CHICAGO-The new Illinois law requiring residents to pay sales tax on online purchases has sparked wars between online retailer Amazon.com and traditional retailer Sears, but it will have little impact on retail property owners, according to industry experts.
Illinois Gov. Pat Quinn signed House Bill 3659, the Main Street Fairness Act, into law just days ago. The legislation requires major online retailers to collect the state's 6.25% sales tax on all purchases made by Illinois residents. Like many states, Illinois residents previously did not have to pay any sales tax on Internet purchases.
“We’ve always wondered why an Internet retailer should have an advantage over bricks and mortar stores,” says Greg Maloney, president and CEO of Jones Lang LaSalle. “Why should people be enticed to not go into a brick and mortar store? It’s unfair to retailers.”
Yet the trickledown effect of no sales tax so far has been minimal for retail property owners because the Internet accounts for only a small percentage of retail sales. That could change, especially for those owners who receive percentage rent as part of their leases. “As the Internet grows and accounts for a larger portion, it’s something that could definitely have an impact,” he tells GlobeSt.com. “That’s why it’s a smart move to address it now before it causes harm to owners.”
Online sales would have generated $153 million for the Illinois state government in 2010 if those sales had been subject to the state's 6.25% sales tax, according to the Illinois Department of Revenue.
A number of retailers have hailed Quinn’s move, even going so far as to issue statements lauding the move. Sears and Walgreens, both based in Illinois, were among the retailers to comment publicly.
Sears referred to the measure as the "E-fairness law" and applauded it for helping "correct a long-standing problem of out-of-state businesses not collecting and remitting the sales tax in Illinois, a practice that has put brick-and-mortar retailers at an unfair competitive disadvantage for far too long." The retailer, which has suffered from poor performance off-and-on for years, said the law establishes "long overdue fairness to the tax system for retailers and taxpayers in Illinois."
Walgreens president of community management Mark Wagner issued a similar statement: “Governor Quinn has ensured that all Illinois retailers are operating on a level playing field with out-of-state online competitors. Illinois retailers are the backbone of the state’s economy and are vital components of Illinois communities. By signing HB 3659, Gov. Quinn has strengthened the Illinois retail industry and the communities we serve every day.”
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