DENVER – Opponents of Colorado’s “Amazon tax” were back in court Friday to try to get a judge to block it once again.
When the Legislature passed the law in 2010, it was a novel way to get around a long-standing 1992 U.S. Supreme Court case banning states from collecting sales taxes from out-of-state sellers.
The Direct Marketing Association sued Colorado in federal court in 2010, and the federal judge blocked the law.
Colorado got a reprieve, though, when an appeals court decided federal courts don’t have jurisdiction. So, nearly four years later, the case is starting over again – this time in Denver District Court.
Internet sales make up a growing part of commerce, and local retailers argue it’s unfair their customers have to pay sales taxes while some out-of-state companies, such as Amazon.com, can sell to Coloradans tax-free.
Many states have tried to find a way to tax Internet sales, but none has followed an approach exactly like Colorado.
Instead of taxing Internet sales, Colorado tells out-of-state retailers they must notify their customers they owe “use tax” – essentially the same thing as sales tax, but it’s paid by the customer directly to the state instead of being collected by the retailer. Typically in online sales, retailers collect sales tax from their customers and forward the taxes to the state.
Colorado’s law made it a burden for retailers to communicate with their customers and keep sales records for state inspection, but they can avoid the hassle if retailers decide to simply pay sales taxes.
Direct Marketing Association lawyer George Issacson argued Colorado’s law discriminates against out-of-state retailers and is unconstitutional.
But Melanie Snyder of the Colorado Attorney General’s office argued the law is perfectly constitutional.
“You can treat people differently, and that doesn’t mean it’s discrimination,” she said.
The plaintiffs are asking Denver District Judge Morris Hoffman to temporarily block the law while their lawsuit proceeds.
Hoffman did not say when he would rule on the request, but he wants to get a decision out soon.