Colorado Considers Taxing Internet Sales

The State of Colorado is attempting a new tactic in collecting sales tax from out-of-state vendors. Those vendors (Amazon.com, etc.) which do not have a presence in Colorado are currently not required to collect sales tax on sales made to Colorado residents.

The state of Colorado is close to passing a bill that would require the out-of-state merchants to a) notify purchasers how much they owe in Colorado sales tax (hopefully prompting these purchasers to voluntarily pay), and b) a comprehensive report to the Colorado Department of Revenue at year end disclosing the identify of the Colorado purchasers and the relative amounts purchased.

Not all Colorado lawmakers are excited about this.

"This is a big deal. It really is. And it’s the broader question of whether or not it’s appropriate to tax Internet sales. And I got to tell you, the people of Colorado are going to be really mad when they find out the Department of Revenue is sending them a bill for things that they’ve purchased online," said Sen. Greg Brophy, R-Wray."

If this bill is passed, the main legal question appears to be whether the Colorado Department of Revenue can then successfully enforce a Colorado law and require the Amazon's of the world to comply.

For now, the US Supreme Court has already decided that out-of-state merchants are not required to collect sales tax in this situation; however, they were not asked to address whether filing an annual notice with the purchaser's state tax department would be a similar burden.