Online Retailers Lose Affiliate Tax Battle In Illinois

A battle in the war against online retailers has been lost in Illinois, after Illinois Governor Pat Quinn signed a bill yesterday taxing online retailers with affiliates in that state. The bill is the latest to target online retailers--in particular, use affiliate marketing to drive customers to their sites. Illinois, which follows states such as Colorado, North Carolina, and Rhode Island to pass similar laws, is hoping to bolster the state's balance sheet by forcing Internet retailers to collect sales taxes on its behalf.

California also has similar bills in motion. has already threatened the California Board of Equalization with cutting California affiliates if any of those bills pass. Interestingly enough, California's high tech industry powers the affiliate marketing industry, with such companies as ValueClick, and its subsidiary Commission Junction, powering much of the affiliate marketing efforts of online retailers. Other local firms which derive much of their value from being affiliates of online retailers include sites like,, Shopzilla, and others. The Illinois law looks to already have a devastating impact on similar businesses in Illinois; one retailer, said last night that, "Illinois will lose jobs, many thriving businesses like CouponCabin and other affiliate marketing firms will be forced to move to other states, and most important, this law will not generate the tax revenue Illinois thinks it will collect."