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Shopping online would get more expensive for Illinois residents under a new measure passed by the state’s General Assembly that changes the way online sales are taxed.
The changes would require online marketplaces, like Etsy and eBay, to collect state sales tax from Illinois residents. Though the individual merchants who sell through those marketplaces are required to collect taxes now, Rob Karr, president and CEO of Illinois Retail Merchants Association, said many do not.
That means consumers at times aren’t paying taxes on those purchases, and come Jan. 1, totals at checkout could go up 6.25% to include the tax. A coffee cup off Etsy that cost an Illinois customer $10 without taxes would cost $10.63.
“Now everything is level,” Karr said. “A sale is a sale no matter where it is occurring.”
The measure also would require online shops that do not have bricks-and-mortar locations in Illinois, like Wayfair and Zappos, to start collecting local sales tax on top of the state taxes they already collect. A Chicago dweller who buys a $100 couch on Wayfair would pay a 10.25% tax on that purchase, making the total $110.25. Currently, the total would amount to $106.25. That measure would go into effect July 1, 2020.
E-commerce giant Amazon has collected sales tax from Illinois buyers since 2015. That will not change on Amazon items it sells since it has physical locations in the state. However, it will be required to start collecting the 6.25% tax on items purchased from sellers other than Amazon.
“It makes you question, do I really need that dress?” said Printers Row resident Fabiola Camacho. “Can I go to a store down the street and find something?”
Though the increases on a single purchase may not make a huge impact, it will add up, said Camacho, 28. Add on shipping fees and the potential hassle of returning something that doesn’t fit, and buying in person starts to sound more appealing.
Three or four years ago, customers at pool and patio chain American Sale regularly told the company’s president, Bob Jones, that they didn’t have to pay sales tax if they made their purchase online. “It was always a difficult thing to compete with,” he said.
That notion has diminished as more online retailers started collecting sales tax. Illinois’ new measures could be a nail in that coffin, Jones said.
The state started requiring retailers to charge sales tax on online purchases even if they lack a physical location in the state last October. The move mirrored a South Dakota law at the center of a Supreme Court case involving Wayfair.
Communities will benefit from more tax dollars coming in, said Brad Cole, executive director of the Illinois Municipal League, a proponent of the measures.
“It’s state government catching up with today’s technology in the retail world,” he said. “Welcome to the 21st century.”
With the onus on online retailers to collect and remit sales taxes, consumers will not have to report on their tax returns their unpaid sales taxes for online purchases. State lawmakers approved the changes over the weekend as part of the budget and capital bills. The capital bill still awaits Gov. J.B. Pritzker’s signature.
It makes sense that taxes should be the same regardless of whether you’re paying online or in person, said Adam Schuster, budget and tax research director at the Illinois Policy Institute. But he was worried about the consumer.
“Our biggest concern is the total tax burden facing the average Illinois resident,” he said. “All of the bills that were passed this session related to the budget and capital spending are essentially just ways to get more money from taxpayers.”
The spike expected during future online checkouts likely won’t be enough to make Beverly resident Kevin Gerk change his online shopping habits.
“It’s almost like a convenience tax in a sense,” said Gerk, 28. “It’s just easier to find stuff online.”
Twitter @AllyMarotti