Illinois “click-through nexus” law held unconstitutional

BY SALLY P. SCHREIBER

On Monday, the Circuit Court for Cook County in Illinois issued an eagerly awaited order explaining its bench decision on April 25, which declared Illinois’s “click-through nexus” law unconstitutional ( Performance Marketing Ass’n v. Hamer, No. 2011 CH 26333 (Ill. Cir. Ct. Cook Cty. 5/7/12)).

The order found that the law (35 Ill. Comp. Stat. 105/2), which expanded the definition of retailers obligated to collect sales tax to those having a contract with a person located in Illinois who refers potential customers through a link on the Illinois person’s website (a so-called click-through connection), violated the Commerce Clause and (by violating the federal Internet Tax Freedom Act, P.L. 105-277) the Supremacy Clause of the U.S. Constitution.

Performance Marketing Association   

Performance Marketing Association (PMA), the plaintiff in the case, is a national trade association whose members are in the performance marketing business, which the PMA defines as marketing and advertising programs in which the person (called a publisher or affiliate) displays an advertisement (in this case, on the internet) and is paid, usually when there is a sale. The PMA also states that there is usually no other connection between the advertiser and publisher.

According to the PMA, Illinois premised its tax collection on this slim connection. PMA’s complaint alleged two Commerce Clause violations: (1) that the law violated the requirement under the Commerce Clause that there be substantial nexus or a minimum connection between an out-of-state retailer and the state before the state may impose the obligation to collect sales tax; and (2) that the law improperly burdened interstate commerce because it used the publishers’ location in Illinois to establish the requirement to collect sales tax and did not limit the obligation to sales to customers located in Illinois. It also claimed that the law violated the Internet Tax Freedom Act provision prohibiting multiple or discriminatory taxes on electronic commerce (Internet Tax Freedom Act, §1101(a)(2)).

The court’s ruling

The order, which granted the PMA’s motion for summary judgment, included the following findings:

  • The law failed the substantial nexus requirement of the Commerce Clause and therefore was unenforceable. In addition, the law could not be construed in a way to preserve its validity.
  • The Internet Tax Freedom Act preempted the Illinois law by virtue of the Supremacy Clause.


The court explicitly declined to rule whether the act violated the Commerce Clause by regulating commerce outside of Illinois because the claim was moot as a result of the first two findings.

In addition, because the case involves the law’s constitutionality, the court found its ruling was directly appealable to the Illinois Supreme Court under Illinois Supreme Court Rule 302(a). The state is expected to appeal the decision.

Sally P. Schreiber ( sschreiber@aicpa.org ) is a JofA senior editor.

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