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By Tripp Baltz
A Colorado reporting requirement imposed on out-of-state retailers that don’t collect and remit taxes on remote sales invades the privacy of the state’s consumers, an e-commerce trade association said.
NetChoice is pushing a bill that would repeal the state requirement, which has been embroiled in legal battles since its enactment in 2010, that certain remote sellers report information about consumer purchases to the state Department of Revenue, according to a draft version of the bill obtained by Bloomberg BNA March 16.
“This bill protects the privacy of Colorado citizens,” Amy G. Stephens, principal with Dentons US LLP and a lobbyist for NetChoice, told Bloomberg BNA March 16. “This takes it out of the hands of the Department of Revenue. Sorry, big brother.”
Colorado’s law, approved by the state General Assembly in 2010, requires those sellers that don’t collect and remit sales and use taxes on remote transactions to report data about those transactions—including names, purchases amounts and shipping addresses—annually to the department. It also requires those same sellers to give customers an annual report of their purchases and to notify them of their obligation to pay taxes on those purchases.
The law applies to retailers that have more than $100,000 in aggregate sales to Colorado buyers on an annual basis. It was finally affirmed as constitutional in February 2016 by the U.S. Court of Appeals by the Tenth Circuit, and in December the U.S. Supreme Court denied a petition by the Data & Marketing Association to review the appellate ruling ( Brohl v. Direct Mktg Ass’n, U.S., No. 16-458, 12/12/16 ).
In February, the Data & Marketing Association reached a settlement with the state to prevent further litigation, ensuring that out-of-state sellers won’t be liable for any past penalties for noncompliance with the law’s requirements in exchange for the group dropping the case. The parties agreed that the law’s notice and reporting requirements will take effect July 1.
The draft bill would remove only the requirement that retailers report information to the Department of Revenue. It would let stand the law’s provisions requiring notice and reports to consumers. Additionally, it would change the law to allow companies to send reports to consumers via email. The current law requires reports to be sent via First Class Mail, Stephens said.
The Department of Revenue is in the process of developing rules for the 2010 law to take effect July 1. With the law moving forward, the Multistate Tax Commission voted March 7 to take up its model uniform statute—which is patterned after Colorado’s law—for reporting and notice on remote sellers, and Phil Horwitz, director of tax policy in the Colorado Department of Revenue, is chairing that effort.
A handful of states are considering bills to impose similar regimes this session, with Alabama the first state to advance such a bill through both chambers of its legislature.
Stephens said the landscape has changed in the seven years since the law was enacted. During debate on the law in the 2010 session, Amazon.com Inc. strenuously opposed the legislation and carried through on its threat to end its relationship with Colorado-based affiliates, although there is no affiliate trigger in the law. Now Amazon collects and remits taxes on all sales in Colorado, Stephens said.
Stephens said the 2017 bill, if approved, would shift the burden of paying taxes on remote sales from out-of-state companies to Colorado consumers. “This way, Colorado citizens keep their personal information private and fulfill their responsibility to pay online sales tax with the information retailers send them,” she said.
She said the bill’s chances of passage are good in the Senate, where it is being carried by Sen. Chris Holbert (R), the Senate Majority Leader.
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Information on bills in the 2017 Colorado General Assembly is at http://leg.colorado.gov/bills.
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