Illinois Sues Online Retailers Claiming Cyber Tax Evasion

On September 17, the House of Representatives passed the Internet Tax Non-Discrimination Act, the bill that imposes a permanent ban on taxes on Internet services. The current moratorium, set to expire on November 1, 2003, was a temporary fix installed two years ago, providing legislators with time to debate the issues of the permanent moratorium. The moratorium applies to all methods of Internet access, including pricier high-speed links taxed by some states.

However, the ban does not apply to online sales taxes, which are already prohibited under a Supreme Court decision unless the retailer has a substantial in-state presence.

Illinois Attorney General Lisa Madigan announced last week that she has joined 62 lawsuits against at least 62 companies alleging that the companies failed to collect and remit to the state sales tax on items sold through their Web sites.

According to Madigan, companies such as Gateway Computers, Barnes & Noble, The Finish Line, Inc., and numerous other retailers cheated Illinois out of millions of dollars by not collecting taxes on Internet sales to Illinois residents.

"In a time of soaring budget deficits and fiscal crisis in Illinois, precious tax dollars are being lost with a simple click of a mouse," Madigan said. "It’s time for this cyber tax evasion to end."

In January, Madigan took over similar lawsuits against five other stores, including Wal-Mart, Target and Viking Office Products.

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