Remote Sellers to Collect Sales Tax Under Illinois Budget

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By Michael J. Bologna

Illinois has adopted South Dakota’s economic nexus standard as part of its fiscal year 2019 budget, adding its name to an increasing list of states looking to capture sales tax revenue from remote sales.

Gov. Bruce Rauner (R) didn’t reference the nexus language during a June 4 budget-signing ceremony, but he applauded a legislative process that gave the state a budget without the drama and name-calling that has marred spending and revenue negotiations with the General Assembly throughout his administration.

“We are signing a balanced budget for the first time in many years—on time—and making great forward progress for the people of Illinois,” Rauner said. “This is a budget that was put together on a bipartisan basis. It is a compromise. It is not perfect, but it is a good step in the right direction.”

Creation of the FY 2019 budget ( H.B. 3342) avoided the legislative battles that left Illinois without a conventional budget for two years early in Rauner’s administration. The budget crisis was resolved last July when Democrats enacted a $5 billion income tax increase over Rauner’s veto.

With H.B. 3342, Illinois plans to take advantage of a potential sales and use tax windfall if the U.S. Supreme Court sides with the state in South Dakota v. Wayfair, a direct challenge to the court’s 1992 decision in Quill Corp. v. North Dakota. Quill, which states for years have tried to “kill” through lawsuits and legislation, prohibits states from imposing sales tax collection obligations on vendors lacking an in-state physical presence. The case was argued April 17, and practitioners expect a decision by late June.

Under H.B. 3342, Illinois revised its definition of a retailer with economic nexus in the state. The new standard extends to any seller with gross receipts of more than $100,000 per year to customers in Illinois or with 200 or more separate transactions to Illinois customers. The law takes effect Oct. 1.

To contact the reporter on this story: Michael J. Bologna in Chicago at mbologna@bloomberglaw.com

To contact the editor responsible for this story: Ryan C. Tuck at rtuck@bloombergtax.com

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