At the end of last week, a federal court struck down a law passed in 2010 that would have required certain online retailers to collect Colorado state sales tax for online purchases.
The court’s decision held that the law was unconstitutional, because it placed an undue burden on interstate commerce. Generally speaking, this is because Colorado cannot pass laws that restrict commerce or business that crosses state lines, because the U.S. Congress has the sole responsibility to regulate that area of the law.
Legalese aside, this means that when you buy things online you still do not have to pay sales tax, unless the online retailer is actually located within Colorado.
Some news stories have spun the issue, saying the decision “vindicated” the Republicans or that the Democrats lost. But, the truth is that the court didn’t care who “won.” Knowing Judge Blackburn, the judge who wrote the decision, I am confident that the decision was neutral and objective, and legally the correct outcome.
However, the real issue is not which party won a fiscal battle, but what affect the decision will have going forward. The law was originally passed with two laudable goals: 1) to generate additional tax revenue to aid an out-of-balance state budget; and 2) an attempt to even the playing field for local retailers (some called it the “Amazon Tax”).
I would be a hypocrite and liar to say that I don’t shop online, or that I don’t love seeing “$0.00” for sales tax when making a purchase. But, as a proponent of small businesses, I think it is critical to support the local economy, as well as continue to search for viable solutions for our unwieldy state budget. Regardless of whether the court was right in making its decision (which it probably was), there still exist two problems in need of solving.
Currently, online retailers have three main advantages over local brick-and-mortar retailers: 1) little or no sales tax encourages online spending; 2) low overhead (no fancy storefronts needed); and 3) a much larger potential customer base. The proposed law would have at least limited one of the three advantages that online retailers have over local stores.
Additionally, as far as the state budget is concerned, the proposed sales tax produced a new source of funding to the government that was based on consumption, rather than taking more from your paycheck every week, before you even cash it. Unless you also receive a paycheck from an online retailer, online shopping is a one-way street that siphons money out of the local economy.
So, while it’s nice to buy things for the advertised price, with no add-ons inflating the bill at check-out, it is equally important to remember where your money is going, whether to New Jersey, China, India, or anywhere else.
The court’s decision held that the law was unconstitutional, because it placed an undue burden on interstate commerce. Generally speaking, this is because Colorado cannot pass laws that restrict commerce or business that crosses state lines, because the U.S. Congress has the sole responsibility to regulate that area of the law.
Legalese aside, this means that when you buy things online you still do not have to pay sales tax, unless the online retailer is actually located within Colorado.
Some news stories have spun the issue, saying the decision “vindicated” the Republicans or that the Democrats lost. But, the truth is that the court didn’t care who “won.” Knowing Judge Blackburn, the judge who wrote the decision, I am confident that the decision was neutral and objective, and legally the correct outcome.
However, the real issue is not which party won a fiscal battle, but what affect the decision will have going forward. The law was originally passed with two laudable goals: 1) to generate additional tax revenue to aid an out-of-balance state budget; and 2) an attempt to even the playing field for local retailers (some called it the “Amazon Tax”).
I would be a hypocrite and liar to say that I don’t shop online, or that I don’t love seeing “$0.00” for sales tax when making a purchase. But, as a proponent of small businesses, I think it is critical to support the local economy, as well as continue to search for viable solutions for our unwieldy state budget. Regardless of whether the court was right in making its decision (which it probably was), there still exist two problems in need of solving.
Currently, online retailers have three main advantages over local brick-and-mortar retailers: 1) little or no sales tax encourages online spending; 2) low overhead (no fancy storefronts needed); and 3) a much larger potential customer base. The proposed law would have at least limited one of the three advantages that online retailers have over local stores.
Additionally, as far as the state budget is concerned, the proposed sales tax produced a new source of funding to the government that was based on consumption, rather than taking more from your paycheck every week, before you even cash it. Unless you also receive a paycheck from an online retailer, online shopping is a one-way street that siphons money out of the local economy.
So, while it’s nice to buy things for the advertised price, with no add-ons inflating the bill at check-out, it is equally important to remember where your money is going, whether to New Jersey, China, India, or anywhere else.
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