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Thursday, February 11, 2010
1:27 PM EST
Kelly William Cobb

Virginia and Colorado Online Tax Bills Take Interesting Twists

Originally posted at www.StopETaxes.com.

A Colorado measure aimed at requiring consumers to pay tax on all online purchases took an interesting and disturbing twist on Wednesday. As we previously reported, the Colorado House passed an unconstitutional bill (HB 1193) to require out-of-state Internet retailers to collect tax on Coloradoans, known as the affiliate nexus or “Amazon” tax. Yesterday the Senate also approved the measure, but not without making some significant changes.

Colorado’s Senate stripped the etax bill of sections that require retailers to collect the tax, and instead expanded upon a section that would permit the state Department of Revenue to subpoena these retailers to collect personal and private information about their Colorado customers. The goal is to collect sales receipts from consumers so that the state can go after Coloradoans who owe “use tax,” which is tax collected on out-of-state purchases. Companies that don’t comply (read: protect your information) are fined significantly. Ironically, the intent of the bill is to raise revenue for the state, but it includes over $200,000 in annual appropriation to the Department of Revenue to go after consumers and out-of-state businesses.
 
Meanwhile, across the country, and braving the east coast winter storm, the Virginia Senate Finance Committee on Wednesday met and signed off on an affiliate nexus tax bill requiring out-of-state retailers to collect tax on Virginia residents. Perhaps most interesting was the bill’s fiscal impact statement, which for the first time of any state all but explicitly told legislators to oppose the measure, as the state would likely lose tax revenue:
 
When similar legislation was enacted in Rhode Island and North Carolina, large online retailers ended their affiliate programs. If this were to happen as a result of this bill, there would be no additional revenue from the enactment of this bill. In fact, by ending the affiliate program with Virginia vendors, such vendors would likely lose business and remit less Retail Sales and Use Tax to Virginia.
 
The fiscal statement also warned that enactment of the measure could trigger a costly lawsuit, similar to the lawsuit currently in New York challenging the law’s constitutionality.
 
Click here for ATR's letter to the Senate Finance Committee.
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