Performance Marketing Ass'n, Inc. v. Hamer
998 N.E.2d 54
Ill.2013Background
- PMA filed suit against Brian Hamer challenging Public Act 96-1544 which expands use tax collection obligations for certain internet performance marketing.
- Act defines 'retailer maintaining a place of business in this state' and 'serviceman' to include contracts with Illinois-based affiliates that refer customers via click-through links and exceed $10,000 in annual sales.
- Act targets out-of-state internet retailers with online performance marketing; no requirement that Illinois residents make the sales for tax collection to apply.
- Circuit Court granted PMA summary judgment for counts alleging preemption under the ITFA and invalidity under the commerce clause; ITFA preemption was the primary basis.
- Illinois appealed directly to the Illinois Supreme Court; the majority affirmed the circuit court’s preemption ruling, while a dissenter argued commerce clause flaws and urged reversal.
- The ITFA is treated as a moratorium on discriminatory taxes, and the majority concluded the Act’s provisions are expressly preempted as discriminatory to electronic commerce.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether ITFA preempts the Act’s definitions. | PMA contends Act imposes discriminatory taxes on e-commerce. | Hamer argues the Act is not discriminatory and fits within ITFA's moratorium. | Yes, the Act’s definitions are expressly preempted. |
| Whether the Act violates the commerce clause as facially invalid. | PMA argues substantial nexus and burden on interstate commerce. | Hamer contends the Act accounts for nexus and modulates tax collection fairly. | Not necessary to reach after preemption ruling; commerce clause challenge rejected on the merits. |
| Whether the Act imposes discriminatory taxes on electronic commerce under ITFA. | PMA asserts online performance marketing is disproportionately taxed relative to offline promotion. | Hamer maintains existing offline provisions and other statutes justify distinctions. | Act discriminates against electronic commerce; preempted. |
| Whether the Act’s treatment is uniquely targeted to internet performance marketing and thus discriminatory under ITFA. | PMA highlights lack of similar treatment for offline performance marketing. | Hamer cites other provisions and potential analogs to offline activity. | Yes, discriminatory relative to ITFA's scope; preemption affirmed. |
Key Cases Cited
- Klein Town Builders, Inc. v. Department of Revenue, 36 Ill. 2d 301 (1966) (basis for use tax purpose and nexus principles)
- Brown’s Furniture, Inc. v. Wagner, 171 Ill. 2d 410 (1996) (use tax collection responsibility on retailers)
- National Geographic Society v. California Board of Equalization, 430 U.S. 551 (1977) (jurisdiction and nexus implications for taxes)
- Sprietsma v. Mercury Marine, 537 U.S. 51 (2002) (preemption-law interpretation context)
- City of Chicago v. StubHub!, Inc., 624 F.3d 363 (7th Cir. 2010) (ITFA contextual guidance on discriminatory taxes)
- Overstock.com, Inc. v. New York State Department of Taxation & Finance, 987 N.E.2d 621 (N.Y. 2013) (state internet affiliate tax in another jurisdiction)