Fight Settled Over Colorado Online Tax Reporting Law

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By Tripp Baltz

The Data & Marketing Association reached a settlement today resolving its long-standing court battle with Colorado over the state’s 2010 law requiring out-of-state vendors to report certain information on consumer purchases if they don’t collect and remit state sales and use taxes.

Under the state court agreement, out-of-state sellers won’t be liable for any past penalties for noncompliance with the law’s requirements, and, in exchange, the DMA will drop its case ( Direct Mktg. Ass’n v. Colo. Dep’t of Revenue , Colo. Dist. Ct., No. 13-CV-34855, settlement announced 2/23/17 ).

The parties agreed the law’s notice and reporting requirements will take effect July 1.

‘Quill’ Under Attack

Approved by the 2010 Colorado General Assembly, the statute requires out-of-state vendors that don’t collect and remit taxes to provide information on customer transactions to the state Department of Revenue, as well as provide notice to consumers of their obligation to pay the tax.

In December, the U.S. Supreme Court refused to hear the DMA’s appeal in a related federal case in which the U.S. Court of Appeals for the Tenth Circuit found the law constitutional. The DMA alleged the Colorado law violated the interstate commerce clause by imposing on out-of-state sellers requirements not binding on in-state retailers. In a cross-petition to the U.S. Supreme Court, the state asked the court not to take the appeal, but if it did decide to review the case, to also consider overturning its foundational standard in Quill Corp. v. North Dakota,504 U.S. 298 (1992).

That ruling, under attack in many states, bars a state from requiring a remote vendor from collecting sales taxes if the vendor doesn’t have a physical presence in the state.

Since the U.S. Supreme Court refused to wade into the matter, seven states have introduced bills this legislative session to create reporting/notice regimes like Colorado’s. Those states are Alabama, Arkansas, Georgia, Hawaii, Kansas, Nebraska, and Rhode Island. About 25 states have introduced bills on remote sales taxation, generally.

To contact the reporter on this story: Tripp Baltz in Denver at abaltz@bna.com

To contact the editor responsible for this story: Ryan C. Tuck at rtuck@bna.com

For More Information

Text of the settlement is at http://src.bna.com/msJ.

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