How the ruling will impact e-retailers.
The Supreme Court has upheld a 2010 Colorado law that puts pressure on online retailers to collect sales tax, and the decision could have wide-reaching implications for retailers in other states. The Denver Post reported that in its latest order list, the Supreme Court announced that it won’t hear a challenge to a February ruling by the 10th U.S. Circuit Court of Appeals, which sided with Colorado in a lawsuit from industry.
The move means that it has affirmed a 2010 law compelling out-of-state companies like Amazon to collect sales tax from residents who make online purchases.
“It certainly feels like validation for all the mom-and-pop businesses in Colorado who stood up in 2010 and wanted to compete on a level playing field,” said state Sen. Mike Johnston, D-Denver, one of the co-sponsors of the Colorado law. “It was nice to see the Supreme Court agree with us on what seemed to clear in 2010.”
The key is that the law puts online companies between a rock and a hard place: rather than forcing them to act as the tax man, they have the choice between collecting the sales tax and dealing with additional paperwork and notifying residents of Colorado that they owe sales tax to the state. Brick-and-mortar stores have no choice: they are required by law to collect sales tax.
Amazon announced earlier this year that it would begin including sales tax on purchases made by Coloradans, though the regulations were challenged by a lawsuit brought by the Data & Marketing Association (previously known as the Direct Marketing Association).
The group expressed frustration with the court’s decision not to hear the group’s challenge to the state law. ““DMA is proud to have led the multi-year charge against this Colorado statute that was purposely written to discriminate against out-of-state sellers,” said Emmett O’Keefe, DMA’s SVP of Advocacy. “We are disappointed the Supreme Court did not take the case and are concerned it will only encourage other states to adopt similar laws and regulations that are designed to put arbitrary burdens on out-of-state sellers. This is an issue Congress should address as the Constitution explicitly gives the legislative branch the authority to regulate interstate commerce.”
At least three other states have passed similar laws that could take effect in the wake of the Colorado case. Louisiana, Oklahoma, and Vermont are among those that have enacted such legislation. The Court’s decision is likely to prompt other states into action as well.
George S. Isaacson, who represented the marketing group and teaches constitutional law at Bowdoin College, said the high court may simply be waiting to see more states copy Colorado.
"Colorado was the first state to pass such a law, and the Supreme Court may be waiting to see how other state legislatures and lower courts deal with this type of highly controversial state legislation before addressing the constitutional issues," Isaacson said in a statement.