Colorado HB 1193 was enacted earlier this year as part of a package of revenue raising legislation. It originally started as an advertising nexus bill, but turned into a reporting bill when a lot of in-state companies that rely on affiliate advertising revenue complained that they would be harmed. Now it is consumer privacy that is harmed.
The Colorado state tax department will now have a listing of all purchases its citizens make from out-of-state companies. The state wants to enforce sales tax on purchases by way of the use tax that each of us owes to our government when sales tax isn’t collected.
But the Colorado law goes too far. HB 1193 forces out-of-state retailers to track and report the purchases of Coloradans: (a) must file an annual statement with purchase data for each purchaser to the Department of Revenue; (b) must send buyers a summary statement of all their purchases so they know how much use tax to pay (like a 1099 form we receive on investments); and (c) on every invoice and receipt must notify Colorado purchasers of their need to file a sales and use tax return with the state.
The state revenue department just issued emergency regulations to resolve some but not all of the questions from retailers. Unfortunately, the department assumes that the legislature wanted notices shown on every single invoice — effective as of last week. And the state hasn’t yet told online retailers how they would send snail mail reports to purchasers for whom they have no mailing address.
So that it can earn a few more bucks in sales tax, Colorado’s Department of Revenue will now know all the vendors where residents made online or catalog purchases from remote sellers. This would include sensitive items of a particular kind of merchandise — adult movies, medical products, items that reveal political views, etc.
Other states have variants of this law and require remote sellers to provide “readily visible” notification on their retail Internet websites/catalogs and invoices that use tax is imposed and must be paid by the purchaser. These states include Oklahoma (H.B. 2359, signed by gov. 6/9/10).
What’s wrong? Privacy legislation that sets information collection defaults will harm the growth of online commerce.
April 4, 2012 at 2:33 pm
[...] Colorado Use Tax Reporting Regime was enacted in February 2010 and promptly earned a top spot on the iAWFUL list. The bill would have required state retailers to mail both consumers and tax [...]