Amazon tax blocked by Colorado court

A U.S. District Court judge in Denver Wednesday issued a preliminary injunction that would block the enforcement of a controversial law passed by the General Assembly last year.

Judge Robert Blackburn issued the injunction against the Colorado Department of Revenue, which is responsible for collecting taxes from Colorado residents for purchases made from online retailers, such as Amazon.

As part of their efforts to balance the 2010-11 budget, the General Assembly last February passed House Bill 10-1193, which requires online retailers that do not collect Colorado state sales and use taxes to notify customers that they are obligated to pay the taxes to the state. The online retailer also must provide customers with an annual report detailing the purchases in the previous year and notify the customer that the retailer is required to report the customer’s name and amount of purchases to DOR. Finally, online retailers must annually report to DOR the names, addresses and total purchases made by Colorado customers.

Blackburn, in his ruling, sided with the plaintiffs in the case, the Direct Marketing Association, which filed the suit on June 30. “The Act and the Regulations impose a notice and reporting burden on these out-of-state retailers and that burden is not imposed on in-state retailers, except for the very few in-state retailers who defy their statutory sales tax obligations. Given these circumstances, I conclude that the plaintiff has shown a substantial likelihood that it will succeed in showing that the Act and the Regulations are discriminatory because, in practical effect, they impose a burden on interstate commerce that is not imposed on in-state commerce. Blackburn’s ruling comes just five days before the deadline for online and out-of-state retailers to issue reports and notices to their Colorado customers.

House Majority Leader Amy Stephens, R-Monument, praised Blackburn’s ruling in a Thursday statement. “House Republicans have questioned the constitutionality, and the rationale, of this online tax since it was introduced,” Stephens said. “We knew from the beginning that this tax placed an undue burden on businesses and consumers across Colorado, and the nation.”

Two Senate bills have already been introduced this session to repeal the so-called “Amazon tax,” and Stephens said she plans to introduce a bill on the same issue. Senate Bill 11-056 aims directly at repealing HB 10-1193; and SB 11-073 would attempt to overturn all 11 of the tax exemption and credit repeal bills passed in 2010.

Democrats prefer to see the court case reach its conclusion before deciding on any further action. Senate Majority Leader John Morse, D-Colorado Springs, said “absolutely not!” to any suggestions of a Democratic-led repeal of HB 1193. “The standard to win in trial is proof beyond a reasonable doubt, and all we’re doing is enforcing the laws that have been on the books since 1935 concerning sales and uses taxes,” Morse told The Colorado Statesman Thursday. The state wanted to “level the playing field for small businesses that operate here that have to collect the sales tax,” and Morse said that while he disagrees with Blackburn’s ruling, “it’s best to let the case run its course” and go through the appeals process.

Gov. John Hickenlooper, while not having seen the ruling, said Thursday that all retailers should collect and pay the taxes owed the state. “Is it fair that local bookstores are getting beat up over these sales on the Internet? There should be a national way of collecting sales tax, of leveling the playing field.”


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