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Federal Court Kills Amazon Tax Law

Ruling calls Colorado bill 'unconstitutional' and 'unfair.'

A federal court has thrown out a Colorado law that would require out-of-state online retailers to collect state sales taxes, sometimes called the “Amazon Tax.”

The law was passed in 2010 in a package of bills that was intended to help balance the state budget. But a federal court blocked its enforcement until a decision could be made on its constitutionality. The law would have required online retailers, such as Amazon, to collect the 2.9-percent tax, or keep a record of purchases made by Coloradoans and report those findings to the buyers and to the state every year.

U.S. District Judge Robert Blackburn declared Friday that the Amazon Tax law was unconstitutional and unfair to out-of-state retailers. The language of the tax bill didn’t distinguish between businesses that are in state or out of state, but the effect of the tax did, he ruled.

“Enforcing a reporting requirement on out-of-state retailers will, by definition, discriminate against the out-of-state retailers by imposing unique burdens on those retailers,” Blackburn wrote in his ruling.

All purchases—regardless if they’re made online or at brick-and-mortar shops—are subject to state sales taxes, but courts uphold that the online retailers are not required to collect the tax from their customers.

“The whole intent of the bill was to protect Colorado jobs and Colorado retailers,” said Sen. Rollie Heath, D-Boulder, who sponsored the 2010 bill.

However, after the bill was first introduced, Amazon dropped an estimated 4,000 affiliates in the state.

Republican State Rep. Amy Stephens had unsuccessfully tried to repeal the law in 2011, but says this win is huge for small businesses and new business startups.

About the author

Sarah Brown
Sarah Brown is a freelance writer who writes about e-commerce and small businesses. She recently graduated from Chico State with a journalism degree and is also a budding online entrepreneur, having launched two Web businesses and her own line of handmade products. Opinions expressed here may not be shared by The Online Seller and/or its principals.



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