Update: Colorado Online Sales Tax

Posted by: Albert Realuyo, Vice President of Product Management

In July, we wrote a couple of blogs that informed you about the new online tax laws in the state of Colorado. This new law requires all online retailers outside the state of Colorado to collect sales tax information from customers and turn it over to Colorado’s Department of Revenue.  Shortly after the new law was passed, the Direct Marketing Association (DMA) filed a lawsuit in federal court against the state challenging the constitutionality of the law. They feel that the law discriminates against interstate commerce, violates the privacy of consumers and risks the disclosure of confidential consumer data.

Last Thursday, the judge in the case granted the DMA a preliminary injunction, which prevents the state from enforcing parts of the law relating to providing customer data for an indefinite period of time.  This was a win for the DMA as they were able to provide evidence that the law is not constitutional as it discriminates against out-of-state retailers.

What does this mean for online retailers? Retailers who carry out eCommerce (yet are not located in Colorado) have no obligation to provide the state with: a transaction notification at the point of sale; a notification to consumers who live in Colorado; or even a notice to Colorado Department of Revenue. This injunction will stand until the final ruling is made in the case, but there has been no specified date for this yet.

This is definitely a huge win for the DMA and retailers as more and more states continue to create new laws that concern online sales tax, but the case is not over yet.  We here at Dydacomp will continue to keep you up-to-date on any important information that can affect your business. We will also ensure that Multichannel Order Manager and SiteLINK will perform for you so you will continue to be able to adhere to the different states’ approaches to collecting sales tax.  You can also check out more information about this ruling in this article from MultichannelMerchant.com.

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