Colorado lawmakers are considering a new tactic to go after tax revenue from online sales. They want out-of-state online retailers to either start collecting the tax or send annual notices to their customers telling them to pay the tax themselves.
The proposal, which won initial backing in the Senate on Monday, is part of an overall package of tax bills to cover a $1.5 billion shortfall due to the recession.
The amended measure would require retailers like Amazon.com Inc. and Overstock.com Inc. to either start collecting sales tax on March 1 or send notices to their customers in Connecticut and elsewhere stating how much they spent with them in the previous year and telling them how much they owe in state sales tax.
Technically, everyone – including Connecticut residents — who buys items tax-free online is supposed to file a form with the state at least once a year and pay the tax if the purchase would have been taxed by an in-state company. But hardly anyone knows that or does it.
To help enforce the law, the bill would allow the state Department of Revenue to ask online retailers with annual sales of more than $100,000 to provide a list of summarizing what each Colorado resident bought in the previous year.
Opponents say that could violate the privacy of customers if retailers have to list details of what books, for example, were purchased. But Phil Horwitz, the department’s tax policy director, said he thinks most retailers would simply choose to collect the tax to avoid the more unpleasant option of having to send tax notices to their customers.
As online sales have grown and state tax revenues have dropped, at least three other states — New York, North Carolina and Rhode Island — have tried to get out-of-state retailers to start collecting taxes. The U.S. Supreme Court has ruled that only companies with a physical presence in a state have to collect taxes.
However, these states have argued that people within their borders who earn money by linking customers to online stores — called affiliates — amount to stand-ins for those out-of-state retailers and therefore require the online stores to collect taxes on all sales they make in the state. (AP)
