DMA Files Lawsuit Against the State of Colorado Over Internet Sales Tax Law
Washington, DC, June 30, 2010 — Today, the
Direct Marketing Association (DMA) filed a lawsuit in Federal District Court in Colorado challenging the constitutionality of a new Colorado notice and reporting law (HB 1193) that requires out-of-state retailers to turn over to the Department of Revenue (DOR) confidential purchasing history information regarding their Colorado customers, and even certain customers in other states. This legislation constitutes an unprecedented invasion of consumer privacy and also unfairly discriminates against interstate commerce, as the law is targeted solely at out-of-state retailers.
“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. “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.”
The DMA suit asserts that the law and regulations violate both the United States Constitution and the Colorado Constitution. The DMA’s complaint details how the new law:
* Discriminates against interstate commerce;
* Exceeds the permissible scope of state regulatory authority over out-of-state companies;
* Violates the right to privacy of Colorado consumers;
* Infringes upon the free speech and due process rights of both consumers and retailers; and
* Exposes confidential consumer information to the risk of unauthorized disclosure.
The challenged law would permit state tax officials to pry into citizens’ purchasing behaviors and histories. DMA contends that the state has no business knowing where consumers shop or how much they spend. Tellingly, the law only applies to out-of-state sellers and does not require Colorado retailers to disclose similar customer information to the Department of Revenue. The state’s attempt to force out-of-state companies to turn over confidential customer information or, in the alternative, to forgo their Constitutional rights and agree to collect Colorado sales tax, deserves to be abandoned in short order.
The new law was passed by the Colorado General Assembly in late February and became effective on March 1, 2010. It requires out-of-state retailers with more than $100,000 of gross sales to Colorado consumers to: (1) inform customers that they are required to self-report use tax on all non-exempt purchases on which the retailer does not collect sales tax; (2) send year-end statements to Colorado customers summarizing their purchases for the previous year and informing them that the retailer will be disclosing their purchase information to the state; and (3) turn over to the Department of Revenue information regarding their Colorado customers, including their billing and shipping addresses and the amount of their purchases during the prior year. DMA estimates that the personal information of hundreds of thousands of Colorado and non-Colorado consumers will have to be reported to the DOR as a result of this law.
A copy of the lawsuit can be downloaded here:
http://www.the-dma.org/government/colorado_lawsuit.
About Direct Marketing Association (DMA)
The Direct Marketing Association (
www.the-dma.org) is the leading global trade association of businesses and nonprofit organizations using and supporting multichannel direct marketing tools and techniques. DMA advocates standards for responsible marketing, promotes relevance as the key to reaching consumers with desirable offers, and provides cutting-edge research, education, and networking opportunities to improve results throughout the end-to-end direct marketing process. Founded in 1917, DMA today represents companies from dozens of vertical industries in the US and 48 other nations, including nearly half of the Fortune 100 companies, as well as nonprofit organizations.
In 2009, marketers – commercial and nonprofit – spent $149.3 billion on direct marketing, which accounted for 54.3% of all ad expenditures in the United States. Measured against total US sales, these advertising expenditures generated approximately $1.783 trillion in incremental sales. In 2009, direct marketing accounted for 8.3% of total US gross domestic product. Also in 2009, there were 1.4 million direct marketing employees in the US. Their collective sales efforts directly supported 8.4 million other jobs, accounting for a total of 9.9 million US jobs.
