SPRINGFIELD -- The Illinois Department of Revenue is warning out-of-state businesses that receive money from consumers through Illinois businesses they are connected to that they must begin collecting the state’s use tax.

SPRINGFIELD -- The Illinois Department of Revenue is warning out-of-state businesses that receive money from consumers through Illinois businesses they are connected to that they must begin collecting the state’s use tax.


The so-called “Amazon tax,” which won’t affect the online giant because it has terminated its relationship with all in-state affiliates, went into effect when Gov. Pat Quinn signed it into law in March.


Department spokeswoman Sue Hofer said a recent bulletin posted on the department’s website is the latest attempt to educate out-of-state companies about the state’s attempt to increase collection of what is essentially Illinois’ sales tax.


The agency has a list of the top 100 online companies and is comparing it to a list of companies that have registered to collect the tax on behalf of Illinois consumers, Hofer said. It intends to send out notices to those who have to collect the tax and haven’t yet registered. The department believes 68 percent of those online companies already collect Illinois’ use tax because they have presences here.


“There is no list of people who should pay taxes in Illinois but aren’t. We are collecting information about who they are and where they are,” Hofer said. “Once we have a list of who would be required to file, we will do individual outreach.”


The law forces Internet retailers to collect Illinois' 6.25 percent sales tax on all purchases made in the state. Illinoisans are already required to pay that tax, but it is up to them to declare it.


The law attempts to shift responsibility for collecting the tax to online retailers by requiring out-of-state retailers to collect the tax if they sell products through in-state businesses and websites, pay commissions to those entities and have gross receipts from Illinois customers of more than $10,000 annually.


Under federal law, out-of-state online retailers without a presence in a state cannot be compelled to collect that state’s sales tax. Only an act of Congress can change that. A 2009 study published in State Tax Notes estimated that Illinois loses $153 million in unpaid use taxes every year because online retailers don’t have to collect the tax.


If out-of-state businesses who are required to don’t collect the tax, the consequences could be stiff, Hofer said.


“It is a criminal violation to knowingly commit tax fraud,” she said. “Before that, we have any number of collections activities. We have the right to call in a collection agency. We have the right to put a lien on property owed by the company.”


Advocates for small businesses, including the Illinois Retail Merchants Association, support the law, which they say creates a more even playing field. The law could help mom-and-pop shops become more competitive, they say.


But George Rishel, owner of The Sly Fox bookstore in Virden, is skeptical that the state’s action will make much of a difference.


“I think an argument can be made that businesses ought to be treated alike and pay their fair share, but as far as it having a significant impact on buyer behavior, I remain doubtful of that,” he said. “Just the fact that Amazon has pulled their affiliates in Illinois hasn’t stopped people from buying from Amazon. How many people are actually dependent on buying through an affiliate?


“We live and survive off the local trade. That’s built off of service.”


Chris Wetterich can be reached at (217) 788-1523.