DENVER—Colorado’s efforts to collect more state taxes on Internet sales have been revived by an appeals court.
A federal appeals court ruled Tuesday that a lower court overstepped its jurisdiction in tossing out the 2010 law last year. The law requires online retailers to collect Colorado’s 2.9 percent tax on purchases.
The 10th Circuit Court of Appeals has lifted a permanent injunction issued by a lower court last year, The Denver Post reported ( ).
The law was intended to urge non-collecting retailers to start charging the tax.
Last year, a federal judge permanently blocked Colorado from enforcing the law because it placed an “undue burden on interstate commerce.” The Direct Marketing Association, a business trade group, had argued that the reporting obligations under the law are unconstitutional.
The U.S. Court of Appeals for the 10th Circuit on Tuesday remanded the case to the district court to dismiss the DMA’s claims and to lift the permanent injunction.
The decision cited the Tax Injunction Act, which states that federal courts shouldn’t enjoin, suspend or restrain any state tax assessments or collections if the disputed matter can be resolved by lower courts.
“We are satisfied that Colorado provides avenues for remote retailers to challenge the scheme allegedly forcing them to choose between collecting sales tax and complying with the notice and reporting requirements,” the ruling states.
The decision noted a report that Colorado’s state and local governments stood to lose $172.7 million last year because of residents’ failure to pay the 2.9 percent use tax on e-commerce purchases from out-of-state retailers.
Retailers with a physical presence in Colorado are required by law to collect a 2.9 percent tangible-goods sales tax from consumers.
Among other things, the Amazon law requires non-collecting online retailers whose gross sales in Colorado exceed $100,000 to mail annual notices to residents who purchased more than $500 in goods from them during the preceding calendar year.
The e-tailer also must file annual reports with the Colorado Department of Revenue that include consumers’ names, addresses and the amount of goods they purchased during the previous year.
“We are pleased with the court’s ruling that DMA’s claims should be dismissed and that the state’s law should remain in effect,” said Carolyn Tyler, a spokeswoman for the Colorado Attorney General’s office. “We will continue to work with the Department of Revenue to evaluate the implications of (Tuesday’s) decision.”
At the federal level, lawmakers are considering the Marketplace Fairness Act, which would allow states to collect sales taxes from online retailers regardless of whether they have a physical presence in the state.
The Direct Marketing Association is considering its options, which could include asking the full federal appeals court to review the case or pursuing the matter in state court. Jerry Cerasale, senior vice president of government affairs for the association, said congressional efforts to mandate online retailers to collect state sales taxes could make the Colorado case moot.
———
Information from: The Denver Post,
