Performance Marketing Association Suit Challenging Illinois Affiliate Nexus Law Now in State Court

On July 27, the Performance Marketing Association (“PMA”) filed a complaint in the Illinois Circuit Court for Cook County, challenging the new Illinois “affiliate nexus” law (“HB 3659”). In the complaint, the PMA asserts the same claims first raised in its complaint filed in the United States District Court in Chicago on June 1. As detailed in the complaint, the PMA alleges that HB 3659 violates the Commerce Clause and impermissibly discriminates against electronic commerce in violation of the Internet Tax Freedom Act (“ITFA”).

In connection with filing the suit in state court, the PMA has voluntarily dismissed the federal court action.  The voluntary dismissal will prevent a protracted dispute with the Defendant, the Director of the Illinois Department of Revenue, regarding whether the federal court has jurisdiction over the case. Brann & Isaacson attorneys George Isaacson and Matt Schaefer are counsel to the PMA in the case.

Performance Marketing Association Files Lawsuit Challenging Illinois Affiliate Nexus Law

Performance Marketing Association, Inc. (“the PMA”), the leading trade association in the United States representing the interests of businesses, organizations, and individuals using and supporting performance marketing methods, filed a lawsuit yesterday in Federal District Court in Chicago against the Director of the Illinois Department of Revenue, Brian A. Hamer. The lawsuit challenges the constitutionality of the Illinois affiliate nexus law, HB 3659.  Brann & Isaacson attorneys George Isaacson and Matthew Schaefer are counsel to the PMA in connection with the suit.

The case is captioned Performance Marketing Association, Inc. v. Hamer, Federal District Court, Northern District of Illinois, case no. 1:11-cv-03690. A copy of the PMA’s Complaint is available here.

In its complaint, the PMA asserts that HB 3659 unlawfully targets the business of online performance marketing in order to expand Illinois’ regulatory authority beyond its borders. We have previously written about HB 3659 several times, including here and here. The PMA alleges that the law, which goes into effect July 1, 2011, violates the Commerce Clause of the United States Constitution, and the federal Internet Tax Freedom Act (“ITFA”), by using the relationships between Illinois publishers of online advertisements and out-of-state advertisers as grounds for imposing use tax collection and reporting obligations on Internet retailers located outside the state. The enactment HB 3659 has damaged thousands of Illinois publishers through the loss of advertising contracts with Internet retailers.

Illinois Governor Signs "Amazon" Affiliate Nexus Law

On March 10, Illinois Governor Pat Quinn signed into law HB 3659, the affiliate nexus bill passed by the legislature in January. Quinn's signing makes Illinois the fourth state (along with New York, Rhode Island, and North Carolina) to enact such a law. The Illinois bill provides that once an out-of-state Internet retailer realizes $10,000 in receipts from sales made to customers linked to the retailer's website from the websites of its Illinois affiliates, the retailer will be deemed to be a “retailer having or maintaining a place of business in this State” and be obligated to collect and remit tax on all of its sales to Illinois consumers.

In response, Amazon.com promptly informed its Illinois affiliates that it is terminating its relationships with them. Look for further developments in the coming days.