Colorado in­ter­net-tax case could change on­line shop­ping

Kuwait Times - - TECHNOLOGY -

Buy­ing things on­line could get pricier af­ter the US Supreme Court re­jected a case Mon­day that could ul­ti­mately lead to states col­lect­ing bil­lions of dol­lars in sales taxes lost to in­creas­ingly pop­u­lar in­ter­net re­tail­ers.

The court would not hear a chal­lenge to a Colorado law re­quir­ing on­line sell­ers such as Ama­ to no­tify cus­tomers and the state how much they owe in taxes. State of­fi­cials have es­ti­mated that Colorado alone has been miss­ing out on as much as $172.7 mil­lion a year.

At least three other states Louisiana, Ok­la­homa and Ver­mont have passed sim­i­lar laws that could take ef­fect given the res­o­lu­tion of the Colorado case. Though the court didn’t en­dorse Colorado’s law and could even weigh in against it if given a dif­fer­ent case, other states are likely to see Mon­day’s move as a green light to step up col­lec­tion ef­forts. That comes de­spite a 1992 Supreme Court de­ci­sion say­ing re­tail­ers must have a phys­i­cal pres­ence in a state be­fore of­fi­cials can make them col­lect sales tax.

A change is com­ing

On­line shop­pers al­ways have owed state sales taxes on their pur­chases, but the rule has been widely ig­nored. States have spent years ex­am­in­ing ways to cap­ture those lost tax dol­lars, but their op­tions are lim­ited when the re­tail­ers are not based in the state. So-called Ama­zon taxes that started in New York have not been ad­e­quate to fill the widen­ing gap, said Mark Behlke, di­rec­tor of bud­get and tax pol­icy for the Na­tional Con­fer­ence of State Leg­is­la­tures.

Sales taxes ac­count for about a third of rev­enue in many states, more in those with no in­come taxes, such as Texas and Florida. And with on­line sales go­ing up about 15 per­cent a year, states are in­creas­ingly feel­ing the ef­fects of those taxes go­ing un­paid.

The Colorado Leg­is­la­ture found a pos­si­ble so­lu­tion in 2010 when it passed a law re­quir­ing on­line re­tail­ers to no­tify cus­tomers to pay sales tax and re­port pur­chases to the state. That’s not the same as de­mand­ing tax pay­ments from outof-state re­tail­ers.

The Data and Mar­ket­ing Association sued, and a fed­eral judge put the law on hold in 2012. A year later, a fed­eral ap­peals court sided with Colorado. The association ap­pealed to the na­tion’s high­est court, ar­gu­ing that the law would med­dle in in­ter­state com­merce. The mar­ket­ing group said the Supreme Court’s re­fusal to hear the case could have far-reach­ing im­pli­ca­tions for on­line shop­pers. “It will only en­cour­age other states to adopt sim­i­lar laws and reg­u­la­tions that are de­signed to put ar­bi­trary bur­dens on out-of-state sell­ers,” association spokesman Mike Uehlein said in a state­ment.

Sup­port­ers of Colorado’s law agreed it sends a strong sig­nal that re­port­ing re­quire­ments don’t in­fringe on con­sti­tu­tional pro­tec­tions for in­ter­state com­merce. “This set­tles the is­sue, once and for all, that the 2010 law is con­sti­tu­tional, it was not an un­due bur­den on busi­ness,” said Tim Hoover, spokesman for the Colorado Fis­cal In­sti­tute, which sup­ported the law.

Ge­orge S. Isaac­son, who rep­re­sented the mar­ket­ing group and teaches con­sti­tu­tional law at Bow­doin Col­lege, said the high court may sim­ply be wait­ing to see more states copy Colorado. “Colorado was the first state to pass such a law, and the Supreme Court may be wait­ing to see how other state leg­is­la­tures and lower courts deal with this type of highly con­tro­ver­sial state leg­is­la­tion be­fore ad­dress­ing the con­sti­tu­tional is­sues,” Isaac­son said in a state­ment. —AP

PHOENIX: In this Dec 2, 2013 file photo, Ama­ em­ploy­ees or­ga­nize out­bound pack­ages at an Ama­ Ful­fill­ment Cen­ter on “Cy­ber Mon­day” the busiest on­line shop­ping day of the hol­i­day sea­son. —AP

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