The Illinois Department of Revenue added the place an offer is made, the location of inventory and the location of sales personnel authorized to negotiate and finalize transactions to the location a sale is accepted for determination of where a sale is taxable. The change was done by “emergency” rule, which means that it is immediately effective, but has to pass muster as an “emergency” at the Joint Committee on Administrative Rules of the Illinois General Assembly.
5 ILCS 100/5-45 is the definition of an “emergency” rule under the Illinois Administrative Procedure Act. Section 5-45 provides for the immediate adoption of a rule to address a situation that an “agency finds reasonably constitutes a threat to the public interest, safety, or welfare.”
Robert John Kane and Susan Meister, in their forthcoming Chapter 4 of the Illinois State Bar Association Handbook of Illinois Administrative Law (3d Ed.), for which I am General Editor, say the following items are required for “emergency” rulemaking:
“1. The existence of any situation that any agency finds reasonably constitutes a threat to the public interest, safety or welfare;
2. That the situation necessitates the adoption of rules in less than the time period for adoption using general rulemaking procedures;
3. That the agency state its reasons for determining that an emergency exists;
4. That the agency take reasonable and appropriate measures to make emergency rules known to the persons who may be affected by them;
5. No emergency rule may be effective for longer than 150 days.”
In addition, an “emergency” rule can implement a consent order, which may have been present in this case, since the rules follow an Illinois Supreme Court decision striking previous rules, and the objective of administrative review by courts is compliance.
A broader definition of where there is tax nexus can be expected to produce additional revenue to Chicago (for O’Hare aviation gas sales) and for other places where retail sales are generated, but not currently “accepted.”
What does this mean for business? Traditional “bricks and mortar” sales locations may benefit from increased costs for their internet competitors, if the new regulations hold. A constitutional challenge for any taxation based only on the location of sales personnel can be expected. In-state and out-of-state retailers may need to examine the new tax nexus factors to determine whether their sales come within the additional locations defined by the new rules.