There is a lot of talk in the state Legislature these days about taxes — from tax hikes on marijuana and new taxes for improved transportation to reduced taxes on business personal property and even eliminating taxes on some personal hygiene products.
However, lawmakers may want to add one more tax-related issue to this robust debate — a re-examination of rules that would make the Department of Revenue privy to the personal online shopping habits of Coloradans.
Six years ago, state lawmakers addressed the internet sales tax issue through legislation. It was a fatally flawed law, aimed at increasing collection of sales and use taxes for purchases made online or through catalogs. Lurking in that bill was a dangerous intrusion into the private lives of Colorado citizens. Because current U.S. Supreme Court precedent bars Colorado from outright forcing online companies outside the state to collect sales tax, Colorado lawmakers chose to approve a law that would compel businesses to report Colorado residents’ purchases back to the Department of Revenue.
The law has been mired in litigation since 2010 — litigation that contested the state’s intent to regulate and tax out-of-state businesses. When the case finally wound its way up to the highest court in the land, the U.S. Supreme Court declined to hear it. Yet, while the law will be allowed to go into effect this year, online retailers are still protected by the original Supreme Court precedent prohibiting sales tax collection regulations on out-of-state companies.
The law stipulates that, if sales tax is not collected at the time of sale, catalog and online sellers must provide the Department of Revenue with the seller’s identity, the name and address of the Coloradan purchasing their products or services; the address of the Coloradan receiving products or services and how much was spent during the prior year.
With access to that information, the state could glean intimate information on Coloradans’ political inclinations, entertainment choices, medical issues and financial status, among other things. And by collecting shipping addresses, the state will learn when a Colorado citizen has his gift purchases delivered to a different address, potentially revealing personal and very private relationships. Furthermore, the law has no specific provisions to ensure the confidentiality of the personal data collected by the state and doesn’t prohibit access by other government agencies or employees.
Luckily, Coloradans are beginning to understand the impact this law will actually have on their privacy, and they don’t approve. Indeed, 78 percent of Coloradans said the Department of Revenue should not have access to information on their online purchases, and 67 percent said the law is an invasion of the privacy they expect when they make purchases, according to a recent poll of Colorado residents by NetChoice.
That same poll showed that 60 percent of Coloradans believe the law is indistinguishable from a statewide tax increase, and two-thirds oppose Colorado’s effort to regulate businesses outside the state.
I am proud to say I opposed this law when I was in the state House in 2010. Since its inception, consumer privacy from the state government was always a first concern. Today, after numerous court battles, this issue is a reality at our doorstep, and my friends in the House should make every effort to protect their constituents from this unnecessary and unwanted intrusion.