One of the major objections that brick-and-mortar retailers in states with sales taxes have against online giant Amazon is that consumers can avoid paying state sales taxes by purchasing online from Amazon.  Colorado attempted to level the playing field with a law passed in 2010 that would have made online retailers either collect the sales tax themselves or notify Colorado residents in writing of the taxes owed on each purchase and provide a list of purchases by Colorado residents to Colorado tax officials.

 

According to The Denver Post, Federal Judge Robert Blackburn threw out the Colorado law stating that it “imposed an undue burden on interstate commerce.”  Blackburn continued, “Enforcing a reporting requirement on out-of-state retailers will, by definition, discriminate against out-of-state retailers by imposing unique burdens on those retailers.”

 

So it’s back to the drawing board for states that are hungry to increase their revenues during an economic slump and to protect local brick-and-mortar retailers from unfair competition.  The collection of online sales taxes continues to be murky legal mess with no clear solution.  Online purchases have always been subject to state sales taxes, but courts have consistently held that online retailers don’t have to collect state sales taxes from consumers unless the retailer has a brick-and-mortar location in the state.  

 

The 2010 Colorado statute, that was dubbed the “Amazon tax” law, was an attempt to get online retailers to collect state sales taxes or face a paperwork burden that would make collecting the taxes and sending them to the state a better option than complying with the law’s reporting regulations.