Remove ‘Tattletale’ Provision of Colorado’s Sales and Use Notice Law

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By Tripp Baltz

Information about online purchases by Colorado consumers is “none of the government’s business,” a state lawmaker testified in support of a bill (S.B. 238) that would amend Colorado’s long-litigated reporting and notice law.

“It’s your responsibility and mine to be an honest taxpayer” and pay sales and use taxes on online purchases, said Sen. Chris Holbert (R), chief Senate sponsor of the bill and the Senate Majority Leader. The Senate Finance Committee approved the measure 3-2 on April 4 and sent it to the Appropriations Committee. The bill would amend the 2010 law to remove the reporting requirement for out-of-state retailers that don’t collect and remit sales and use taxes to Colorado.

Opponents of the 2010 legislation have called it a “tattle-tale” law that invades the privacy of Colorado consumers. The law requires non-collecting vendors to make annual reports to the state Department of Revenue, including the names, shipping addresses, billing addresses and total amounts spent by online consumers. It covers retailers with more than $100,000 in aggregate sales to Colorado buyers.

It was affirmed as constitutional in February 2016 by the U.S. Court of Appeals for the Tenth Circuit, and in December the U.S. Supreme Court denied a petition by the Data & Marketing Association (formerly Direct Marketing Association) to review the appellate ruling ( Brohl v. Direct Marketing Ass’n, U.S., No. 16-458, 12/12/16 ).

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Leaves Notice in Place

The bill would leave in place the requirement that covered retailers give notice to consumers about their obligation to pay sales and use taxes on products purchased via electronic commerce. It would make one other change to the law—remove a requirement that annual reports to consumers be sent via regular mail, allowing such reports to be sent via email.

Amy Stephens, a Denver-based principal in the public policy and regulation practice at Dentons, told the committee the state “has no business knowing where I bought my guns online.” She said an amendment to the bill will be introduced directing the state Department of Revenue to initiate a “Know What You Owe” campaign educating consumers about their obligation to pay sales and use taxes on remote purchases.

“You’re going to get a higher remit rate when people are educated,” Stephens, a former state lawmaker, told the committee. “Meanwhile, consumers get to keep their privacy.” Stephens was the House Majority Leader in 2010 when the Colorado General Assembly enacted the law, and she said the purpose of it was to prompt higher collection and remittance rates by remote vendors.

‘Privacy Costs.’

Carl Szabo, senior policy counsel with NetChoice, which is pushing the bill to repeal the reporting requirement, asked committee members whether the information to be gathered by the state “was worth the privacy costs.” The bill “creates a honeypot of privacy that could be left on a bus on a thumb-drive.”

The DOR is in the process of developing rules for the 2010 law, which is set to take effect July 1.

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 S.B. 238 is at http://src.bna.com/nEG.

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