In its second-largest acquisition, Amazon buys the company for $970 million.
Colorado enacted a new law this week that requires e-retailers that don’t collect sales tax to notify consumers of their responsibility to pay the tax.
Colorado enacted a new law this week that requires online retailers that don’t collect sales tax to notify Colorado consumers of their responsibility to pay the tax themselves directly to the state.
The law also requires online retailers doing more than $100,000 a year in online sales in Colorado to file with the state’s Department of Revenue each year a list of all online Colorado customers and the dollar value and category of their online purchases, according to Mark Couch, the department’s legislative liaison.
“Every online retailer who sells to a Colorado purchaser and doesn’t collect sales tax will be required to put a notice in the customer’s invoice that says, ‘You are obligated to pay sales tax in the state of Colorado for this purchase,’” Couch says. He adds that the requirement to submit a list of customers and purchasing data each year is intended to support the state’s ability to check compliance with the law.
In effect, the Colorado law puts legislative teeth behind the widely flouted requirement that consumers pay their own sales tax to states that collect sales taxes, if the purchase is made from an out-of-state retailer that does not charge sales tax in that state.
The law, which Gov. Bill Ritter Jr. signed into law March 1, is the first of its kind, says Daniel Schibley, a state tax analyst at CCH Inc., a Wolters Kluwer company that publishes tax and business information.
Several states have already approached Colorado to express their interest in the law and plan to monitor its effectiveness, Couch says. He adds that Colorado has estimated the law will raise about $4.7 million in the state’s fiscal year beginning July 1, and that it is only one of several measures the state is taking to address a budget shortfall of several hundred million dollars.
The new law initially was proposed as a measure similar to a law passed in New York, often called the Amazon law, that says online retailers have a physical presence in New York if they maintain online affiliate relationships with New York-based web sites and, therefore, are required to collect sales tax. North Carolina and Rhode Island have enacted similar laws.
But the Colorado state legislature decided to drop the language in its bill related to affiliates out of concern that large online retailers would stop doing business with Colorado-based affiliates, Couch says. The governors of California and Hawaii vetoed such affiliate bills last year after major online retailers like Amazon.com, Overstock.com and Blue Nile began cutting off affiliates in those states over the sales tax issue.