Denver Business Journal:
The Direct Marketing Association is suing to overturn Colorado’s so-called “Amazon tax” that applied sales tax to affiliate sales in the state for the first time.
The lawsuit, filed in U.S. District Court for Colorado in Denver, challenges provisions of the law requiring online retailers to report to the Colorado Department of Revenue what consumers owe in sales and use taxes from previously untaxed online sales.
The New York City-based association filed the suit late Wednesday.
The sales tax law change took effect March 1.
Supporters said the law was intended to apply taxes on sales generated by retailers’ affiliates in Colorado, which should be subject to sales and use tax just like stores with brick-and-morter locations in the state.
Online retailers, such as giant Amazon.com, use networks of affiliates to drive sales. The affiliates put links to merchandise on their websites and blogs and get a percentage of the sales they generate.
Seattle-based Amazon dropped an estimated 4,200 affiliates it had in the state rather than comply with the law and tally what Colorado consumers owe due to the 2.9 percent sales tax.
“The regulations are burdensome and no other state has similar rules,” Amazon wrote in a March 8 letter to its affiliates. “…they are clearly intended to increase the compliance burden to a point where online retailers will be induced to ‘voluntarily’ collect Colorado sales tax — a course we won’t take.”
The DMA suit claims that the law violates the privacy of consumers and businesses by requiring retailers disclose their purchases to the state.
It also claims the law unfairly discriminates against out-of-state-retailers, noting that officials predicted many retailers would simply pay the state’s 2.9 percent sales tax for customers rather than establish a costly system to notify customers of their Colorado taxes.
Some opponents of the tax law praised the DMA’s lawsuit Thursday.
“These are problems even the sponsors of the bill recognized,” said State Rep. Amy Stephens, R-Monument. “Unfortunately, the tax proposal was still rushed through the Legislature, causing concern for consumers and leading to the immediate loss of Colorado jobs.”