Colorado – Remote-Seller Reporting Requirements Unconstitutional

SALT Report 1516 – A federal court in Colorado ruled that a 2010 Colorado law unfairly discriminates against out-of-state businesses and is in violation of Article 1 of the US Constitution.
The 2010 law requires all out of state business that do not collect Colorado tax do the following:
  • Notify Colorado customers of their obligation to self-report and pay use tax,
  • Provide Colorado customers with an annual report detailing the customer’s purchases, and
  • Provide the Colorado Department of Revenue with an annual report that includes the name, address, and total amount of purchases of each of the seller’s Colorado customers
In his opinion, Judge Robert Blackburn wrote, “The state cannot require out-of-state retailers…to collect and remit sales tax on sales those retailers make to residents of Colorado… Such a system imposes a burden on out-of-state retailers because the different burden is imposed precisely because the retailer is an out-of-state retailer entitled to the protection of Quill. Quill creates the in-state versus out-of-state distinction, and the dormant Commerce Clause prohibits differential treatment based on that distinction.”
Judge Blackburn also noted that “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.” Therefore, Judge Blackburn issued a permanent injunction based on the fact that the regulations set forth in the 2010 law are unconstitutional.
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