Court Opinion

ID: 2644002
Source: CourtListenerOpinion
Date Created: 2013-11-25 22:51:19.832036+00
Date Added: 2024-06-11T09:12:08.087954
License: Public Domain

ILLINOIS OFFICIAL REPORTS
                                         Supreme Court

                    Performance Marketing Ass’n v. Hamer, 2013 IL 114496

Caption in Supreme         PERFORMANCE MARKETING ASSOCIATION, INC., Appellee, v.
Court:                     BRIAN HAMER, Director of Revenue, Appellant.

Docket No.                 114496

Filed                      October 18, 2013

Held                       The federal Internet Tax Freedom Act, which prohibits discriminatory
(Note: This syllabus       taxes on electronic commerce, preempts Illinois’ statutory attempt to
constitutes no part of     require retailers from other states to collect and remit sales or use taxes
the opinion of the court   to Illinois if they utilize click-through performance marketing
but has been prepared      arrangements to generate over $10,000 per year in internet sales to Illinois
by the Reporter of         customers—commerce clause not reached.
Decisions for the
convenience of the
reader.)

Decision Under             Appeal from the Circuit Court of Cook County, the Hon. Robert Lopez
Review                     Cepero, Judge, presiding.

Judgment                   Affirmed.
Counsel on                Lisa Madigan, Attorney General, of Springfield (Michael A. Scodro,
Appeal                    Solicitor General, and Brian F. Barov, Assistant Attorney General, of
                          Chicago, of counsel), for appellant.

                          Ronald L. Wisniewski, of Chicago, and George S. Isaacson and Matthew
                          P. Schaefer, of Brann & Isaacson, of Lewiston, Maine, for appellee.

                          Brian D. Day and Roger Huebner, of Springfield, for amicus curiae
                          Illinois Municipal League.

                          Tanya P. Triche, of Chicago, for amicus curiae Illinois Retail Merchants
                          Association.

                          Shirley Sicilian, Bruce Fort and Roxanne Bland, of Washington, D.C., for
                          amicus curiae Multistate Tax Commission.

Justices                  JUSTICE BURKE delivered the judgment of the court, with opinion.
                          Chief Justice Kilbride and Justices Freeman, Thomas, Garman, and Theis
                          concurred in the judgment and opinion.
                          Justice Karmeier dissented, with opinion.

                                            OPINION

¶1        The plaintiff, Performance Marketing Association, Inc., filed a complaint seeking
      declaratory and injunctive relief against the defendant, Brian Hamer, in his capacity as
      Director of the Illinois Department of Revenue. Plaintiff alleged that portions of Public Act
      96-1544, a so-called “click-through” nexus law, were preempted by federal law and violated
      the commerce clause of the United States Constitution. The circuit court of Cook County
      agreed with both propositions and entered summary judgment in plaintiff’s favor. Defendant
      appealed directly to this court. Ill. S. Ct. R. 302(a) (eff. Oct. 4, 2011). Because we agree with
      the circuit court’s conclusion that the relevant portions of Public Act 96-1544 are preempted
      by federal law, we affirm the judgment of the circuit court.

¶2                                            Background
¶3        Sales tax in the State of Illinois is comprised of two complementary taxes, the Retailers’
      Occupation Tax Act (35 ILCS 120/1 et seq. (West 2010)), which is the principal means for
      taxing the retail sale of tangible personal property in Illinois, and use tax. Use tax is imposed

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     “upon the privilege of using in this State tangible personal property purchased at retail from
     a retailer.” 35 ILCS 105/3 (West 2010). The purpose of the use tax is “primarily to prevent
     avoidance of the [retailers’ occupation] tax by people making out-of-State purchases, and to
     protect Illinois merchants against such diversion of business to retailers outside Illinois.”
     Klein Town Builders, Inc. v. Department of Revenue, 36 Ill. 2d 301, 303 (1966). The
     Retailers’ Occupation Tax and the use tax are imposed at the same rate. 35 ILCS 105/3-10
     (West 2010); 35 ILCS 120/2-10 (West 2010).
¶4        The ultimate responsibility for paying the use tax falls upon the consumer. However,
     because it is impractical to collect the tax from individual purchasers, the burden of its
     collection is imposed upon the out-of-state retailer. Brown’s Furniture, Inc. v. Wagner, 171
Ill. 2d 410, 418 (1996) (citing National Geographic Society v. California Board of
     Equalization, 430 U.S. 551, 555 (1977)). In Illinois, any retailer “maintaining a place of
     business in this State” is required by statute to collect use tax from its customers and remit
     it to the Illinois Department of Revenue. 35 ILCS 105/2, 3-45 (West 2010).
¶5        In 2011, the Illinois General Assembly enacted Public Act 96-1544 (eff. Mar. 10, 2011)
     (hereinafter, Act). In relevant part, the Act amended the definition of a retailer or serviceman
     “maintaining a place of business in this state” in Illinois’ Use Tax and Service Use Tax Acts.
     Under these new definitions, a retailer “maintaining a place of business in this state” now
     includes:
              “a retailer having a contract with a person located in this State under which the
              person, for a commission or other consideration based upon the sale of tangible
              personal property by the retailer, directly or indirectly refers potential customers to
              the retailer by a link of the person’s Internet website.” Pub. Act 96-1544, § 5 (eff.
              Mar. 10, 2011) (codified at 35 ILCS 105/2(1.1) (West 2010)).
¶6        A serviceman “maintaining a place of business in this state” now includes any
     serviceman:
              “having a contract with a person located in this State under which the person, for a
              commission or other consideration based on the sale of service by the serviceman,
              directly or indirectly refers potential customers to the serviceman by a link on the
              person's Internet website.” Pub. Act 96-1544, § 10 (eff. Mar. 10, 2011) (codified at
              35 ILCS 110/2(1.1) (West 2010)).
¶7        Thus, pursuant to the Act, out-of-state internet retailers and servicemen are required to
     collect state use tax if they have a contract with a person in Illinois who displays a link on
     his or her website that connects an Internet user to that remote retailer or serviceman’s
     website. There is no requirement under the Act that sales be made to Illinois residents to
     subject the out-of-state retailer or serviceman to Illinois use tax obligations, and there is no
     requirement that the computer server hosting the Illinois affiliate’s website be located in
     Illinois. Both new definitions are limited, however, to referral contracts that generate over
     $10,000 per year. Pub. Act 96-1544, §§ 5, 10 (eff. Mar. 10, 2011) (codified at 35 ILCS
     105/2(1.1) (West 2010), 35 ILCS 110/2(1.1) (West 2010)).
¶8        The type of contractual relationship taxed by the new definitions in the Act is known as
     “performance marketing.” Performance marketing refers to marketing or advertising

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       programs in which a person or organization which publishes or displays an advertisement
       (often referred to as an “affiliate” or “publisher”) is paid by the retailer when a specific
       action, such as a sale, is completed. In performance marketing, the retailer tracks the success
       or “performance” of the marketing campaign, and sets the affiliate’s compensation
       accordingly. Such contractual arrangements are not limited to the Internet. They are also used
       in print and broadcast media, where promotional codes are used to generate and track sales.
¶9          After the Act was enacted, plaintiff, a trade group which represents businesses engaged
       in performance marketing, filed a complaint against defendant in the circuit court of Cook
       County. In count I of its complaint, plaintiff alleged that the new definitions in the Act were
       unconstitutional under the commerce clause of the United States Constitution (U.S. Const.,
       art. I, § 8), because they authorized the collection of use tax with respect to an activity that
       lacked a substantial nexus with the state of Illinois (see Quill Corp. v. North Dakota, 504
U.S. 298 (1992)). In count III of its complaint, plaintiff alleged that the provisions of the Act
       were expressly preempted by the Internet Tax Freedom Act (ITFA) (47 U.S.C. § 151 note
       (2000)), which prohibits “discriminatory taxes on electronic commerce.” Plaintiff and
       defendant filed cross-motions for summary judgment.
¶ 10        Following a hearing, the circuit court held that the relevant provisions of the Act failed
       the substantial nexus requirement for state taxes under the commerce clause and were
       therefore unconstitutional. The court also concluded that the provisions were expressly
       preempted under the ITFA. The court therefore entered summary judgment in plaintiff’s
       favor on counts I and III of its complaint, and denied defendant’s motion for summary
       judgment. This appeal followed.

¶ 11                                           Analysis
¶ 12       Summary judgment is proper when “the pleadings, depositions, and admissions on file,
       together with the affidavits, if any, show that there is no genuine issue as to any material fact
       and that the moving party is entitled to a judgment as a matter of law.” 735 ILCS 5/2-1005(c)
       (West 2010). The interpretation of a statute is a matter of law and is thus appropriate for
       summary judgment. Village of Chatham, Illinois v. County of Sangamon, Illinois, 216 Ill. 2d
402, 433 (2005). We apply a de novo standard of review to issues of statutory interpretation
       and summary judgment rulings. First American Bank Corp. v. Henry, 239 Ill. 2d 511, 515
       (2011).
¶ 13       Plaintiff alleges both that the relevant provisions of the Act are preempted by federal
       legislation and that they violate the commerce clause of the United States Constitution. We
       begin with preemption.
¶ 14       Article VI of the federal constitution provides that the laws of the United States “shall
       be the supreme Law of the Land; *** any Thing in the Constitution or Laws of any State to
       the Contrary notwithstanding.” U.S. Const., art. VI, cl. 2. Under the supremacy clause, a
       federal statute will preempt state law in any one of three circumstances: “(1) express
       preemption—where Congress has expressly preempted state action; (2) implied field
       preemption—where Congress has implemented a comprehensive regulatory scheme in an
       area, thus removing the entire field from the state realm; or (3) implied conflict

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       preemption—where state action actually conflicts with federal law.” Carter v. SSC Odin
       Operating Co., 237 Ill. 2d 30, 39-40 (2010). State law is null and void if it conflicts with
       federal law. Sprietsma v. Mercury Marine, 197 Ill. 2d 112, 117 (2001).
¶ 15        Plaintiff argues that the relevant provisions of the Act are expressly preempted under
       section 1101(a)(2) of the ITFA (47 U.S.C. § 151 note). That section prohibits a state from
       imposing “discriminatory taxes on electronic commerce.” Section 1105(2)(A)(iii) of the
       ITFA defines a discriminatory tax, in part, as:
                    “(A) any tax imposed by a State or political subdivision thereof on electronic
                commerce that—
                                                   ***
                         (iii) imposes an obligation to collect or pay tax on a different person or entity
                    than in the case of transactions involving similar property, goods, services, or
                    information accomplished through other means.” 47 U.S.C. § 151 note.
       The term “tax” in turn is defined in sections 1105(8)(A)(i) and (ii) of the ITFA to include
       both revenue-raising measures and “the imposition on a seller of an obligation to collect and
       to remit to a governmental entity any sales or use tax imposed on a buyer by a governmental
       entity.” “Electronic commerce” is defined in section 1105(3) as “any transaction conducted
       over the Internet *** comprising the sale *** of property, goods, [or] services.”
¶ 16        Plaintiff argues that, under the plain language of the ITFA, the relevant provisions of the
       Act constitute a prohibited, discriminatory tax on electronic commerce. According to
       plaintiff, the amended definitions of retailer and serviceman “maintaining a place of business
       in this State” result in the “imposition on a seller of an obligation to collect and remit” use
       tax, and thus constitute a “tax” within the meaning of the ITFA. Further, the Act’s tax-
       collection obligation is targeted at out-of-state Internet retailers who enter into agreements
       with Internet affiliates for online performance marketing arrangements and, thus, applies to
       electronic commerce as defined in the ITFA.
¶ 17        At the same time, however, the Act does not require use tax collection by out-of-state
       retailers who enter into performance marketing contracts with “offline” Illinois print
       publishers and over-the-air broadcasters. Plaintiff points to the parties’ joint stipulation of
       facts, which indicates that many out-of-state retailers with no physical presence in the state
       engage in performance marketing through a variety of media such as catalogs, magazines,
       newspapers, television and radio, that are accessible by, or distributed to, consumers in
       Illinois, but are directed at a regional, national and even international audience. Plaintiff
       asserts that the Act is targeted solely at performance marketing accomplished through “a link
       on the person’s website,” with no similar treatment of sales accomplished by other, “offline”
       means. In plaintiff’s view, this is the type of discrimination, directed at electronic commerce,
       that is expressly prohibited under the ITFA.
¶ 18        Defendant, in response, does not dispute that the Act makes no mention of traditional,
       “offline” performance marketing contracts. Nevertheless, defendant maintains that the Act
       is not discriminatory because there are other statutory provisions in Illinois that already
       impose a use tax collection obligation for “offline” performance marketing. In support,
       defendant points to paragraph 3 of the definition section of the Use Tax Act. That provision

                                                  -5-
       states that a retailer “maintaining a place of business in this State” includes a
                “retailer, pursuant to a contract with a broadcaster or publisher located in this State,
                soliciting orders for tangible personal property by means of advertising which is
                disseminated primarily to consumers located in this State and only secondarily to
                bordering jurisdictions.” 35 ILCS 105/2(3) (West 2010).
       According to defendant, this provision covers “offline” performance marketing contracts that
       are similar to those entered into with Internet affiliates. Thus, in defendant’s view, the Act
       is not discriminatory within the meaning of the ITFA. We disagree.
¶ 19        Under paragraph 3 of the definition section of the Use Tax Act, retailers who enter into
       contracts with Illinois publishers and broadcasters for advertising “disseminated primarily
       to consumers located in this State,” i.e., locally, are obligated to collect use tax. But Internet
       advertising is different. As the parties’ joint stipulation of facts states: “The home page and
       other publicly-available pages of any Internet website can be accessed from a computer, or
       other digital device, located anywhere in the world that is connected to the Internet via wire
       or radio signal. Thus, information appearing on a webpage is available and disseminated
       worldwide.” (Emphasis added.) Illinois law does not presently require out-of-state retailers
       who enter into performance marketing contracts for “offline” print or broadcast advertising
       which is disseminated nationally, or internationally, to collect Illinois use tax. However,
       under the Act, out-of-state retailers who enter into such contracts with Illinois Internet
       affiliates for the publication of online marketing—which is inherently national or
       international in scope and disseminated to a national or international audience—are required
       to collect Illinois use tax. In this way, by singling out retailers with Internet performance
       marketing arrangements for use tax collection, the Act imposes discriminatory taxes within
       the meaning of the ITFA.
¶ 20        Defendant also points to section 150.801(c)(2) of title 86 of the Illinois Administrative
       Code (86 Ill. Adm. Code 150.801(c)(2) (2000)). Under this provision, out-of-state retailers
                “who have any kind of place of business in Illinois or any kind of order-soliciting or
                order-taking representative either stationed in Illinois or coming into Illinois from
                time to time, must collect and remit the Use Tax, as such, from Illinois purchasers
                for use even though the seller is not required to pay Retailers’ Occupation Tax when
                he does nothing in Illinois except to solicit orders.” 86 Ill. Adm. Code 150.801(c)(2)
                (2000).
¶ 21        Defendant does not maintain that an Illinois newspaper or radio station which has a
       performance marketing contract with an out-of-state retailer would be considered “an order-
       soliciting or order-taking representative” for purposes of this provision. That is, defendant
       does not maintain that section 150.801(c)(2) of title 86 applies to advertising. Defendant
       contends, however, that the Internet links at issue in this case “are not advertising.” Instead,
       according to defendant, “they are active efforts to solicit sales on behalf of out-of-state
       retailers.” Defendant maintains that, because the click-through link is “active” solicitation,
       it is similar to the activity which is subject to use tax collection under section 150.801(c)(2)
       of title 86. Thus, according to defendant, the Act is not discriminatory. Again, we disagree.
¶ 22        The parties’ joint stipulation of facts states that an Internet affiliate does not receive or

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       transmit customer orders, process customer payments, deliver purchased products, or provide
       presale or postsale customer services. Further, an Internet affiliate displaying a link on its
       website does not know the identity of Internet users who click on the link, and after a user
       connects to the retailer’s website, the affiliate has no further involvement with the user. It is
       clear, therefore, that there is no interaction between an affiliate and a customer, and no
       “active” solicitation occurs on the part of the Internet affiliate. The click-through link makes
       it easier for the customer to reach the out-of-state retailer, but the link is not different in kind
       from advertising using promotional codes that appear, for example, in Illinois newspapers
       or Illinois radio broadcasts.
¶ 23        In short, under the Act, performance marketing over the Internet provides the basis for
       imposing a use tax collection obligation on an out-of-state retailer when a threshold of
       $10,000 in sales through the clickable link is reached. However, national, or international,
       performance marketing by an out-of-state retailer which appears in print or on over-the-air
       broadcasting in Illinois, and which reaches the same dollar threshold, will not trigger an
       Illinois use tax collection obligation. The relevant provisions of the Act therefore impose a
       discriminatory tax on electronic commerce within the meaning of the ITFA. Accordingly,
       we affirm the circuit court’s judgment that the definition provisions contained in the Act,
       quoted above and codified at 35 ILCS 105/2(1.1) (West 2010), and 35 ILCS 110/2(1.1)
       (West 2010), are expressly preempted by the ITFA and are therefore void and unenforceable.
       Because we hold that the provisions of the Act are void based on preemption, we do not
       reach plaintiff’s alternative argument that the new definitions provisions of the Act violate
       the commerce clause of the United States Constitution. See National Commercial Banking
       Corp. of Australia, Ltd. v. Harris, 125 Ill. 2d 448, 454-55 (1988).

¶ 24                                        Conclusion
¶ 25       For the foregoing reasons, the judgment of the circuit court granting summary judgment
       in favor of plaintiff and denying defendant’s motion for summary judgment is affirmed.

¶ 26       Affirmed.

¶ 27       JUSTICE KARMEIER, dissenting:
¶ 28       Public Act 96-1544 does not impose any new taxes or increase any existing taxes.
       Substantive tax liability under Illinois law is unaffected. Sales transactions subject to use and
       service use taxes are the same now as they were before the Act took effect. What the law
       does, instead, is simply amend the definition of retailers and servicemen who are obligated
       to collect and remit Illinois use and service use taxes to the Department of Revenue. It makes
       this change for reasons that are entirely reasonable and proper: (1) to enhance the collection
       of revenues already due under Illinois law by reducing the circumstances in which payment
       of the tax is left to individual purchasers or consumers who may neglect or refuse to remit
       what they owe to the Department of Revenue, and (2) to ameliorate the competitive
       disadvantage suffered by existing Illinois retailers and servicemen who must already include
       use and service use taxes in the amount they charge their customers and then take

                                                   -7-
       responsibility for remitting the tax to the state.
¶ 29        Under controlling case law, we must presume Public Act 96-1544 to be valid. The burden
       is on Performance Marketing Association, Inc. (PMA), the plaintiff in this case, to overcome
       that presumption. In my view, it has failed to meet that burden. Contrary to the majority, I
       would therefore reverse the judgment of the circuit court and remand with directions to enter
       summary judgment in favor of the Director of the Department of Revenue.
¶ 30        Prior to enactment of Public Act 96-1544, retailers and servicemen who utilized the
       internet to make retail sales of tangible personal property or services used in Illinois were
       required to collect and remit use or service use taxes only if they or one of their subsidiaries
       had an actual office, distribution house, sales house, warehouse or other place of business
       located within this state or had an agent or other representative operating within this state
       under their authority or the authority of a subsidiary. If the retailer or serviceman did not have
       such a presence in Illinois, its retail sales of tangible personal property or services used here
       were still subject to the tax. The difference is that the obligation to remit the tax shifted to
       the purchasers, who were required to self report and pay the tax directly to the Department
       of Revenue. 35 ILCS 105/10 (West 2012); 35 ILCS 110/10 (West 2012).
¶ 31        When the onus is placed on consumers to report and remit tax on their retail purchases,
       taxable retail sales are underreported. That is so, in part, because such sales are difficult for
       the state to police, a circumstance which consumers are quick to appreciate. The result is that
       collection of use and service use taxes suffers, depriving the state of needed revenue to which
       it is entitled. Moreover, as consumers realize that they can avoid their use tax liability by
       turning to out-of-state internet retailers with no physical presence here, retailers and
       servicemen with places of business located within Illinois are placed at a competitive
       disadvantage because they, unlike their out-of-state internet competitors, must include the
       tax in the amount they charge and then assume responsibility for remitting that tax money
       to the State. See Joel Griffiths, Comment, Use It or Lose It: State Approaches to Increasing
       Use-Tax Revenue, 60 U. Kan. L. Rev. 649 (2012); Michael R. Gordon, Up the Amazon
       Without a Paddle: Examining Sales Taxes, Entity Isolation, and the “Affiliate Tax”, 11 N.C.
       J. L. & Tech. 299 (2010).
¶ 32        This situation is not unique to Illinois. It has been problematic for many states throughout
       the United States. Three basic strategies have emerged for addressing it: (1) increasing efforts
       to notify remote sellers and in-state purchasers that the transaction is subject to the use tax;
       (2) participation by the state in the Streamline Sales Tax Project (SSTP) and adoption of the
       Streamlined Sales and Use Tax Agreement (SSUTA), a collaborative effort aimed at
       reducing compliance and administrative burdens related to use taxes; and (3) implementation
       of what have become known as “affiliate” or “Amazon” tax provisions, the latter appellation
       derived from the giant online retailer. Griffiths, supra at 659-64.
¶ 33        The first “affiliate” or “Amazon” tax law was enacted by New York State in 2008. Under
       the New York law, an internet retailer is presumed to be a vendor required to collect sales
       tax on its New York sales if the retailer makes sales of taxable property or services and:
                    “ ‘enters into an agreement with a resident of [New York] under which the
                resident, for a commission or other consideration, directly or indirectly refers

                                                  -8-
                potential customers, whether by a link on an internet website or otherwise, to the
                seller, if the cumulative gross receipts from sales by the seller to customers in [New
                York] who are referred to the seller by all residents with this type of an agreement
                with the seller is in excess of ten thousand dollars during the preceding four quarterly
                periods ... .’ ” Gary C. Bingel & John C. Genz, High Court Upholds ‘Amazon Tax’
                Provision for Internet Retailers, 23 J. Multistate Tax’n & Incentives 33 (July 2013).
       Similar legislation was subsequently enacted in at least half a dozen other states, including
       Illinois. Griffiths, supra at 659; Jessica Nicole Cory, The Gap Created by E-Commerce: How
       States Can Preserve Their Sales and Use Tax Revenue in the Digital Age, 8 Okla. J. L. &
       Tech. 57 (2012).
¶ 34        Public Act 96-1544, the legislation being challenged in this case, is the Illinois version
       of New York State’s Amazon Law. The Act amended section 2 of the Use Tax Act (35 ILCS
       105/2 (West 2012)) and section 2 of the Service Use Tax Act (35 ILCS 110/2 (West 2012))
       to expand the definition of “retailer maintaining a place of business in this State” and
       “serviceman maintaining a place of business in this State.” Basically, the amendment
       broadened those definitions to include retailers and servicemen who contract with internet
       affiliates having a physical presence in Illinois to place links on the affiliates’ website to
       solicit customers for their businesses, pay their Illinois internet affiliates a commission based
       on the sales generated through the links, and make over a certain dollar amount in sales
       through those links.
¶ 35        PMA, a trade organization representing internet retailers who oppose Public Act 96-1544,
       brought this action for declaratory and injunctive relief to have the law invalidated on the
       grounds that it unduly burdens interstate commerce in contravention of the commerce clause
       of the United States Constitution (U.S. Const., art. I, § 8, cl. 3). PMA alleged that the statute
       also violates the commerce clause because it represents an improper attempt by Illinois to
       regulate commerce outside this state’s borders. In addition, PMA challenged the law on the
       grounds that it imposes a “discriminatory tax” within the meaning of the federal Internet Tax
       Freedom Act (47 U.S.C. § 151 note) and, under the federal Constitution’s supremacy clause
       (U.S. Const., art. VI, cl. 2), is preempted by the federal statute.
¶ 36        On the parties’ cross-motions for summary judgment, the circuit court concluded that
       Public Act 96-1544 was facially invalid under the commerce clause. It further held that the
       statute was preempted by the federal Internet Tax Freedom Act and could not be enforced
       in any case. Although the circuit court reserved for future consideration PMA’s request for
       an award of attorney fees and costs, the court made an express written finding pursuant to
       Supreme Court Rule 304(a) (Ill. S. Ct. R. 304(a) (eff. Feb. 26, 2010)) that there was no just
       reason for delaying enforcement or appeal. Because it declared the statute invalid, the circuit
       court opined that the appeal could be brought directly to our court under Supreme Court Rule
       302(a) (Ill. S. Ct. R. 302(a) (eff. Oct. 4, 2011)).
¶ 37        Throughout this appeal, the focus of the argument by the parties and by the Multistate
       Tax Commission and the Illinois Retail Merchants Association and Illinois Municipal
       League, who were granted leave to file friend of the court briefs in support of the Director
       of Revenue, has been whether the circuit court erred when it held that Public Act 96-1544

                                                 -9-
       is invalid under the commerce clause. Contrary to the majority’s characterization, the
       commerce clause issue was not merely an “alternative” challenge. Supra ¶ 23.
¶ 38        That the parties’ arguments centered on the commerce clause is hardly surprising. The
       limits posed by the commerce clause have been at the center of a nationwide debate
       regarding the power of states to impose and collect taxes on sales conducted through the
       internet. See, e.g., Gordon, Up the Amazon Without a Paddle, supra; Griffiths, Use It or Lose
       It, supra; Rob Owen, The “Amazon Tax” Issue: Washing Away the Requirement of Physical
       Presence for Sales Tax Jurisdiction Over Internet Businesses, 2013 U. Ill. J. L. Tech. &
       Pol’y 231.
¶ 39        While this appeal was pending, the Court of Appeals of New York, that state’s highest
       court, considered and rejected a commerce clause challenge to New York’s version of Public
       Act 96-1544. Overstock.com, Inc. v. New York State Department of Taxation & Finance, 987
N.E.2d 621, 622 (N.Y. 2013). The parties have not cited and I have not discovered any
       authority from a court of review which has reached a contrary result and held that internet
       affiliate tax collection requirements of the kind at issue here and in the New York case run
       afoul of the federal commerce clause. How our court was going to resolve the issue was
       therefore a matter of considerable interest, concern and significance.
¶ 40        Unfortunately, the majority has elected to ignore the commerce clause issues entirely and
       decide the case based solely on federal preemption grounds. The decision is a puzzling one
       for several reasons. First, a determination that a state law is preempted by a federal one is not
       tantamount to a repeal or invalidation of the state statute. The legislative enactment of the
       state is merely suspended and rendered unenforceable by the existence of the federal
       enactment. Lily Lake Road Defenders v. County of McHenry, 156 Ill. 2d 1, 8 (1993); Kinsey
       Distilling Sales Co. v. Foremost Liquor Stores, Inc., 15 Ill. 2d 182, 193 (1958).1 Because of
       this, we have made clear that a determination that a statute of this state is preempted by
       federal law does not constitute “invalidity” for purposes of the rule authorizing direct appeal
       to our court in cases where a statute of the United States or of this state has been held invalid.
       Ill. S. Ct. R. 302(a) (eff. Oct. 4, 2011).
¶ 41        If preemption were the sole basis for the circuit court’s ruling in this case, that ruling
       would therefore not even be properly before us under Rule 302(a). Rather, we would be

               1
                 The majority cites Sprietsma v. Mercury Marine, 197 Ill. 2d 112, 117 (2001), for the
       proposition that federal preemption renders a conflicting state law “null and void.” Supra ¶ 14.
       Sprietsma does not say that and it is incorrect as a matter of law. When a state statute conflicts with
       an act of Congress, the state statute merely “yields” to the federal law (see Crosby v. National
       Foreign Trade Council, 530 U.S. 363, 372 (2000)), which supercedes it (see, e.g., Arizona v. United
       States, 567 U.S. ___, ___, 132 S. Ct. 2492, 2501 (2012)). To the extent of the conflict, the state law
       is “without effect” (Altria Group, Inc. v. Good, 555 U.S. 70, 76 (2008)) and enforcement is
       precluded (see Arizona v. United States, 567 U.S. at ___, 132 S. Ct. at 2501), but the state law itself
       remains on the books. I note, moreover, that Sprietsma did not even involve a conflict between a
       state statute and a federal one and, in any case, it was promptly reversed by the United States
       Supreme Court (Sprietsma v. Mercury Marine, a Division of Brunswick Corp., 537 U.S. 51, 64
       (2002)), circumstances the majority fails to mention.

                                                   -10-
       obliged to transfer the appeal to the appellate court. See Ill. S. Ct. R. 365 (eff. Feb. 1, 1994).
       Under these circumstances, I would think that if we are intent on proceeding with direct
       review, we should at least give some consideration to the one issue decided by the circuit
       court which would give us jurisdiction to do so.
¶ 42        I must also point out that Justice Burke, author of the majority’s opinion, has frequently
       taken this court to task for not reaching important legal issues presented by an appeal, even
       when resolution of those issues is not necessary for disposition of the particular controversy
       before it. See, e.g., In re Estate of Boyar, 2013 IL 113655, ¶¶ 49-51 (Burke, J., dissenting);
       In re K.E.F., 235 Ill. 2d 530, 541-43 (2009) (Burke, J., dissenting, joined by Freeman, J.);
       People v. Evans, 2013 IL 113471, ¶¶ 22-27 (Burke, J., dissenting); Cooney v. Rossiter, 2012
IL 113227, ¶¶ 42-46 (Burke, J., specially concurring, joined by Freeman and Theis, JJ.);
       People v. White, 2011 IL 109689, ¶¶ 156-82 (Burke, J., dissenting, joined by Freeman, J.).
       In Boyar, her most recent pronouncement on the subject, Justice Burke defended her
       position, in part, on the grounds that deferring resolution of an issue can prove
       counterproductive in circumstances when the same issue is likely to come before us again.
       In re Estate of Boyar, 2013 IL 113655, ¶ 51 (Burke, J., dissenting).
¶ 43        Such circumstances were not actually present in Boyar itself, where the legal issue Justice
       Burke wanted us to take up was arcane, it had no application to the dispute before us, and
       there was no empirical basis for believing it was likely to arise again any time soon. Such
       circumstances are present here. Recurrence of the commerce clause issue is highly likely.
       The Internet Tax Freedom Act (47 U.S.C. § 151 note), the federal law held by the majority
       to preempt Illinois’ Public Act 96-1544, is not a ban but a moratorium. See Title XI of Pub.
       L. No. 105-277, § 1101(a). It had no effect on liability for taxes accrued and enforced prior
       to its enactment (id. § 1101(c)), and it will expire, by its terms on November 1 of next year.
       47 U.S.C. § 151 note (as amended by H.R. Res. 3678, eff. Nov. 1, 2007).
¶ 44        Once the moratorium imposed by the federal law is lifted, Public Act 96-1544 will be
       revived and reinstated without the need for any express reenactment by the legislature. Lily
       Lake Road Defenders v. County of McHenry, 156 Ill. 2d at 8; Kinsey Distilling Sales Co. v.
       Foremost Liquor Stores, Inc., 15 Ill. 2d at 193. A new commerce clause challenge is certain
       to follow. A year from now we could therefore find ourselves in precisely the same position
       we are in today, facing the same commerce clause challenge brought by and against the very
       same litigants. The delay will have accomplished nothing.
¶ 45        The issue has been fully briefed and argued and is ripe for a decision now. We should
       make one. I am prepared to do so. Just as New York’s high court did when reviewing its
       state’s internet affiliate tax law, I would hold that the tax-related obligations imposed by
       Public Act 96-1544 apply to an activity with a substantial nexus to Illinois and that PMA’s
       claim that the law is facially invalid under the commerce clause should therefore have been
       rejected by the circuit court.2

               2
                State taxation obligations which impact the commerce clause must meet various criteria in
       addition to the substantial nexus requirement, but here, as in the New York case, the substantial
       nexus requirement was the basis for plaintiff’s challenge to the law.

                                                 -11-
¶ 46        Failure to address and resolve the commerce clause challenge is not only the reason I
       cannot join in the majority’s opinion. I must also take issue with its conclusion that, under
       federal preemption principles, Public Act 96-1544 is rendered wholly inoperative by the
       federal Internet Tax Freedom Act. Although the majority opinion enumerates the various
       ways in which federal law may operate to preempt a state law, it omits any mention of the
       standards established by the United States Supreme Court for assessing whether and to what
       extent there is federal preemption in a particular case. We are bound by those standards. Had
       the principles articulated by the United States Supreme Court been properly considered and
       applied here, they would have compelled the conclusion that Public Act 96-1544 has not
       been preempted.
¶ 47        The United States Constitution created a federal government of limited powers. It is
       unmistakably clear on this point. “The powers not delegated to the United States by the
       Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to
       the people.” U.S. Const., amend. X. Under our constitutional system, the states thus retain
       substantial sovereign authority. Gregory v. Ashcroft, 501 U.S. 452, 457 (1991).
¶ 48        Because our federal system recognizes that sovereign power resides in both the state and
       federal governments, the potential for conflict between state and federal laws is apparent.
       The Constitution addresses this problem through the supremacy clause (U.S. Const., art. VI,
       cl. 2), which provides that federal law “shall be the supreme Law of the Land; and the Judges
       in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to
       the Contrary notwithstanding.” Arizona v. United States, 567 U.S. ___, ___, 132 S. Ct. 2492,
       2500 (2012).
¶ 49        The supremacy clause has been interpreted by the United States Supreme Court to mean
       that Congress has the power to preempt state law (id. at ___, 132 S. Ct. at 2500) provided,
       of course, that it is acting within the powers granted to it by the Constitution when it does
       so (Gregory v. Ashcroft, 501 U.S. at 457). However, because of the extraordinary nature of
       this power and its implications for the critical political balance between the state and federal
       governments, the United States Supreme Court has cautioned that it is a power we must
       assume Congress does not exercise lightly. Id. at 460.
¶ 50        Consistent with this admonition, the Supreme Court has held that preemption analysis
       must begin with the presumption that Congress did not intend to supplant state law.
       Maryland v. Louisiana, 451 U.S. 725, 746 (1981); Scholtens v. Schneider, 173 Ill. 2d 375,
       379 (1996). Where a state statute is claimed to be preempted by an act of Congress, as in the
       case before us here, the language used in the federal legislation is the best evidence of
       whether or not Congress intended it to have preemptive effect. Dan’s City Used Cars, Inc.
       v. Pelkey, 569 U.S. ___, ___, 133 S. Ct. 1769, 1778 (2013).
¶ 51        When reviewing the language of the federal law, it is important to bear in mind that
       inclusion of an express preemption clause or provision does not end the inquiry. Such a
       provision tells us that Congress intended to supersede or modify state law to some extent, but
       courts must still deal with the task of determining the substance and scope of Congress’
       displacement of state law. If the text of a preemption provision is open to more than one
       plausible reading, courts ordinarily accept the reading that disfavors preemption. Riegel v.

                                                -12-
       Medtronic, Inc., 552 U.S. 312, 334-35 (2008) (Ginsburg, J., dissenting).
¶ 52       Just as there is a presumption against preemption, there is a presumption in favor of the
       validity of the state law. Pharmaceutical Research & Manufacturers of America v. Walsh,
       538 U.S. 644, 661 (2003). The burden of overcoming that presumption and establishing that
       Congress intended to oust the state from the exercise of powers otherwise available to it is
       on the party claiming that the state law has been preempted. Id. at 661-62; Motor Vehicle
       Manufacturers Ass’n of the United States, Inc. v. Abrams, 899 F.2d 1315, 1319 (2d Cir.
       1990)). The presumption against federal preemption applies with special force where a
       matter of primary state responsibility, such as local taxation, is at stake. Accordingly, no
       federal preemption exists concerning a state or local tax unless Congress made its intent to
       preempt unmistakably clear in the language of the federal statute. Tri-State Coach Lines, Inc.
       v. Metropolitan Pier & Exposition Authority, 315 Ill. App. 3d 179, 194 (2000).
¶ 53       Public Act 96-1544, the legislation being challenged in this case, falls within this
       standard. It concerns state tax. As explained earlier in this dissent, it amends the Illinois use
       tax and service use tax statutes to expand the definition of retailers and servicemen obligated
       to collect and remit use and service use taxes.
¶ 54       When it enacted the federal Internet Tax Freedom Act, Congress did not make it
       unmistakably clear that it intended to preempt use tax collection measures such as Public Act
       96-1544. Contrary to its title, the federal law “does not create ‘tax freedom’ for transactions
       on the Internet” (City of Chicago, Illinois v. StubHub!, Inc., 624 F.3d 363, 366 (7th Cir.
       2010)), and the Act itself does not purport to assert any general federal authority over matters
       of state and local taxation. To the contrary, when Congress drafted the Internet Tax Freedom
       Act, it went to pains to make clear that except as provided in section 1101 of the Act,
                “nothing in this [Act] shall be construed to modify, impair, or supersede, or authorize
                the modification, impairment, or superseding of, any State or local law pertaining to
                taxation that is otherwise permissible by or under the Constitution of the United
                States or other Federal law and in effect on the date of enactment of this Act.”
                Interstate Tax Freedom Act, § 1101(b), 47 U.S.C. § 151 note.
¶ 55       The moratorium imposed by the Interstate Tax Freedom Act is addressed to two specific
       things: (1) “taxes on Internet access,” something which has no bearing whatever on the
       subject matter of Public Act 96-1544, and (2) “multiple or discriminatory taxes on electronic
       commerce.” Interstate Tax Freedom Act, § 1101(a)(1), (2), 47 U.S.C. § 151 note. As defined
       by the Act, “multiple” tax means two states taxing the same thing without a tax credit. Id.
       § 1105(6), 47 U.S.C. § 151 note; City of Chicago, Illinois v. StubHub!, Inc., 624 F.3d at 366.
       The expanded definitions implemented by Public Act 96-1544 do not result in that
       happening, so that is not at issue here either. That leaves only the question of whether the
       changes introduced by Public Act 96-1544 run afoul of the Internet Tax Freedom Act’s
       temporary ban on “discriminatory taxes.”
¶ 56       Because Public Act 96-1544 does not create any new taxes or tax liability, it is not a
       “tax” in the commonly understood sense. However, in another peculiarity of phrasing, the
       Internet Tax Freedom Act includes in its definition of “tax” not only actual taxes, but also
       “the imposition on a seller of an obligation to collect and to remit to a governmental entity

                                                 -13-
       any sales or use tax imposed on a buyer by a governmental entity.” Interstate Tax Freedom
       Act, § 1105(8)(A)(ii), 47 U.S.C. § 151 note. The statutory amendments promulgated under
       Public Act 96-1544 do expand the group of sellers obligated to collect and remit Illinois sales
       and use tax, so they certainly fall within the federal statute’s unique conception of a tax. The
       real dispute is whether and to what extent they are “discriminatory.”
¶ 57       To be “discriminatory” within the meaning of the federal law, a tax must fall within one
       of the following specifically defined categories:
                   “(A) any tax imposed by a State or political subdivision thereof on electronic
               commerce that—
                       (i) is not generally imposed and legally collectible by such State or such
                   political subdivision on transactions involving similar property, goods, services,
                   or information accomplished through other means;
                       (ii) is not generally imposed and legally collectible at the same rate by such
                   State or such political subdivision on transactions involving similar property,
                   goods, services, or information accomplished through other means, unless the
                   rate is lower as part of a phase-out of the tax over not more than a 5-year period;
                       (iii) imposes an obligation to collect or pay the tax on a different person or
                   entity than in the case of transactions involving similar property, goods, services,
                   or information accomplished through other means;
                       (iv) establishes a classification of Internet access service providers or online
                   service providers for purposes of establishing a higher tax rate to be imposed on
                   such providers than the tax rate generally applied to providers of similar
                   information services delivered through other means; or
                   (B) any tax imposed by a State or political subdivision thereof, if—
                       (i) the sole ability to access a site on a remote seller’s out-of-State computer
                   server is considered a factor in determining a remote seller’s tax collection
                   obligation; or
                       (ii) a provider of Internet access service or online services is deemed to be the
                   agent of a remote seller for determining tax collection obligations solely as a
                   result of—
                            (I) the display of a remote seller’s information or content on the out-of-
                       State computer server of a provider of Internet access service or online
                       services; or
                            (II) the processing of orders through the out-of-State computer server of
                       a provider of Internet access service or online services.” Interstate Tax
                       Freedom Act, § 1105(2), 47 U.S.C. § 151 note.
¶ 58       In the case before us today, the amendments to the use and service use tax statutes
       contained in Public Act 96-1544 are not alleged to be “discriminatory” in any of the
       foregoing ways except one: imposing “an obligation to collect or pay the tax on a different
       person or entity than in the case of transactions involving similar property, goods, services,
       or information accomplished through other means.” Interstate Tax Freedom Act,

                                                 -14-
       § 1105(2)(A)(iii), 47 U.S.C. § 151 note. But the amendments at issue here do no such thing.
       The obligation they impose with respect to collecting and remitting use and service use taxes
       falls on retailers and servicemen just as it does in all other transactions, electronic or
       otherwise, where the sales activity of the vendor or service provider has a substantial nexus
       with Illinois. The law simply refines the definition of retailer and servicemen to reflect the
       evolving nature of electronic commerce involving our state. Its goal is to insure equal
       treatment, not impose extra responsibility.
¶ 59        In disputing this point, PMA attempts to find a discriminatory effect in the law by
       positing a situation where an out-of-state retailer advertises the sale of tangible personal
       property under a contract with an Illinois publisher or broadcaster and the advertising is
       directed primarily at a national or even international audience, rather than to Illinois
       consumer. As PMA reads our use tax law, such a retailer would not be obligated to collect
       and remit the use tax on any transactions subject to the law, and in PMA’s view, that
       retailer’s status is indistinguishable from the status of the out-of-state e-commerce retailers
       it represents who will be subject to tax collection obligations under Public Act 96-1544.
       Because the “offline” retailer would not be required to collect and remit the tax, PMA argues
       that under the Internet Tax Freedom Act, the e-commerce retailers it represents cannot
       lawfully be required to collect it either.
¶ 60        This contention is untenable. For one thing, the parallel drawn by PMA between the sales
       activities of the internet vendors it represents and the “offline” merchants in its example is
       flawed. It is true that most commercial solicitations made via internet websites can be viewed
       anywhere in the world by anyone with computer access. That is in the nature of how the
       internet works. But contrary to the position urged by PMA and accepted by the majority (see
       supra ¶ 19), the mere fact that it is technically possible to view an internet ad from anywhere
       does not make the ad “inherently national or international in scope and disseminated to a
       national or international audience.” One of the great advantages of internet marketing is that
       it permits narrow targeting of particular customers in particular places with particular
       interests in a way which print and broadcast media do not. From the record before us, there
       is no reason to assume that this will not be the predominant way in which Illinois-based
       internet services will be utilized by the out-of-state retailers and servicemen now covered by
       Public Act 96-1544. There is no dispute that when an out-of-state retailer avails itself of
       Illinois print or broadcast media to target Illinois consumers, it is required to collect and
       remit use tax. 35 ILCS 105/2(2), (3) (West 2012). If an out-of-state retailer uses Illinois
       internet services to target Illinois consumers in the same way, requiring it to likewise collect
       and remit use tax is therefore not discriminatory. It is fair.3
¶ 61        Second, as the Multistate Tax Commission aptly observes in its friend of the court brief,
       the particular form of solicitation activity addressed by Public Act 96-1544 has no direct
       analog outside the context of the internet. Other forms of commercial solicitation may

               3
                Arguably, it is more than fair. Out-of-state internet retailers are not covered by the law
       unless they meet a certain sales threshold. Offline retailers are obliged to collect and remit use tax
       no matter how small their sales are.

                                                   -15-
       employ some form of “performance-based” marketing, but none possesses the immediacy
       or directness of the “click-through” marketing possible online. As pointed out earlier in this
       dissent, the Internet Tax Freedom Act does not, in fact, create “tax freedom” for commercial
       transactions on the internet. It requires only that internet transactions not be treated less
       favorably than would be the case with non-internet-based transactions. If an internet
       marketing scheme has no true offline counterpart, it is difficult to see how requiring the
       retailer to collect and remit the use tax due on the resulting transactions can be deemed
       discriminatory within the meaning of the federal statute.
¶ 62       Finally, PMA has not adduced a single example of a situation in Illinois or any other
       jurisdiction with an “affiliate” or “Amazon” tax where a use tax has actually been imposed
       on an internet retailer in a way that is inconsistent with the language and purposes of the
       Internet Tax Freedom Act. PMA’s concerns over conflicting state law are therefore entirely
       speculative. That one may be able to hypothesize potential conflicts with federal legislation
       is not a legally sufficient basis under the supremacy clause for completely jettisoning a state
       law as the majority has done here. To the contrary, it is well settled that under the supremacy
       clause of the United States Constitution, a federal law preempts a conflicting state law and
       the state law is displaced only to the extent it actually conflicts with federal law. Dalton v.
       Little Rock Family Planning Services, 516 U.S. 474, 476 (1996); People ex rel. Director of
       Corrections v. Booth, 215 Ill. 2d 416, 425-26 (2005); In re Marriage of Hulstrom, 342 Ill.
       App. 3d 262, 266 (2003). Absent a showing of such an actual conflict, PMA’s claims of
       preemption must therefore be rejected.4
¶ 63       In National Private Truck Council, Inc. v. Oklahoma Tax Comm’n, 515 U.S. 582, 586
       (1995), the United States Supreme Court observed that it has “long [been] recognized that
       principles of federalism and comity generally counsel that courts should adopt a hands-off
       approach with respect to state tax administration [for] ‘[i]t is upon taxation that the several
       States chiefly rely to obtain the means to carry on their respective governments, and it is of
       the utmost importance to all of them that the modes adopted to enforce the taxes levied
       should be interfered with as little as possible.’ [Citation.]” Rather than heed this admonition,
       the majority ignores it and, indeed, the entire body of supremacy clause jurisprudence
       developed by the United States Supreme Court over the past several decades. This it may not
       do. The supremacy clause itself forbids it. As the Supreme Court of Pennsylvania correctly
       observed, “[i]t is fundamental that by virtue of the Supremacy Clause, the State courts are
       bound by the decisions of the Supreme Court with respect to the federal Constitution and
       federal law, and must adhere to extant Supreme Court jurisprudence. U.S. Const. art. VI, cl.
       2; Chesapeake & O. Ry. Co. v. Martin, 283 U.S. 209, 221, 51 S. Ct. 453, 75 L. Ed. 983
       (1931).” Council 13, American Federation of State, County & Municipal Employees ex rel.
       Fillman v. Rendell, 986 A.2d 63, 77 (Pa. 2009).

               4
                I note, parenthetically, that to the extent federal law might preempt the application of
       portions of Illinois use tax law in certain circumstances, there would be no impediment under Illinois
       law to enforcement of the remainder of the law or its application to persons or circumstances other
       than those to which it was held invalid. 35 ILCS 105/18 (West 2012).

                                                   -16-
¶ 64       Today’s decision by the majority marks the first time a court of review in the United
       States has determined that the Internet Tax Freedom Act preempts a state from enacting an
       internet affiliate tax law to facilitate the collection of existing use taxes to which the state is
       legally entitled. Under the standards articulated by the United States Supreme Court and set
       forth in this dissent, standards by which we are bound, that determination is inconsistent with
       supremacy clause principles. For this reason, and because Public Act 96-1544 is not invalid
       under the commerce clause, the judgment of the circuit court in favor of PMA should be
       reversed and the cause should be remanded with directions to enter summary judgment in
       favor of the Director of Revenue. I therefore respectfully dissent.

                                                  -17-