When All Else Fails

Colorado E-Retail Law Rankles Privacy Advocates

by Don Reisinger, IE

The Colorado legislature has passed a bill that would require all online retailers to furnish the state a full listing of customers residing in Colorado who purchased products from the Web during the year. Upon receiving those documents, Colorado will force taxpayers to pay sales and use tax for those purchases on their annual tax returns.

One of the bill’s supporters (and its prime sponsor) is Democrat state senator Rollie Heath. The lawmaker has said in interviews that the bill could help the state’s economy. The reason for that, according to Heath and co-sponsors, is that the state of Colorado relies heavily on the taxes generated from in-state stores. If consumers continue to buy goods online because they can save money, it reduces the amount they pay in sales tax and the amount Colorado can collect from in-state businesses.

But not everyone sees it the same way as Senator Heath.

The Direct Marketing Association, a strong critic of the bill, sees several problems with it. For one, Jerry Cerasale, senior vice president of government affairs for the organization, told me in an email that online retailers will be facing an “administrative burden” unlike anything they’ve seen to this point.

Cerasale itemizes his view of this burden: “First, the administrative burden of maintaining the records, preparing a detailed purchase summary of every Colorado purchaser, sending the summary, preparing the reports for the Department of Revenue (including all billing and shipping addresses for Colorado purchasers), filing the reports for each individual and, finally, handling the eventual audits from the Department of Revenue.” He cited a landmark Supreme Court decision, Quill v. North Dakota, that explicitly stated that “states could not require out-of-state marketers to shoulder the administrative and cost burdens of collecting sales tax.” Cerasale contends that case applies to Colorado’s decision.

But it goes beyond the retailers. There is also an issue of privacy. Since online retailers would be forced to divulge what people bought online and when, the state government would have access to those records. And for some folks, online purchases are private and should be kept that way.

“For many marketers, the name of the company indicates what was purchased,” Cerasale says. “Many customers would not be comfortable with the government having that detail of their on-line purchases, and that discomfort might reduce their willingness to purchase on-line.”

Read the rest at this link.