Hat tip to our colleague (and IL guru) in Chicago, Mike Wynne, for letting us know as news broke today that an IL Circuit Court Judge has invalidated as unconstitutional IL Public Act 096-1544, a law enacted last year containing certain so-called Amazon nexus provisions.
After the legislation was signed into law, the Performance Marketing Association (“PMA”) filed a lawsuit in the Circuit Court of Cook County challenging the law and specifically, language that expanded the definition of a retailer maintaining a place of business in Illinois to include remote sellers having contracts with in-state publishers whereby the publisher would refer—either directly or indirectly—customers to the remote seller’s website in exchange for a sales commission or other consideration (and where the seller’s gross receipts amount to more that $10,000 a year as a result of these sales).
Citing Quill Corp. v. North Dakota, 504 U.S. 298 (1992), PMA asserted that absent substantial nexus with Illinois (e.g., a business location or other indicia of physical presence), a law requiring a remote seller to collect and remit sales tax to Illinois would violate the Commerce Clause.
Judge Robert Lopez Cepero today agreed with PMA. A yet-to-be-issued order (there was no decision written up; an order should be released in a few days), will confirm today’s notice striking down the law.
In a nutshell, this may be big news.
Why? Well, first, although the IL decision is just one decision of one Circuit Court Judge in one state, when issued, the Order will be cite-inducing precedence for those that may wish to chip away at the constitutionality of the states’ so-called Amazon laws. Specifically, those that wish to challenge states that have incorporated this “advertising nexus” language.
This is significant because Illinois is not alone in either considering or enacting similar language that would expand the definition of those doing business in the state—i.e., those obligated to collect and remit sales tax for online purchases made as a result of the remote seller entering in to, say, an advertisement agreement with an in-state person (“publisher”). California, Arkansas, North Carolina, New York, Vermont, and Rhode Island are among the states that have legislatively considered this language. Pennsylvania, while not enacting a law to the same, used similar language in a widely-discussed Bulletin issued last year.
If the law fails in IL, what will this mean for other states? It could mean the end—or, at least, a reprieve or pause—of language in broader laws that affect so-called performance-based marketers or even, just “plain” advertisers. It could also create Constitutional ripples into the various points in opposition to the states’ Amazon laws.
We will post a link to the order here as soon as it is issued.