Federal Court Tosses Out Colorado's 'Amazon Tax'

On Tuesday, a federal court chucked out Colorado’s “Amazon Tax” law, with U.S. District Judge Robert Blackburn writing that “the veil provided by the words of the act and the regulations is too thin to support the conclusion that the act and the regulations regulate in-state and out-of-state retailers even-handedly.”

The law, passed in 2010, was intended to push online-only retailers with no physical presence in the state to collect and remit sales taxes on purchases made by Colorado residents by creating burdensome bureaucratic requirements that would apply where such retailers did not collect and remit.

However, the law appears to have fallen afoul of a principle laid out in the Quill v North Dakota Supreme Court decision, which bars states from requiring such collection and remittance in the absence of congressional action on the grounds that such requirements would constitute an “undue burden.”

A federal court had previously halted the law, albeit temporarily.

Blackburn’s ruling makes that circumstance permanent.

In addition, the ruling reinforces arguments raised by opponents of various state efforts to force collection and remittance that since Congress has not acted to give the “all clear” to state efforts to make online-only, out-of-state retailers pay up, they are unconstitutional.

Of course, certain state efforts are also completely ineffective. As noted by Chicagoist last month, Illinois suffered an “actual decrease in use tax collected of over $11 million” over the final half of the year, following implementation of an “affiliate nexus” “Amazon Tax” law.