Colorado law sets new rules for Amazon, other online retailers

A bill signed into law by Colorado Gov. Bill Ritter last week is adding a new twist to the debate over Amazon.com and internet sales tax. The law requires Amazon and other online retailers to inform Colorado residents how much they owe in sales tax on web purchases. It may also require large online retailers to provide a summary of people's web purchases to the state. While the law doesn't try to force Amazon to actually collect sales tax — a strategy pursued by some other states — it does draw Amazon into Colorado's sales tax collection efforts.

The Colorado law requires online retailers to inform state residents that their web purchases are subject to state sales tax both at the time of checkout and in an end-of-year summary, said Mark Couch, a spokesman for the Colorado Department of Revenue. The state Department of Revenue may ask online retailers that do more than $100,000 in annual sales to provide data on what individual Colorado residents spend each year (without breaking out specific purchases). Here's the full text of the bill.

Ecommerce giant Amazon currently only collects sales tax in a handful of states — a position that's come under increasing pressure as cash-strapped states try to drum up new sources of revenue.

Colorado lawmakers originally looked at making web retailers like Amazon collect sales tax on the basis of their ties to local affiliate websites, which link to products. The idea is that affiliates give companies like Amazon a physical "nexus" in the state that requires them to collect sales tax. But after an outcry from state affiliates — many of them small business owners — the Colorado bill was modified to its current form.

Amazon last year threatened to cut off affiliate programs in states that passed such "nexus" laws (and followed through on that threat in the case of North Carolina and Rhode Island). But lawmakers in California, which is in the midst of a budget crisis, are considering such legislation again.

It's not clear how Amazon will respond to the Colorado law. A spokeswoman for the company didn't immediately respond to a request for comment.

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About Eric Engleman

ERIC ENGLEMAN is senior technology staff writer for TechFlash and the Puget Sound Business Journal, covering online retail giant Amazon.com. Engleman tracks Amazon's increasingly complex business, spanning ecommerce, Kindle, cloud computing, and more. He's been covering technology and other industries for the Business Journal since 2003.

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