I think it’s sad that Amazon has discontinued the Associates Program for Illinois residents. Brick and Mortar businesses have to pay/charge the tax, I’m not sure on-line retailers with a presence in the state are justified in their viewpoints. They can’t expect it would never happen.

Gov. Pat Quinn signed legislation Thursday to require online merchants with a physical presence in Illinois to collect and remit sales tax.

The controversial law, called the Main Street Fairness Act, means online retailers — including giant Amazon.com Inc. and Overstock.com Inc. — must collect sales taxes on purchases made by Illinois residents as long as the retailer has a physical presence in the state. The law is effective immediately.

The move is expected to have little effect on consumers’ online shopping habits, but deals a blow to small businesses that count the giant retailers as a major source of ad revenue.

Amazon and Overstock.com said they would avoid collecting sales tax by stopping their affiliation with Web site companies in Illinois that direct traffic to Amazon and Ovestock. Under the new law, online retailers are deemed to have a presence in Illinois if they have a contract with an affiliate based in here.

“Illinois’ main street businesses are critical to ensuring our long-term economic stability, which is why they must be able to compete with every company doing business online in Illinois,” said Quinn. “This law will put Illinois-based businesses on a level playing field, protect and create jobs and help us continue to grow in the global marketplace.”

Amazon and Overstock, along with other out-of-state online merchants, have ties to thousands of deal and coupon sites. These so-called affiliate marketing sites typically send potential customers to Amazon and Overstock in exchange for a cut of sales.

Illinois is among a handful of states that have instituted similar laws to extract sales taxes from online merchants and boost depleted state coffers. The Illinois Department of Revenue estimates it misses out on $153 million to $170 million in uncollected sales taxes each year from online purchases. The uncollected taxes of goods sold online and through catalogs totaled $8.6 billion in 2010 nationwide, according to a Wall Street Journal report citing the National Conference of State Legislatures.

The U.S. Supreme Court ruled in 1992 that companies without a physical presence in a state aren’t required to collect state sales taxes.