A recent federal court of appeals ruling upheld Colorado sales tax law that would require out-of-state vendors to act as agents for the state. Vendors with no physical presence in the state will be either required to collect use tax on behalf of a Colorado-based purchaser or for the vendor to notify the purchaser of sales or use tax owed the state. The vendor would then be required to file annual reports detailing purchaser information. The retailer is effectively required to be a “trustee for any tax collected and … act as an agent of Colorado. (Colorado Sec. 39-26-204; Reg. 39-26-204.2)
Colorado’s approach to out-of-state sales and use tax collection is somewhat unique and certainly controversial. The reason this bill is controversial is because it requires that business from outside of Colorado report customer information to the Colorado government. Critics wondered if this was an overreach from the state and the matter went to court. The appeals court ruled that this law is okay which sets the stage for Colorado regulators to start using tracking systems to monitor resident’s use tax obligation.
While this state-monitored system is likely to collect far more in use tax than the traditional method of asking residents to self-report tax owed, it will be interesting to see what happens to this law should the Marketplace Fairness Act push its way through congress.
Read more at The Daily Caller
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