Direct Marketing Association Files Suit Against Colorado’s Amazon Tax
When Colorado Governor Bill Ritter signed HB 1193 into law he heralded it as a landmark bill, the first of its kind to put teeth behinds its attempt to collect sales tax. Initially the law targeted Amazon, who quickly terminated Colorado affiliates upon the bill’s passing, but then morphed into a convoluted mess, imposing burdensome and unconstitutional reporting requirements for in-state sales for out of state merchants. To all sides a legal challenge seemed only a matter of time.
The Direct Marketing Association delivered that challenge via a letter to its membership base. According to the letter the DMA will file suit against the state of Colorado in Federal Court on behalf of its members so â€œno one business has to feel the brunt of any recourse from the Colorado Department of Revenue.” The DMA is calling into question the constitutionality of HB 1193 through this lawsuit.
The DMA claims that the reporting required by the law could cost internet retailers up to $4,000 per year on 1st class mail notifications alone. While this total seems a bit arbitrary, it is clear that providing a yearly report to the Colorado Department of Revenue, as the new law requires, detailing the total amount of all purchases made by Colorado residents on which sales tax was not collected; is not only burdensome but poses a potential consumer privacy nightmare.
Although Amazon has not sued Colorado yet, it has sued North Carolina over similar legislation that demanded the disclosure of â€œall transaction details, including names and addresses, involving state residents.â€ It will be interesting to see whether Amazon will publicly support the lawsuit, whether DMA members will rally to the cause, and whether the Performance Marketing Association will follow the DMA’s lead.
The fact that similar legislation, modeled after Colorado, may appear in Tennessee and California should be enough to have retailers and publishers concerned.