The law, effective March 1, requires online retailers to notify the state of all purchases made by Colorado residents. Retailers are questioning the constitutionality of the law, said Jerry Cerasale, SVP of government affairs at the DMA. Most retailers believe it is part of state’s strategy to replenish its cash-strapped coffers, he added.
“The law itself was included in a budget package that was passed by the legislature and signed by governor,” he said. “It’s all part of the economic situation that all of us are finding ourselves in. It was likely the trigger for this law.”
In a strongly worded letter dated April 27, ACMA President and Executive Director Hamilton Davison implored members and non-members alike to make monetary contributions to fund litigation against the state.
“What’s worse than having to pay sales taxes in every state?” Davison wrote. “Having to report to every state every purchase your customers have made so the taxing authorities can start chasing your customers down and ordering them to pay back taxes.”
However, the bill’s sponsor, state Sen. Rollie Heath, a Democrat, told the Associated Press in February that lawmakers are protecting in-state stores that contribute property taxes.
“There’s no new tax,” Heath told the AP. “We’re just collecting what’s already on the books.”
Davison added that the Multistate Tax Commission, an organization that coordinates state policies on interstate commerce, is considering citing the Colorado law as a model for other states to emulate.
For example, Tennessee and California, both of which are suffering fiscal difficulties, may follow suit with similar legislation.
“Fact is, every state needs more revenue today,” wrote Davison. “Out-of-state companies, who do not use any state services and who do not elect state politicians, are easy targets.”
Retailers are also questioning whether the Colorado law violates the 1992 Quill Corp. vs. North Dakota case, in which the US Supreme Court ruled that retailers who do not have a physical presence in a state do not have to collect and remit sales taxes there, added Cerasale.
The DMA has hired George Isaacson, a Lewiston, ME-based attorney, to strengthen its legal stance.
“We’re moving ahead to see if we can get [this challenge] going,” said Cerasale.