Commerce Clause – Rock On

The Commerce Clause is like one of those old bands on a reunion tour. You can almost hear people asking – “they’re still around?” But as we know from the recent Supreme Court arguments on the Affordable Health Care Act, it’s still rocking. Further evidence of that point comes from a federal court in Colorado, which recently struck down a Colorado statute known as the “Amazon Law.” The act was a tax provision that applied to vendors who had no physical presence in the state. Like, you know, Amazon. The commerce clause prohibits a state from imposing a sales tax on out of state vendors. But it can impose a “use tax” on the buyers. That is, as you can imagine a tough tax to enforce. And it gives online vendors an advantage over brick and mortar vendors. Under the Colorado law, online vendors would need to provide an annual report to the state taxing authority identifying Colorado purchasers and the amount of their purchases. The law also required the vendors to notify Colorado customers of their obligation to report and pay the use tax. According to the Colorado based federal court, even that much regulation violated the commerce clause. It’s a big win for the Direct Marketing Association, the industry group that brought the suit. And it’s a big deal for Colorado and other cash strapped states. Don’t be surprised if this commerce clause reunion tour eventually gets a gig at the Supreme Court.