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FatWallet leaving Illinois over online sales tax law

FatWallet.com is leaving Illinois for Wisconsin after losing business ties with major online retailers since Gov. Quinn signed of the “Amazon.com tax” earlier this month.

The web shopping business, based near Rockford, partners with online retailers like Amazon and Overstock.com, will relocate to Beloit on April 8 after at least a dozen retailers told FatWallet they would cut ties after the law forced online retailers to collect the state’s 6.25-percent sales tax in a way to preserve profits.

The company, which nets about $13 million a year, was expecting to lose $4 million in annual revenue, said Brent Shelton, FatWallet.com spokesperson.

The company, which employs 54 people, will look for permanent residency in Beloit after the move. Shelton said the company did not know if it would ever return to Illinois.

“I think there is a little bitterness,” he said. “The way the taxation has gone in Illinois, they are not making it a lucrative choice.”

Before the law, Internet retailers weren’t required to charge sales tax like Target and others with a physical presence in Illinois do. The law forces those online businesses to collect through their relationship with physically based partners, like FatWallet.

Illinois became the fourth state to adopt the law. Amazon.com also cut ties to partners in Rhode Island and North Carolina after those states enacted similar legislation.

By not charging sales tax, online retailers had a favorable pricing advantage over stores with a physical presence selling the same product, which had to apply the state’s rate. The Illinois Revenue Department estimated the law, which is effective July 1, would generate $170 million for the state.

“More than 20,000 brick-and-mortar retailers compete with online retailers, and we need to provide a level playing field for all businesses,” said Brie Callahan, a Quinn spokesperson. “To that end, the law requires all retailers – online and brick-and-mortar – to collect the sales tax that is already owed to the state of Illinois.”

Callahan pointed out that before Quinn signed the law, the governor established a program to connect partners with other retailers that both had a physical and online presence in the state, like Walgreens, in an attempt to keep the estimated 9,000 partners from leaving Illinois. About 150 partners have signed up for the program.

FatWallet discussed joining the program, but Shelton said the company could not afford to do it.

“With 30 percent of our revenue being challenged that was not an option for us,” he said.



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