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Illinois Appellate Court holds online cosmetics retailer lacked use tax nexus

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In a case filed under the Illinois False Claims Act, the Illinois Appellate Court recently held that an online cosmetics retailer did not have a duty to collect and remit use tax because it did not have substantial nexus with the state under the Commerce Clause of the U.S. Constitution. The Court held that the online retailer lacked the required nexus with Illinois because it did not have a physical presence in the state. Also, a retailer with stores located in Illinois that sold similar products under the same brand name did not act as the online retailer’s agent. Further, the Court ruled the online retailer did not act with reckless disregard when considering potential use tax liability in the state.