Decision to Strike Down Colorado’s “Amazon Law” Thrown Out by Tenth Circuit

Background
Colorado established a sales tax law (Colo. Rev. Stat. §39-21-112(3.5)) requiring any retailer selling $100,000 or more of products to customers located in Colorado who does not collect and remit sales tax in Colorado to:
1) Notify the purchaser of their obligation to report and pay use tax, 
2) File an annual report detailing purchases of more than $500 per year and the related customer information, and 
3) Advise these customers that this purchase summary will be provided to Colorado’s Department of Revenue.

All of this could be avoided if retailers opted to collect and remit tax from customers in Colorado. The Direct Marketing Association (DMA) had persuaded the district court to issue an injunction to prevent this law from being enforced.  The district court made the injunction permanent, finding the law violated the dormant Commerce Clause because it discriminated against out-of-state retailers.

Dismissal by Appeals Court
The Tenth Circuit Appeals Court dismissed the injunction on August 20, 2013, holding that the Tax Injunction Act (TIA, 28 U.S.C. § 1341) prevents federal jurisdiction over the DMA claim regarding a violation of the Commerce Clause.  The Appeals Court remanded the case to district court.  Any future proceedings need to begin in Colorado’s courts or administrative agencies.  The Tenth Circuit indicated the tax injunction act is a broad jurisdictional barrier preventing federal courts from interfering with states concerning the collection of taxes.

How This Impacts Retailers
Retailers selling over $100,000 in products to customers located in Colorado who do not collect and remit sales tax in Colorado will be held to the three requirements listed above.  They can opt to pursue remedies in Colorado’s courts or administrative agencies.

How Can We Help? 
Allyn’s tax team is staffed with seasoned tax professionals experienced in all aspects of multi-state and local tax compliance and consulting for large US and global corporations.  We use that experience to your advantage.  Contact us and we can provide a customized cost-effective solution to meet your company’s needs in Colorado or any other state.  For further information on Allyn Tax services, please contact: tax@allynintl.com.