As Lisa Blaeser of CCH recently reported, Illinois has enacted legislation
that creates a rebuttable presumption that retailers will
have nexus with Illinois if their in-state sales contacts provide potential customers
with a promotional code that allows the retailer to track the referred
customers’ purchases.
P.L. 98-1089 (S.B. 352), Laws 2014, which is scheduled to take
effect on January 1, 2015, has amended the existing Illinois click-through
nexus law to provide that a retailer is presumed to be maintaining a place of
business in the state if the retailer has a contract with a person located in
Illinois under which the person, for a commission or other consideration that
is based on the sale of tangible personal property by the retailer, directly or
indirectly refers potential customers to the retailer by providing them with a promotional code
or other mechanism that allows the retailer to track purchases referred by such
persons. Under the law, examples of a mechanism that allows the tracking of
purchases include the use of a link on the person’s website, promotional codes distributed
through hand delivery or by mail, and promotional codes distributed through
radio or other broadcast media.
The presumption will apply only if the cumulative gross receipts from sales of
tangible personal property by the retailer to customers who are referred to the
retailer by all persons in Illinois under such contracts exceed $10,000 during the
preceding four quarterly periods ending on the last day of March, June,
September, and December. The presumption can be rebutted by submitting proof
that the in-state contacts’ referrals or other activities in Illinois did not meet
the nexus standards of the U.S. Constitution during the four quarterly periods.
The legislation purportedly fixes a defect Illinois’ click-through nexus law, which,
as Blaeser reported, was previously held void and unenforceable by the Illinois
Supreme Court in Performance Marketing Association, Inc. v. Hamer. In that case, the court held that the
Illinois click-through nexus law was preempted by the Internet Tax Freedom Act
because it imposed discriminatory taxes on electronic commerce. The law was
found to be discriminatory because it imposed a use tax collection obligation
on out-of-state retailers who maintained links on websites, but it did not
impose such an obligation on similar types of advertising such as promotional codes made
available by out-of-state retailers in newspapers or other printed publications
or through over-the-air broadcasting. The court did not address the issue of
whether the click-through nexus law violated the Commerce Clause of the U.S.
Constitution.
