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Colorado’s Use Tax Notification Law Blocked… Again


 Colorado's "Amazon tax law" still walking the tightrope.

In 2010, Colorado instituted a use tax reporting requirement for out-of-state sellers that did not collect and remit Colorado sales tax. Under the 2010 law, remote retailers not voluntarily collecting sales tax on behalf of the state are required to notify Colorado buyers of their sales and use tax obligation. In response, the Direct Marketing Association (DMA) asked for an injunction against the law, claiming it was in violation of the U.S. Constitution’s Commerce Clause and placed and undue burden on remote retailers.

In 2012, the injunction was granted and the Colorado Department of Revenue appealed to the U.S. Court of Appeals for the Tenth Circuit. In August 2013, that court determined it had “no jurisdiction to reach the merits of this appeal” and kicked it back to the district court. The injunction was dissolved on December 10. This was seen as a win for the state’s so-called Amazon tax.

Still, the threat of continuing litigation lingered. Last December the Colorado Department of Revenue published a notice about the non-collecting retailer reporting requirements, stating that it would not enforce penalties for failure to comply with the law during the injunction and it would not assess penalties for retailers’ failure to comply with reporting requirements due in March 2014.

This brings us to the present. On February 18, 2014, Denver District Court Judge Morris Hoffman granted the preliminary injunction most recently sought by the DMA against the remote sales and use tax notification reporting requirement. The DMA blog calls this a “Victory,” but it is a tenuous one. Judge Hoffman “stressed that his conclusions are preliminary and not ‘written in stone.’” He noted in his order that “the Supreme Court and lower courts have almost universally rejected the idea that states can single out non-residents for an economic burden to offset other burdens imposed on residents.” His decision was based in large part on the fact that in-state businesses were not subject to the same reporting requirements as out-of-state businesses (Denver Post).

A federal solution to the problem of remote sales tax is still in the wings. The Marketplace Fairness Act of 2013, which was approved by the Senate last May, is still alive in the House. Lawmakers are said to be refining the discussion around it.

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photo credit: Abdulmajeed Al.mutawee || twitter.com/almutawee via photopin cc


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.