Title
SECOND AND FINAL READING OF AN ORDINANCE AMENDING THE COMMERCE CITY SALES AND USE TAX CODE, ARTICLE I OF CHAPTER 20 OF THE COMMERCE CITY REVISED MUNICIPAL CODE, REGARDING ECONOMIC NEXUS AND THE OBLIGATION OF REMOTE SELLERS TO COLLECT AND REMIT SALES TAX
Body
Summary & Background
The United States Supreme Court in South Dakota v. Wayfair, 138 S.Ct. 2080 (2018), overturned prior precedent and ruled that a State is not prohibited by the Commerce Clause from requiring a retailer to collect sales tax based solely on the fact that such retailer does not have a physical presence in the State.
The longstanding test to determine the constitutional propriety of a state or local tax is whether the tax (1) applies to an activity with a substantial nexus with the taxing State, (2) is fairly apportioned, (3) does not discriminate against interstate commerce, and (4) is fairly related to the services the State provides. This ordinance primarily addresses the first prong of that test.
Following precedent from 1977, the Court in a 1992 case, Quill Corp. v. N. Dakota By & Through Heitkamp, 504 U.S. 298, determined that a physical presence, such as a retail outlet, in a particular state was required to establish sufficient nexus to justify a tax on the business. The case was continuously criticized as incongruent with the modern economy, where customers more frequently purchase goods and services online. Commentators noted that “Quill created an inefficient ‘online sales tax loophole’ that gives out-of-state businesses an advantage.” Wayfair, Inc., 138 S. Ct. 2080, 2092.
In Colorado, retailers must begin collecting Colorado state and local sales tax if their retail sales into Colorado during the previous or current calendar year exceed $100,000. The City’s Sales and Use Tax Code needs to be amended to clearly reflect the changes resulting from the Wayfair case.
The proposed ordinance includes the necessary word changes to the City’s Sales and Use Tax Code required ...
Click here for full text