A unanimous Supreme Court ruled that that federal courts have jurisdiction to hear various taxpayers’ challenge to a Colorado internet tax law. Online retailers challenged the law as a violation of the Constitution’s Commerce Clause. After an initial victory in federal district court, the federal appeals court ruled that the lawsuit should have been filed in state court as a challenge to the state’s collection of taxes. The Supreme Court held that the taxpayers were challenging the constitutionality of the statute and not the state’s efforts to collect taxes, so jurisdiction was proper in federal court.
The Colorado statute, which is often called the “Amazon Tax,” requires online retailers that do not have nexus with Colorado for collection of the state’s sales tax to file reports with the state that disclose information concerning sales to Colorado residents.
The federal appeals court should now proceed to decide the merits of the constitutional challenge.