This is very interesting and has implications across the country as states understandably try to ratchet up their sales, and particularly use tax enforcement.
On February 24, 2010, Colorado enacted a law subjecting out-of-state retailers to certain sales and use notification and reporting requirements. The new use tax reporting established three new obligations for most out-of-state retailers:
(1) Retailers must notify their customers that the retailers did not collect Colorado sales tax, and that the customers are obligated to self-report and pay Colorado use tax;
(2) Retailers must provide each customer with an annual report detailing the customer’s purchases in the previous calendar year, informing the customer of an obligation to report use tax and that the retailer is obligated to report the customer’s name and total amount of purchases to the Colorado Department of Revenue; and
(3) Retailers must provide to the Department an annual report describing Colorado customers’ names, billing addresses, shipping addresses and the total amount of purchases.
The Direct Marketing Association challenged the constitutionality of the reporting regime by filing a suit in federal court seeking a declaration that it was unconstitutional and seeking an injunction preventing the Department from enforcing these requirements.
On March 30, 2012, the U.S. District Court for the District of Colorado permanently enjoined the enforcement of Colorado’s sales and use tax notice and reporting requirements.