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Colorado Amazon Tax Revived

  • Aug 21, 2013 | Gail Cole

 Things are looking up for Colorado Amazon tax.

In 2010, use tax obligation; 2) provide an Annual Purchase Summary to customers who spent more than $500 during the previous calendar year; and 3) give the Annual Purchase Summary and other reports to the Department of Revenue. In response, the Colorado Department of Revenue to court.

In the spring of 2012, U.S. District Judge Robert Blackburn determined that the Direct Marketing Association (DMA) was correct in its claim that Colorado's law violated the U.S. Constitution's Commerce Clause and was unconstitutional. At the time, he wrote that the law imposed an "undue burden on interstate commerce." In response, the Colorado Department of Revenue took the case to the U.S. Court of Appeals for the Tenth Circuit.

And the U.S. Court of Appeals for the Tenth Circuit says…

Under the Tax Injunction Act (TIA), "district courts shall not enjoin, suspend or restrain the assessment, levy or collection of any tax under State law where a plain, speedy and efficient remedy may be had in the courts of such State."

The U.S. Court of Appeals for the Tenth Circuit begins its discussion of the case by asking, "Does DMA seek to enjoin, suspend, or restrain the assessment, levy or collection of a state tax?" If it does, the TIA prohibits action by the U.S. Court of Appeals for the Tenth Circuit.

The opinion acknowledges that "use tax collection is elusive" and cites a 2010 report that estimates that "Colorado state and local governments would lose $172.7 million in 2012 because of residents' failure to pay use tax on e-commerce purchases from out-of-state, non collecting retailers." The Court writes:

"DMA's action seeks to restrain the collection of sales and use taxes in Colorado. The state's notice and reporting obligations, while not taxes themselves, were enacted for the sole purpose of increasing use tax collection. Indeed, the obligations for non-collecting retailers are a substitute for requiring these same retailers to collect sales and use taxes at the point of sale…."

"We have no jurisdiction"

According to the Court opinion, "we … have no jurisdiction to reach the merits of this appeal." Instead, the court remands "for the district court to dismiss DMA's Commerce Clause claims for lack of jurisdiction, dissolve the permanent injunction entered against the Department, and take further appropriate action consistent with this opinion."

Read the complete opinion here.

A win for Amazon tax

The Denver Post called the opinion "a win" for Colorado's Amazon tax law. For now, it seems to be just that. However, DMA may continue to fight the law.

In the meantime, federal lawmakers could move on the Marketplace Fairness Act of 2013 (MFA)  federal legislation that would allow states to require certain out-of-state retailers to collect and remit sales tax. Currently, MFA is waiting in the House.

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Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.