personal property to purchasers in Illinois from outside of Illinois will fall within the definition of "retailer maintaining a place of business in this State" and will be required to charge Illinois Use Tax (or service use tax) to its customers if: "(A) the cumulative gross receipts from sales of tangible personal property to purchasers in Illinois are $100,000 or more, or (B) the retailer enters into 200 or more separate transactions for the sale of tangible personal property to purchasers in Illinois."
The law requires the retailer to determine on a quarterly basis whether he or she meets the criteria of either test for the preceding 12-month period. If so, the retailer is required to collect and remit the tax imposed under the Act and file returns for one year.
At the end of the one-year period, the retailer is to determine whether he or she continued to meet either test. If he or she met either test, the retailer continues filing returns and charging and remitting tax. If the retailer didn't meet either test for the one year period, the retailer is not required to continue to file returns and charge and remit tax, but remains required each quarter to make the determine again.
The Wayfair decision doesn't bring complete tax parity in Illinois between Internet sellers and bricks and mortar sellers because of the manner in which Illinois law deals with locally-imposed sales taxes. Locally-imposed sales taxes are, with certain exceptions, are retailers' occupation taxes. Those taxes are required to be charged and collected by Illinois retailers. There are no corresponding locally-imposed use taxes. The local taxes are paid by purchasers in normal retail transactions because the locally-imposed taxes allow retailers to have a right of reimbursement for the local taxes from purchasers.
After the Wayfair decision, internet retailers like Wayfair will be required to charge and collect the 6.25% Illinois Use Tax on sales to Illinois customers. If, as a resident of Springfield, you decide to buy a sofa from Wayfair, you will pay 6.25% tax. For example, if you buy the same sofa from a local retailer, you will pay either 8.5% or 9.5% depending on the location of the retailer in Springfield. That is still a rather large differential on big-ticket purchases.
Another, and related, issue involves the current Illinois statutory system for distributing a portion of sales tax revenues to local governments. Local governments are not going to see a sudden influx of additional sales tax dollars as a result of Wayfair.
The locally-imposed retailers' occupation taxes go to the local jurisdiction imposing the tax. In addition, 1.25% of the 6.25% Illinois Use Tax is distributed to local governments, but is distributed on the basis of population. There remains a common misconception many members of the public that the local share of use tax dollars is distributed to location of the purchaser. Some local governments will expect an influx of sales tax dollars and there will be consternation when that doesn't materialize.
Bottom line - we now know the answer to the physical presence requirement of
Quill
- it has been eliminated. It is still unclear precisely how much additional revenues the state will bring in from the decision. In the most recent budget signed into law, the General Assembly included $150 million in new revenues from this new source.
This week, Governor Rauner issued an executive order mandating that steps be taken to eliminate the backlog of over 1,000 cases at the Illinois Human Rights Commission (IHRC) dealing with anti-discrimination and equal opportunity complaints. Executive Order 18-0 will streamline government services to provide due process for Illinois residents.
