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Supreme Court Lets Colorado Online Tax Law Stand


screen-shot-2016-12-13-at-8-43-57-pmOnline shoppers may no longer be able to skirt state sales taxes thanks to a recent action by the U.S. Supreme Court.

This week, the court refused to hear a case brought by the Direct Marketing Association regarding a Colorado law that requires ecommerce companies to report the amount shoppers owe in sales tax to the consumers and the state.

The 2010 law, dubbed the “Amazon tax” after the online behemoth, will help Colorado collect unpaid taxes to the tune of $172.7 million. In all, it’s estimated that states lose $23 billion a year in sales taxes on online and catalog purchases.

Several other states have similar laws. And more could follow. But the DMA asserts laws like these violate the Constitution.

In addition to the DMA suit, the state of Colorado petition the Court to rethink a prior ruling (Quill Corporation v. North Dakota) that says states can’t require stores to collect taxes if they don’t have a physical location there. The decision, which dates back to 1992, is seen by some as antiquated given how online sales have exploded.

In fact in a 2015 decision on the matter, Justice Anthony Kennedy said the ruling has proven harmful to states. “When the court decided Quill, mail-order sales in the United States totaled $180 billion,” Kennedy wrote. “By 2008, e-commerce sales alone totaled $3.16 trillion per year in the United States.”

The Supreme Court’s decision not to hear the case is a positive for states but it’s not a definitive result. The Court could decide to hear another similar case if it deems it to have more merit or more directly addresses Quill. Cases could come from several other states, including Ohio, Alabama, South Dakota and Tennessee, with tax laws that could be brought before the Supreme Court.