On Wednesday Illinois Governor Pat Quinn signed a bill repealing the death penalty in the state. The next day Quinn signs a bill into law creating a new death penalty, for Illinois Internet entrepreneurs.

House Bill 3659, what was commonly referred to as the Amazon tax bill, changed the definition of what is an out-of-state retailer. If a company has a physical presence in a state and someone from that state buys from them, they must collect taxes on that purchase. If someone from one state buys something from a company in another state, that company does not have to collect taxes on that sale, and – many people don’t know this – the purchaser must report to their home state what taxes they “should have” paid to their state on that purchase! As many people buy online from firms outside of their home state, they avoid paying sales tax.

The Amazon bill targeted Amazon.com and other companies who do not have a physical presence in the state, but do have affiliate marketers in the state. In the case of Illinois, someone like myself, and thousands of others who place links on their Web sites for products, now are considered a physical presence in Illinois for that company. As an Amazon Affiliate, by being in the Land of Lincoln, in the eyes of Pat Quinn, State Senate President John Cullerton and the rest of the short-sighted legislators who voted for this, Amazon IS in Illinois if someone buys from a link on my Web site.

Amazon, Overstock, other out-of-state retailers, myself and many others believe this is unconstitutional. It was pushed by in-state retailers as a way of “leveling the playing field.” But does it really? By canceling affiliate partnerships with Illinois businesses and residents, Amazon remains an out-of-state retailer. Illinois residents can still purchase from Amazon and others and not pay sales tax. Illinois businesses and residents who earned affiliate revenue previously no longer are – and those people were paying taxes on their earnings!

As a result, this is a true lose-lose situation for the fiscally unstable State of Illinois and its residents. But don’t try telling Pat Quinn this. This is the same person, in his budget for the state, had a line-item for repairs to the Governor’s Mansion. Meanwhile, the state is not paying its bills. A disaster if there ever was one.

For myself personally, I did not make a significant amount of money from Amazon. There are many out there whose sole income is from affiliate marketing, both individuals and businesses. There’s no wonder New Jersey, Wisconsin and Nevada have been trying to lure Illinois-based businesses to their states.

Below is the text of the email I got from Amazon canceling my affiliate accounts. A great article on the math of the Amazon tax bill at the Chicagoist blog is worth reading. There is also a lively conversation at Revenews on this as well. I welcome your thoughts on this move by Illinois in the comments for this post.

Hello,

For well over a decade, the Amazon Associates Program has worked with thousands of Illinois residents. Unfortunately, a new state tax law signed by Governor Quinn compels us to terminate this program for Illinois-based participants. It specifically imposes the collection of taxes from consumers on sales by online retailers - including but not limited to those referred by Illinois-based affiliates like you - even if those retailers have no physical presence in the state.

We had opposed this new tax law because it is unconstitutional and counterproductive. It was supported by national retailing chains, most of which are based outside Illinois, that seek to harm the affiliate advertising programs of their competitors. Similar legislation in other states has led to job and income losses, and little, if any, new tax revenue. We deeply regret that its enactment forces this action.

As a result of the new law, contracts with all Illinois affiliates of the Amazon Associates Program will be terminated and those Illinois residents will no longer receive advertising fees for sales referred to Amazon.com, Endless.com, or SmallParts.com. Please be assured that all qualifying advertising fees earned prior to April 15, 2011 will be processed and paid in full in accordance with the regular payment schedule. Based on your account closure date of April 15, 2011, any final payments will be paid by July 1, 2011.

You are receiving this email because our records indicate that you are a resident of Illinois. If you are not currently a permanent resident of Illinois, or if you are relocating to another state in the near future, you can manage the details of your Associates account here. And if you relocate to another state after April 15, please contact us for reinstatement into the Amazon Associates Program.

To be clear, this development will only impact our ability to continue the Associates Program in Illinois, and will not affect the ability of Illinois residents to purchase online at [url=http://www.amazon.com]http://www.amazon.com[/url] from Amazon’s retail business.

We have enjoyed working with you and other Illinois-based participants in the Amazon Associates Program and, if this situation is rectified, would very much welcome the opportunity to re-open our Associates Program to Illinois residents.

Regards,

The Amazon Associates Team

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