DENVER – The U.S. Supreme Court on Monday heard arguments for a case that online retailers hope will ultimately overturn an Internet sales-tax mandate in Colorado.
The arguments Monday, however, did not rest on the merits of the so-called “Amazon tax,” which comes with its own fiery political ramifications. Instead, the case Monday rested on whether federal or state court is the appropriate venue for challenging the mandate.
“The Colorado Attorney General’s office has defended Colorado’s law to recover the sales and use tax owed to the state on purchases made from Internet and catalog sales,” said Carolyn Tyler, spokeswoman for the AG’s office.
Colorado passed a law in 2010 requiring larger online retailers to tell customers that they owe the state’s 2.9 percent sales tax on purchases. They also have to send an annual list of purchases to customers who spend more than $500.
But a lack of action on the federal level and an ongoing legal challenge has left much of the state law impossible to enforce.
Federal law prohibits states from requiring online retailers that don’t have stores in the state to charge sales tax. The best Colorado can mandate is to require retailers to have their customers pay sales tax to the state annually.
An earlier preliminary injunction issued by a Colorado District Court temporarily prevents the law from being enforced at all, pending the outcome of litigation.
Tyler said Colorado consumers must still exercise their own responsibility. If the retailer doesn’t collect a tax, then consumers must self-report. But few take the time to do so.
“None of this litigation changes the fact that Coloradans have a duty to pay tax on their own Internet and catalog purchases,” Tyler said.
Colorado has estimated losses of $172 million in online sales taxes for 2012.
In filing the challenge to Colorado’s law, the Direct Marketing Association cites the Commerce Clause of the U.S. Constitution, which states, “State laws may not discriminate against or burden interstate commerce.”
“If 50 different states were to issue 50 different requirements for out-of-state businesses, the compliance requirements for businesses would be extraordinary,” said George Isaacson, an attorney for DMA, which represents thousands of businesses. “National marketers having access to a neutral, federal forum is a critical aspect of our justice system.”
The trade group also pointed to the national significance of the case. They highlighted privacy concerns by potentially being forced to report data on customers.
“The outcome of this case is critically important to DMA members and every business that operates across state lines,” said Thomas J. Benton, chief executive of DMA. “The court’s decision will have a significant impact on marketers’ ability to protect the data and privacy of their customers in Colorado and in the other states nationwide.”
pmarcus@durangoherald.com
