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By Tripp Baltz
Out-of-state retailers that don’t collect and remit Colorado use taxes wouldn’t have to report sales data to the state Department of Revenue under a bill ( S.B. 238) approved by the Colorado Senate.
The measure, approved on a party-line 19-14 final vote April 17, now goes to the House, where it is expected to face sharp opposition. The bill would repeal a provision of a 2010 law, which finally won a long legal challenge in December at the U.S. Supreme Court, requiring remote vendors that don’t remit sales and use taxes to report information about sales to the DOR. It would leave intact a provision of the law requiring the same sellers to notify consumers of their obligation to pay the tax.
Sen. Chris Holbert (R), majority leader in the Senate and chief sponsor of the bill, said the law approved by the 2010 Colorado General Assembly amounts to a “gross violation of privacy.” It requires retailers to send annual reports to the department with information about consumer purchases, including total amounts spent, and shipping and billing addresses. It would apply to out-of-state retailers with more than $100,000 in aggregate yearly sales to Colorado buyers.
“I’m not insensitive to the state’s need to collect the use tax, and the need to inform consumers of what they owe,” he said during floor debate on the measure April 13. “But this is a gross violation of the 4th Amendment to the U.S. Constitution.”
Holbert said the Senate Committee on Finance amended the bill to include a provision known as “Know What You Owe,” which would direct the DOR to launch an education campaign so that consumers know how to pay their use taxes, a complex proposition at present. The bill would also allow retailers to provide consumers with annual reports of their purchases via email. Current law requires such reports to be sent via regular mail.
Under that change, the state would be “educating instead of penalizing consumers,” Amy Stephens, principal in the public policy and regulation practice at Dentons in Denver, told Bloomberg BNA April 17. Stephens is a lobbyist representing NetChoice, a prime advocate of the bill to remove the reporting requirement.
“We can get more collections by educating taxpayers than by using the Department of Revenue to squeeze it out of them,” she said. “And we can do it while protecting people’s privacy.”
She said backers of the reporting requirement, which include many Democrats, the majority party in the House, believe the state “needs the heavy hand of the Department of Revenue” to provoke consumers to pay use taxes that are due.
She said supporters of the bill are pushing for it to be assigned to the House Finance Committee rather than the House State, Veterans and Military Affairs Committee. The former committee is likely to be more favorable to the measure, she said, while the latter will likely kill it.
The 2010 law, which is set to take effect July 1, was found to be constitutional in February 2016 by the U.S. Court of Appeals for the Tenth Circuit ( Direct Mktg Ass’n v. Brohl , 10th Cir. App., No. 12-1175, 2/22/16 ).
The department is now developing rules and guidelines to help out-of-state retailers comply with the law. The Data and Marketing Association, formerly the Direct Marketing Association, had challenged the law as violating the Interstate Commerce Clause by imposing requirements on remote sellers that it doesn’t impose on in-state vendors.
The association appealed the Tenth Circuit ruling to the U.S. Supreme Court, and in a cross-appeal petition, Colorado urged the high court justices to overturn its foundational physical presence standard affirmed in Quill Corp. v. North Dakota504 U.S. 298 (1992), which said a state can’t require a remote seller to collect and remit sales and use taxes if the seller doesn’t have a physical presence in that state. The U.S. Supreme Court refused to hear the appeal in December ( Direct Mktg Ass’n v. Brohl, U.S., 16-267, cert. denied 12/12/16 ; Brohl v. Direct Mktg Ass’n, U.S., 16-458, cert. denied 12/12/16 ).
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Text of S.B. 238 is at http://src.bna.com/n02.
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