Supreme Court Refuses to Hear Challenge to Colorado’s Internet Sales Tax

Last Monday, the U.S. Supreme Court declined to hear a challenge to a Colorado state law forcing out-of-state retailers to report their customer’s purchases to state tax collectors. While the law does not directly force retailers without a physical location in the state to collect Colorado sales tax, it does force them to report the customer’s purchases for the purpose of collecting the tax.

Back in 1992, the Supreme Court ruled in Quill Corporation v. North Dakota that states do not have the authority to force out-of-state retailers to collect their state sales tax, unless the retailer has a physical presence in the state. The decision by the Supreme Court on Monday not to hear the challenge could reignite efforts on Capitol Hill to pass a federal internet sales tax in order to preempt a Supreme Court ruling allowing states to tax retailers who don’t have a physical presence in their state.

Earlier this year, House Judiciary Chairman Bob Goodlatte (R-VA) released a discussion draft on an Internet sales tax bill named the Online Sales Simplification Act of 2016. Unfortunately, his bill went in the wrong direction by requiring retailers in states that impose no sales tax to either create one or report purchases to the buyer’s home state.

If Congress wants to prevent states from going rogue and taxing out-of-state businesses, they should pass legislation that codifies Quill. By doing so, they would provide predictability for retailers without funneling more taxpayer money to state governments or violating the principle of “no taxation without representation.”

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