Wednesday, April 04, 2012

Colorado's 'Amazon Tax' law ruled unconstitutional by federal court

A federal court in Colorado has ruled a so-called "Amazon Tax" law unconstitutional, one which had been passed by Colorado legislators in 2010 in an effort to force and other large Internet retailers to collect sales tax on sales made to Colorado customers. has long maintained that it should not be required to collect sales tax on online sales, based on a 1992 Supreme Court decision, Quill vs. North Dakota, in which the Supreme Court ruled that out-of-state retailers cannot be required to collect sales tax on purchases sent to states where they did not have a physical presence.

"The Supreme Court’s reasoning was at least partially based on the fact that, at the time the case was decided in 1992, there were over 6,000 separate sales and use tax jurisdictions in the United States (states, localities, special tax districts, etc.) and to impose a collection obligation on a remote seller would impose a crushing burden that would severely restrict interstate commerce."

Naturally, in terms of the complexity of sales tax law, things have only gotten worse, not better. Although could certainly be said to be capable of collecting sales tax despite all these jurisdictions, these laws would also mean that mom-and-pop Internet retailers would need to collect sales tax, as well.

New York State was the first to label such a law as an "Amazon Tax," as it's key target was the world's largest single Internet retailer.

In most cases, when a state enacted such a law, would cut ties to its Associates based in that state. Associates place ads on their own websites that redirect customers to, and these state attempts to circumvent Quill vs. North Dakota claimed that those sites constituted a physical presence for in the state.

That's what happened in Colorado; pulled the plug on all Associates in the state. In effect, not only did Colorado NOT get any sales tax revenue from, it lost any income tax revenue generated by the Associates: a clear lose-lose situation.

It's unclear if will rehire the Associates; earlier, in California, a similar tax was passed to Colorado's was passed. dumped its Associates, but decided to rehire its Associates after coming to a one-year exemption deal with the state.

No comments: