Coast to Coast Computer Products, a California based retailer of computer supplies, has filed a petition arguing that the Illinois Department of Revenue’s rules regarding remote sellers are unconstitutional. The DOR issued Coast to Coast notices with a total assessment of $518,293.68 for the periods October 1, 2018, through June 30, 2023. Illinois’ economic nexus law became effective on October 1, 2018.
During the periods at issue, Coast to Coast was based in California and had no location, property, or offices in Illinois and no Illinois-based employees, representatives, or agents. The company sells to businesses, government agencies, and governmental bodies, but not to individuals. Some of the company’s sales during the periods at issue were sales for resale.
Coast to Coast made a number of arguments in its petition. Coast to Coast argued that requiring them to collect tax in Illinois less than four months after the South Dakota v. Wayfair decision violated the Commerce Clause of the U.S. Constitution since the rules are unduly burdensome. The company argued that it did not have sufficient time to identify and integrate the necessary tax software to handle its use tax reporting and remittance obligations. Coast to Coast argued that one of the guardrails in the Wayfair decision was South Dakota’s adoption of the Streamlined Sales and Use Tax (SST) Agreement. Illinois is not an SST member state. Coast to Coast stated that Illinois required affected retailers to comply with the economic nexus rules without access to tax compliance software offered by SST member states. Additionally, Coast to Coast claimed that the absence of standardized and uniform rules in Illinois created undue burdens on multistate taxpayers in violation of Wayfair.
Coast to Coast additionally argued that they lack the extensive virtual contacts with Illinois required to satisfy the substantial nexus prong of the Commerce Clause under the Supreme Court’s decision in Wayfair.
Coast to Coast also argued that Illinois’ Leveling the Playing Field Act violates the Commerce Clause since it discriminates against interstate commerce and remote retailers. It should be noted that a case that made a similar argument – PetMed Express, Inc. v. Illinois Department of Revenue – was dismissed on October 1, 2024 as both parties reached a settlement.
Coast to Coast made several additional claims in its petition, arguing that the Illinois Department of Revenue improperly taxed sales for resale and sales to exempt purchasers for the periods at issue.
We will monitor this case for updates. (Coast to Coast Computer Products Inc. v. The Illinois Department of Revenue, case number 24TT42, Illinois Independent Tax Tribunal)