A Christmas miracle: The Grinch won’t be stealing money online from your roads, school and colleges
By Ali Mickelson
Director of Legislative and Tax Policy
No one likes a Grinch. Not when he’s stealing Christmas presents from under your tree and stockings from the fireplace. And certainly not when he’s draining money from the public schools, highways and colleges that build our thriving communities.
That’s why we’re having a splash of eggnog and holiday cheer after a U.S. Supreme Court ruling earlier this week. The court declined to hear an appeal of a 10th Circuit U.S. Court of Appeals ruling that upheld a 2010 Colorado law governing internet retailers and sales taxes on goods they sell in our state.
The so-called “Amazon case” was brought by the Direct Marketers Association in response to a law that CFI helped pass in 2010 requiring internet retailers to provide notification to consumers and the Department of Revenue about internet purchases. Online purchases in Colorado have always been taxed, but a 1992 U.S. Supreme Court ruling said states could not compel online retailers to collect sales taxes the way states can require retailers with an actual physical presence to do so.
The result was decades in which the playing field was tilted in favor of online retailers at the expense of brick-and-mortar retailers, many of them small, locally owned businesses. It also meant that quality services that build up our communities were getting shorted.
This was where the 2010 Colorado law came in.
The Direct Marketers Association, whose membership includes internet giants like Amazon and eBay, filed a lawsuit claiming that the 2010 law violated constitutional prohibitions against imposing an “undue burden” on businesses. But after years of battling in federal and state courts, the U.S. Supreme Court declined to hear an appeal to the most recent ruling by the 10th Circuit Court of Appeals allowing the law to be upheld. In other words, the high court decided it really wasn’t much of a big deal for businesses to comply with the law.
You’re a litigious one, Mr. Grinch. But you won’t get to ruin this holiday.
It is important to understand what this means for Colorado. The 2010 law didn’t impose a new tax on online purchases, which have never been tax-free. Consumers have always been under the obligation to pay “use tax” (basically, a sales tax for an online purchase), but because most were unaware of this, and because it was logistically impractical for states to pursue action against millions of individual purchasers, this unfair situation continued.
The new court ruling merely upholds the 2010 law requiring internet retailers to inform the state about online purchases and to inform customers about their current tax obligation. Alternately, online retailers can simply collect the tax and remit it to the state of Colorado. Many online retailers (excluding Amazon and some other notable examples) have always done so, and with 2016 technology, this task is a simple matter.
In light of the Supreme Court ruling, it’s likely other states will consider similar measures to expedite the collection of taxes. Colorado was a pioneer in making the playing field level for online and storefront retailers, and lawmakers should be proud of the groundwork they have laid to increase use tax collections and make compliance easier for shoppers in Colorado and all states.
Early estimates pegged the revenue impact of the new law at as high as $170 million, but officials say it’s likely to be significantly lower. Still, we’re talking about tens of millions of dollars at a minimum.
And so welcome, Christmas, bring your cheer. Cheer to all Whos far and near. Christmas Day is in our grasp. So long as we have hands to clasp. And a fair online tax law that has finally come to pass.
