A federal judge has granted a request to block Colorado’s sales tax reporting and notification law. That law, HB 1193, covers purchases made from out-of-state retailers. It states that online retailers with over $100,000 in sales to Colorado customers must notify Colorado consumers that use tax is due on their out-of-state purchases. The notice is to be posted on the retailer’s website and on invoices. The law also requires out-of-state retailers that have over $1 million in annual sales into Colorado to mail a 1099-like notice at year-end to consumers who have spent more than $500 at the retailer.
The injunction granted yesterday was in response to a request by the Direct Marketing Association to have the law suspended while they try to get it overturned. This article from the Colorado Statesman, dated July 9, 2010, explains the basis for the DMA’s lawsuit and highlights some of the privacy concerns raised by Colorado’s law.
The Streamlined Sales and Use Tax Agreement (SSUTA) would eliminate the need for states to pass disparate laws, such as this one, that invite litigation. Instead, a federal law such as the Main Street Fairness Act would enable all states that conform to SSUTA to simply require out-of-state retailers to collect and remit the sales tax that is already due on purchases by in-state consumers.