The new tax on e-commerce, the “affiliate nexus tax”, will require out-of-state sellers to collect taxes on Coloradoans if they advertise through an in-state advertiser. The tax attempts to circumvent the 1992 Supreme Court case Quill v. North Dakota that ruled a company must have a substantive physical nexus in order for the state to require that company to collect sales taxes, something out-of-state retailers do not. The same tax is currently undergoing legal challenge in New York.
While the “affiliate nexus tax” already likely violates the U.S. Constitution’s dormant commerce clause, it also – along with the entire tax hike package – expressly violates the Colorado Constitution. The state constitution's Taxpayers Bill of Rights, approved in 1992, requires that a “tax policy change” that raises revenue (which all of these measures are slated to do) must be put on the ballot and voted on by Coloradoans. None of these measures appear headed in that direction, however, and during the House Finance Committee hearing last week, members reportedly dismissed those who stated they must be put on the ballot.
To make matters even worse, the measures were deemed necessary to raise revenue for “vital” and “essential” services; however the “affiliate nexus tax” has failed to raise revenue in both Rhode Island and North Carolina, since retailers simply forgo advertising with in-state businesses to avoid the unconstitutional tax collection scheme. It’s almost laughable that the legislature expects to raise over $10 million through the tax hike, and more probable that they will have at least another $10 million “budget shortfall” in the coming year. Allowing the House Finance Committee to fake budget numbers this year to pass an unconstitutional tax increase is simply horrible and deceptive policy making.
In addition, the measure to expand the sales tax to include computer software was made to appear to protect government services, with 40% of revenue funding K-12 public education. And the other 60%? The general (slush) fund.
