CYBER TAXES: DMA Challenges Colorado Law, Congress Weighs Competing Proposals

DMA Suit Claims Colorado Sales Tax Law Unconstitutional

The Direct Marketing Association (“DMA”) has filed an action in Colorado federal court challenging the Colorado’s House Bill 10-1193 “An Act Concerning The Collection Of Sales And Use Taxes On Sales Made By Out-Of-State Retailers, And Making An Appropriation Therefor” (see Cyber Report discussion) on the grounds that the law unconstitutionally: (i) discriminates against interstate commerce;(ii) exceeds the permissible scope of state regulatory authority over out-of-state companies; and (iii) infringes upon the free speech and due process rights of both consumers and retailers.  The DMA also charges that the law  violates the right to privacy of Colorado consumers and exposes confidential consumer information to the risk of unauthorized disclosure.  The bill’s sponsor appeared at AffCon 2010 in Denver where he was challenged by the Internet Law Center’s Bennet Kelley over the bill’s constitutionality.

More infoDMA ReleaseComplaint; Lawsuit filed over recent Internet sales tax bill, Colorado Statesman

Competing Tax Proposals Emerge

As more states are considering Amazon-style taxes, Congress is stepping in to the debate with competing proposals.  The “Main Street Fairness Act,” would permit states that are a member of the Streamlined Sales Tax Agreement to require out of state companies to collect sales tax.  Thirty-four states are adopted the agreement (see map to left), but only 3 of the 10 largest states have.  The bill’s sponsor, Rep. Bill Delahunt (D-MA) estimated that by 2012 the inability to collect sales tax will cost at least $23 billion annually.  The bill is supported by the National Retail Federation, Retail Industry Leaders of America, National Governors Association, U.S. Conference of Mayors, the National Conference of State Legislatures, National Association of Counties, and National League of Cities but opposed by eBay and other online businesses.

House Internet Subcommittee Chairman Rick Boucher (D-VA) and Lamar Smith (R-TX) have introduced the “Digital Goods and Services Tax Fairness Act of 2010,” which would prohibit multiple and discriminatory taxes on digital downloads and prohibits states from retroactively interpreting older statutes to apply to digital downloads.  Currently 23 states and the District of Columbia tax digital downloads.  Apple, AT&T, Electronic Arts, Cox Communications, Verizon, T-Mobile, and Time Warner Cable have all endorsed the bill.  More InfoTech groups oppose Internet sales tax legislation, Network World; Congress weighs curbs on state ‘iTaxes‘, Cnet.