The law says sales taxes must be charged when people buy from online retailers through an Illinois-based partner. For instance, an Illinois business might sell products through Amazon.com.
Online businesses generally don't charge state sales taxes. Illinois customers are supposed to pay it directly to the state, but they rarely do.
Proponents say the measure that Gov. Pat Quinn signed Thursday will level the playing field between online businesses and brick-and-mortar stores. Opponents say it will drive business out of Illinois.
Chicago-based Coupin Cabin is deflated. The online coupon company s hiring and expects to double this year.
"We built all this momentum over the last couple of years, and this is all kind of disappointing," said Lauren Boukas, Coupon Cabin.com spokesperson.
Online retailers like Amazon or Overstock that are partnered with Illinois-based companies like Coupon Cabin must now collect Illinois state sales taxes. If they don't, they must cut ties with Coupon Cabin.
But Coupon Cabin wants to save that business relationship by moving to Indiana.
"We've built a home here for seven years. The last thing we want to do is leave Chicago. We're all Chicagoans and love living here. But we have to do what's best for the business," said Boukas.
Businesses like Wal-Mart and Sears applauded the new law.
Sears' statement said the law "helps to correct a longstanding problem" that "put brick-and-mortar retailers at an unfair competitive disadvantage" for far too long.
In the meantime, consumers should pay close attention when filing taxes this year. Illinois has a Use Tax Amnesty Program. Residents must think back between July 2004 and December 2010 to figure out if they owe sales taxes for any online purchases. If so, they can pay it now without any penalties.
To figure out how much you may owe, visit http://www.revenue.state.il.us/Individuals/Amnesty-FAQs-Use-Tax.htmThe Associated Press contributed to this report.