Following the State of Illinois passing HB3659 and Governor Quinn signing it into law, the Performance Marketing Association brought a lawsuit against Illinois over the nexus tax in federal court. Since the beginning of June when the suit was filed, the jurisdiction of the case has been questioned. In response, PMA has dismissed its federal court action and filed the same complaint in the Illinois State Circuit Court for Cook County.
Performance Marketing Association, Inc. (“the PMA”) announced today that it has filed a complaint in the Illinois State Circuit Court for Cook County challenging Illinois’ new “affiliate tax” law and asserting the same claims first raised in its complaint filed in the United States District Court on June 1. The complaint alleges that the Illinois law (HB 3659) violates the Commerce Clause of the United State Constitution and the federal Internet Tax Freedom Act (“ITFA”).
In connection with filing its suit in state court, the PMA has voluntarily dismissed the federal court action, in order to avoid a protracted dispute with the Defendant, the Director of the Illinois Department of Revenue, regarding whether the federal court has jurisdiction over the case.
“Our objective in bringing suit in Illinois has always been to obtain a prompt judicial determination that HB 3659 violates the US Constitution and discriminates against online performance marketing in violation of the ITFA, with potentially dire effects for thousands of Illinois publishers of online advertising,” said Rebecca Madigan, Executive Director of the PMA. “The Defendant chose to raise preliminary, jurisdictional questions rather than join the issue immediately on the substance of our claims, so we have decided to re-file our claims in state court, where we believe the parties can proceed directly to the merits of the case.”
The objections to HB 3659 raised by the PMA in its complaint are that the “affiliate nexus tax” law unlawfully targets online performance marketing as a means of expanding the taxing authority of Illinois over out-of-state retailers who have no physical presence in the state, in violation of both the Commerce Clause and the ITFA’s ban on state tax laws that discriminate against electronic commerce.
Today’s update is that there is a lot of jockeying around but no progress on the trial yet. You can see a copy of the Complaint for Declaratory Judgement and Permanent Junction (.pdf) to read the reasons why they believe Internet retailers should be exempt from collecting taxes and HB3659 is unconstitutional.