By Jack Minor
The state of Colorado has said that there is no right to privacy when it comes to on-line purchases. Colorado has filed a motion to dismiss a lawsuit brought by on-line retailers who do business in Colorado. In the lawsuit, the Direct Marketing Association challenged Colorado’s new sales tax on on-line purchases on the basis that it discriminates against interstate commerce and exposes confidential consumer information with the risk of unauthorized exposure.
Under the new law, online retailers with over $100,000 in gross revenue are required to either collect sales tax or send an annual statement to every individual they have done business with notifying them of the tax they owe. The law also applies to individuals who live in other states that have made purchases and had them shipped to friends and relatives living in Colorado.
The tax statements are not permitted to be mailed with any other type of shipment and the requirement to mail statements would apply to every purchase in the state even if the individual made only a single purchase totaling $1 during the year. Additionally, a record of the purchases must be submitted to the state for every transaction an individual has made in the previous year.
“The new law and the regulations implementing it are an unconstitutional and blatant violation of Colorado consumers’ privacy,” said Jerry Cerasale, Senior Vice President, Government Affairs for the Direct Marketing Association. “The law may have been passed in the hope of balancing the state budget through increased use tax reporting by Colorado residents, but it has serious adverse consequences for consumers and businesses.”
In seeking to dismiss the lawsuit, the State claims a person’s rights to privacy regarding their purchases are not protected under the First Amendment as the state is only seeking limited information. It also challenges the Direct Marketing Association’s right to challenge the law on behalf of its members.
State Senator Scott Renfroe said it is a bad idea to tax individuals during the economic downturn and that the law will cause the state to lose tax revenue in the long run. Renfroe pointed out that once the law was passed Amazon.com simply stopped doing business with its affiliate agencies in Colorado.
Supporters of the law say it is intended to level the playing field for local businesses that have a physical presence in the state that collect sales tax at the point of sale. Renfroe disputes that assertion saying the purpose of sales tax is primarily to pay for infrastructure such as police, fire and street maintenance. “An internet company does not get the ability to enjoy those services in the state, so why should they pay the tax?”
Renfroe says the state should repeal the bill in order to “open Colorado back up for business as opposed to putting barriers and bridges in the way…the government doesn’t create jobs, it can only create opportunities by getting out of businesses way and letting them create jobs.”