Colorado House Passes Sales Tax Fairness Bill

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On April 14, the Colorado House of Representatives passed the Marketplace Fairness & Small Business Protection Act (HB 1269), a bill that would require remote retailers with nexus in the state to collect and remit sales tax on purchases made by Colorado residents. The bill passed by a vote of 36 to 26. The vote split down party lines, with no Republicans voting in favor of the legislation.

Colorado has been seeking ways to garner sales tax on e-commerce since 2010, when it passed a law that required businesses that do not collect sales tax to submit extensive reports and notifications, including purchase and sales reports, to consumers and the state Revenue Department. In February of this year, Denver District Court Judge Morris Hoffman temporarily blocked the law. The Direct Marketing Association had requested the injunction, saying that the law was unconstitutional and an unfair burden on online retailers. The law was also deemed unconstitutional in 2012 by U.S. District Court Judge Robert Blackburn, but his ruling was overturned by a federal appeals court.

The Marketplace Fairness & Small Business Protection Act clarifies Colorado’s sales tax laws to note that remote retailers that maintain a warehouse in the state, or that have online affiliates that generate $10,000 or more in gross sales per year, are required to collect and remit sales tax to the state.

House Republicans objected to the bill because they argue that it presumes that all remote retailers have nexus in the state and that the onus is left to the remote retailer to prove otherwise, as reported by the Denver Business Journal (DBJ).

The Colorado Retail Council supports HB 1269.  In late February, Chris Howes, president of the Colorado Retail Council, told DBJ that Internet shopping has increased an average of seven percent annually, partly because Denver residents believe they are not obligated to pay sales taxes on online purchases. As such, the council said the bill is necessary to level the playing field for local businesses that employ people and pay property taxes locally.

HB 1269 is now being considered by the State Senate.