“Amazon tax” law stands in Colorado
The state is still allowed to pressure online retailers.
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.”