“Ama­zon tax” law stands in Colorado

The state is still al­lowed to pres­sure on­line re­tail­ers.

The Denver Post - - FRONT PAGE - By Mark K. Matthews

washington» The U.S. Supreme Court on Mon­day let stand a Colorado law that pres­sures on­line re­tail­ers to col­lect sales tax — a de­ci­sion that could mo­ti­vate other states to pass their own “Ama­zon tax” mea­sures.

The high court an­nounced in its lat­est or­der list that it won’t hear a chal­lenge to a Fe­bru­ary rul­ing by the 10th U.S. Cir­cuit Court of Ap­peals, which sided with Colorado in a law­suit from in­dus­try.

In do­ing so, the Supreme Court af­firmed a Colorado law that com­pels out-of-state com­pa­nies to col­lect sales tax from res­i­dents who make in­ter­net pur­chases — and one that got its nick­name from the on­line gi­ant Ama­zon.com.

“It cer­tainly feels like val­i­da­tion for all the mom-and-pop busi­nesses in Colorado who stood up in 2010 and wanted to com­pete on a level play­ing field,” said state Sen. Mike John­ston, D-Den­ver, one of the co-spon­sors of the Colorado law. “It was nice to see the Supreme Court agree with us on what seemed so clear in 2010.”

By it­self, the Colorado’s law doesn’t force on­line com­pa­nies to act as the tax man.

Rather, it gives them a tough choice: ei­ther col­lect the sales tax or deal with more red tape, in­clud­ing ad­di­tional pa­per­work and the re­quire­ment they re­mind Coloradans that they owe sales tax to the state.

That’s in con­trast to brick-and­mor­tar stores, which are re­quired to col­lect sales tax. Ear­lier this year, Ama­zon said it would in­clude sales tax on pur­chases made by Coloradans.

Yet Colorado’s 2010 on­line reg­u­la­tions were enough to prompt a law­suit from the Data & Mar­ket­ing As­so­ci­a­tion — then called the Di­rect Mar­ket­ing As­so­ci­a­tion — which has bat­tled Colorado in court for sev­eral years.

On Mon­day, the group ex­pressed frus­tra­tion with the de­ci­sion.

“We are dis­ap­pointed the Supreme Court did not take the case and are con­cerned it will only en­cour­age other states to adopt sim­i­lar laws and reg­u­la­tions that are de­signed to put ar­bi­trary bur­dens on out-of-state sell­ers,” Emmett O’Keefe of DMA said in a state­ment.

A tax ex­pert with the Na­tional Con­fer­ence of State Leg­is­la­tures, which tracks gov­ern­ment trends at the state­house level, said the rul­ing could prompt more changes at the state level to on­line tax pol­icy — es­pe­cially since state gov­ern­ments are de­pen­dent on sales tax for a ma­jor chunk of their bud­gets.

“Other states, which have seen their rev­enue de­cline in sales tax, would be more apt to in­tro­duce and en­act leg­is­la­tion like Colorado’s (law),” said Max Behlke, di­rec­tor of tax and bud­get pol­icy at the Na­tional Con­fer­ence of State Leg­is­la­tures.

Al­ready, states such as Ver­mont and Louisiana have taken steps in that di­rec­tion, he said. With the Supreme Court’s bless­ing, more could take that route, he added.

On av­er­age, about one third of state rev­enue comes from sales tax, ac­cord­ing to NCSL. Colorado re­cently es­ti­mated the loop­hole for on­line sales tax cost it about $170 mil­lion a year.

But Behlke said the big­ger trend to watch is whether states be­gin to pass laws that run counter to the 1992 case Quill v. North Dakota. In that de­ci­sion, the Supreme Court ruled that res­i­dents owe taxes to their states for on­line pur­chases, but that states couldn’t force the com­pa­nies to col­lect the money be­cause it was too com­pli­cated.

Given the ad­vances in tech­nol­ogy since 1992, Behlke said Quill v. North Dakota is ripe for an­other Supreme Court re­view and states such as Alabama and South Dakota al­ready have be­gun to pass laws that put the bur­den on on­line com­pa­nies to col­lect.

In Colorado, due to a series of court in­junc­tions, the state has not en­forced its “Ama­zon tax” law since 2011, said Lynn Granger, a spokes­woman with the Depart­ment of Rev­enue. She said she was not sure how quickly state of­fi­cials could move to en­force it, given that a state-level in­junc­tion is still out there.

“Al­though the sta­tus of the state case is likely to be im­pacted by the Tenth Cir­cuit’s rul­ing in fa­vor of the state and the U.S. Supreme Court’s denial of the pe­ti­tion for writ of cer­tio­rari, the state court pre­lim­i­nary in­junc­tion re­mains in place at this time,” wrote Granger in a state­ment.

A spokes­woman for Gov. John Hick­en­looper said his of­fice was “eval­u­at­ing next steps.”

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