Internet Sales Tax Clash Turned Away by U.S. Supreme Court

The U.S. Supreme Court let stand a Colorado law that imposes reporting requirements on internet retailers in an effort to get customers to pay the sales taxes they owe, according to Bloomberg. The justices Monday turned away an appeal by a retail-industry trade group that challenged the measure as violating the U.S. Constitution.

The case raised questions about a 1992 Supreme Court ruling that bars states from requiring merchants to collect taxes unless they have a physical presence in the state. States lose $23 billion every year in uncollected sales taxes from web and catalog purchases, according to a 2012 estimate by the National Conference of State Legislatures, the most recent figures available. Although consumers are supposed to pay the taxes themselves, few do unless the seller collects the money.

The Colorado law requires internet retailers to turn over customers’ names, addresses and purchase amounts to tax authorities. Merchants also must notify consumers of their obligation to pay taxes and provide a purchase summary to people who spend more than $500 in a year. The Direct Marketing Association contended unsuccessfully that the law violates the Constitution’s commerce clause because it applies solely to out-of-state companies.