The law is effective immediately and Quinn said it would level the playing field for brick and mortar stores, which must collect and remit sales tax to the state, the Chicago Tribune reported.
The law makes it harder for online retailers to claim they don't have a physical presence in the state. Such retailers are not required to collect sales taxes.
Amazon.com responded by saying it would sever ties with Illinois-based Web sites on which it advertises. The new law defines that relationship as a physical presence.
"Amazon has basically a 10 percent pricing advantage, and they're fighting like the dickens to keep it," said Fiona Dias, executive vice president of strategy at GSI Commerce, a Pennsylvania-based digital marketing firm.
The Illinois Department of Revenue estimates the state is losing up to $170 million in uncollected sales taxes each year because of Internet purchases.