On February 18, 2014, a Colorado judge enjoined the Colorado Department of Revenue’s enforcement of the remote seller sales and use tax notification requirements enacted by the Colorado legislature in 2010. [Direct Marketing Association v. Dep't of Revenue et al.; District Court, City and County of Denver, Case No. 13CV34855 (2/18/14)] Under the law, non-resident retailers are required to notify their buyers of the use tax that may be due on each transaction, and to provide annual reports to such buyers, as well as file reports with the state summarizing Colorado purchases by such buyers. Readers may recall that this law was previously enjoined in federal court in March 2012, an injunction that was dissolved in December 2013 upon a federal appellate court’s determination that the federal court’s lacked jurisdiction over the matter. [Direct Marketing Ass’n v. Brohl, 10th Cir. Ct. of App., No 12-1175 (8/20/13)] In issuing the current preliminary injunction, the judge noted that the law’s notification and reporting requirements are facially discriminatory in that the law imposes compliance obligations on non-resident retailers that do not apply to resident retailers.
JUDGE SPARES REMOTE SELLERS FROM COLORADO NOTICE REQUIREMENTS
Though non-resident retailers have been pardoned from the unconstitutional burdens imposed by Colorado’s notification and reporting laws, for now, they may soon have to grapple with Colorado’s proposed Amazon Affiliate Nexus law
Since the federal injunction was dissolved, the Department has cooperated with potentially impacted retailers, declaring that it will not impose penalties for non-compliance with the notification and reporting requirements. While non-resident retailers have been pardoned from the unconstitutional burdens imposed by Colorado’s notification and reporting laws, for now, they may soon have to grapple with Colorado’s Amazon Affiliate Nexus law, a version of which was introduced in Colorado’s current legislative sessions as H.B. 12-1269. This law, as proposed is very similar to the affiliate nexus standard enacted in New York in 2008. (see AMAZON AFFILIATE NEXUS)
While at least six other states have enacted similar notification and reporting laws, and at least as many as ten have enacted similar affiliate nexus standards, Colorado appears to be one jurisdiction in which many of the judicial nexus battles will be fought, with the Direct Marketing Association leading the way.