Judge rules against tax on online retail sales

DENVER — A federal court judge extended a preliminary injunction barring the state from implementing a controversial tax on online retailers.

U.S. District Judge Robert Blackburn said in his ruling, handed down late Wednesday, the tax imposed on Internet sales of out-of-state businesses could be unconstitutional because it doesn’t apply to in-state sales.

“Under Colorado law, any retailer who is not subject to the statutory obligation to collect and remit Colorado sales tax necessarily is an out-of-state retailer,” Blackburn wrote. “Given these circumstances, I conclude that the plaintiff has shown a substantial likelihood that it will succeed in showing the (law) and the regulations are discriminatory because, in practical effect, they impose a burden on interstate commerce that is not imposed on in-state commerce.”

The tax, also known as the Amazon tax in reference to online retailer Amazon.com, was one of several controversial moves approved by last year’s Legislature. Most of them primarily focused on temporarily suspending sales tax exemptions on such things as computer software, candy, soda and agricultural products.

Republicans, who introduced numerous bills in this year’s Legislature to do away with those suspensions, hailed the ruling as a win for Colorado taxpayers.

“House Republicans have questioned the constitutionality and the rationale of this online tax since it was introduced,” said House Majority Leader Amy Stephens, R-Colorado Springs.

“We knew from the beginning that this tax placed an undue burden on businesses and consumers across Colorado and the nation.”

A lawsuit against the tax was filed in federal court last year by Direct Marketing Association.

In passing the measure last year, Democratic lawmakers said allowing online sales from out-of-state companies to be exempt from sales taxes placed an unfair burden on brick-and-mortar companies inside Colorado, which are required to collect the tax from consumers.

As a result, online companies can offer lower prices.

Gov. John Hickenlooper, who was not in office when the tax suspensions were enacted, declined to comment on the ruling, but he said all states need to examine the issue.

“Is it fair that our local bookstores are getting beat up over all these sales on the Internet?” the governor asked. “There ought to be some national way of collecting sales tax from everybody so it’s a level playing field.”


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