Direct Marketing Association, The v. Huber

Filing 99

MOTION for Partial Summary Judgment Counts I and II (Commerce Clause) by Defendant Roxy Huber. (Attachments: # 1 Exhibit 1- Fox Decl. & Rep., # 2 Exhibit 2-1 IRS Tax Gap, # 3 Exhibit 2-2 IRS Tax Gap, # 4 Exhibit 2-3 IRS Tax Gap, # 5 Exhibit 2-4 IRS Tax Gap, # 6 Exhibit 2-5 IRS Tax Gap, # 7 Exhibit 2-6 IRS Tax Gap, # 8 Exhibit 2-7 IRS Tax Gap, # 9 Exhibit 2-8 IRS Tax Gap, # 10 Exhibit 3- Saliman Decl., # 11 Exhibit 4- Corjuo Decl., # 12 Exhibit 5- Gable Decl. & Rep., # 13 Exhibit 6- Barry Dep., # 14 Exhibit 7- Stevens Decl., # 15 Exhibit 8- Thompson Decl., # 16 Exhibit 9- Lichtenstein Decl. & Rep., # 17 Exhibit 10- Adler Dep.)(Snyder, Melanie)

Exh.7

Exh.7

Colorado Department of Revenue
Taxpayer Service Division
11/10

FYI Sales 79
Sales of Taxable Items Over the Internet
The sale of goods through the Internet is treated the same as the sale of tangible personal property through
traditional selling methods.
Purchaser
If an individual in Colorado purchases goods over the Internet, they will owe sales tax on the purchase if buying from
a seller that is also located in Colorado. If an individual is buying from a vendor not located in Colorado, they will
probably not pay sales tax to the seller, but will pay a 2.9% use tax directly to the state of Colorado. If an individual is
purchasing through the Internet within the Denver Metro area they will also owe the RTD/CD/FD tax. Use tax is paid
on the Consumer Use Tax Return (DR 0252). [§39-26-106 and §39-26-202, C.R.S.]
MOTOR VEHICLE PURCHASES MADE THROUGH THE INTERNET
The purchase of a vehicle by an individual through the Internet is subject to sales tax. If the individual has paid tax to
the vehicle dealer, the dealer will furnish them with a sales tax receipt showing sales tax has been collected. The
individual will take the sales tax receipt and other vehicle purchase documents to their county motor vehicle
department to initiate registering and titling the vehicle. If the purchaser has not paid sales tax to the vehicle dealer,
they will pay the sales tax to the county motor vehicle department directly. The individual will not use the Consumer
Use Tax Return (DR 0252) to pay tax on a vehicle purchase. Colorado state sales tax of 2.9% is due. The
RTD/CD/FD tax is due if the vehicle is registered within the district. Be aware that many cities, counties, and special
districts impose a use tax on a vehicle purchase that is registered within the city, county or special district. See FYI
Sales 62 Guidelines for Determining When to Collect State-Collected Local Sales Tax and Colorado Sales/Use Tax
Rates (DR 1002) for additional information.
Seller
A Web site that sells tangible personal property collects tax in the same manner as a mail order business that sends
catalogs to customers to place phone or mail orders. If the seller and the customer are both located in the same
taxing jurisdiction, then the seller must collect all applicable state and local sales taxes. For example, if a seller and
the customer ordering from the seller are both located in Colorado, the seller must charge the 2.9% Colorado state
sales tax. If the seller and the customer are both located in Estes Park, the seller must charge Colorado state sales
tax in addition to any county and city tax for Estes Park that may apply. This example assumes the seller has no
physical presence outside of the seller’s local jurisdiction. If a seller delivers items to themselves or if they employ
sales people to sell or advertise products in other jurisdictions, we advise the seller to seek the assistance of a tax
professional to help keep track of the various tax rates and tax filing requirements in each jurisdiction. For further
information on determining when to collect local taxes on shipped sales, see FYI Sales 62.
RETAILERS THAT ARE NOT REQUIRED TO COLLECT COLORADO SALES OR USE TAX AND CHOOSE NOT
TO COLLECT COLORADO SALES OR “NON-COLLECTING RETAILERS”
If such retailers have total annual gross sales in Colorado of $100,000 or more, such retailers must:
Provide notice with each purchase (the “transactional notice”)
The transactional notice must:
• State that the retailer does not collect Colorado sales or use tax.
• State that the purchase is not exempt from Colorado sales or use tax merely because it is made over the Internet
or by other remote means.
• State that State of Colorado requires Colorado purchasers to file a sales or use tax return at the end of the year
for all taxable Colorado purchases that were not taxed, and pay tax on those purchases
• The notice must be easily seen and located near the total price.
The notice may also state that the retailer will provide an end-of-year summary of Colorado purchases to the
customer, and that the retailer is required by law to provide the Colorado Department of Revenue with an annual
report of the total dollar amount of the customers Colorado purchases at the end of the year. (Details of how and
when to file may be found at the Colorado Department of Revenue’s Web site, www.TaxColorado.com)
Page 1 of 3

D151
Exh.7, Exh.A

WHEN NOTICE MUST BE GIVEN:
1. If a retailer does not indicate that no sales tax is due on the transaction, the retailer may provide notice at any
point in the transaction, including sending the notice on a separate sheet of paper with the delivered goods.
Example: Transaction summary that does not indicate that no sales tax is due on the transaction
Item
Shipping and handling
Sales tax collected by [COMPANY NAME]

$1,000.00
$45.00
$0.00

2. If the retailer does indicate that no sales tax is due on the transaction, then the retailer must direct the customer to
a notice every time such an indication is made that no sales tax is being collected.
Example: Transaction summary that indicates no sales tax is due on the transaction
Item
$1,000.00
Shipping and handling
$45.00
Sales tax
$0.00
3. If the retailer knows that a purchase is exempt from Colorado tax (ex: the sale of non-candy food items for home
consumption), then the retailer need not provide any notice at all.
Provide an annual summary of purchases (the “annual customer report”) to Colorado customers that have
more than $500 in annual purchases.
The annual customer report to each customer who spent more than $500 in a calendar year may be sent without
regard to whether the customer has more than one account with a retailer. For example, retailers are not required to
determine whether customer John P. Smith, customer John Peter Smith, and customer J.P. Smith, Inc. are the same
individual for taxation purposes unless the retailer knows in the regular course of its business that such customers
are all the same individual or entity. Similarly, retailers are not required to determine whether customers are part of a
single household. Retailers also do not need to determine whether customers are part of the same entity unless the
retailer knows in the regular course of its business that such customers are all part of the same entity. For example,
retailers do not need to determine whether two different individuals with the same business address are part of the
same business entity.
The annual customer report must:
•
•
•
•

Be sent by first class mail to the last known address by January 31of the following year in an envelope
prominently marked with the words “Important Tax Document Enclosed”.
Summarize the date(s) of purchase(s), a general description of the item(s) (e.g., “books”, “consumer electronics”,
“household appliances”) and the dollar amount(s) of the purchase(s).
State that the State of Colorado requires that the consumer file a sales or use tax return at the end of every year
and pay the tax on Colorado purchases that did not include tax. (Details of how to file this return may be found on
the website www.TaxColorado.com under the Sales Tax or Use Tax web pages.)
Indicate that the retailer is required by law to provide the Colorado Department of Revenue the total dollar
amount of purchases made by Colorado consumers, however no information about the purchases other than the
dollar amount will be provided.

On or before March 1, 2011 and each year thereafter retailers not collecting the tax and have at least one
customer with total annual purchases that are over $500, must also provide an annual report (the “annual
retailer report”) to the Colorado Department of Revenue.
The annual retailer report must include:
• The name(s) of all the Colorado purchasers
• The billing address of all the Colorado purchasers
• The shipping addresses of all the Colorado purchasers
• The total dollar amount of purchases made by each customer in Colorado for the previous year.
Details of how to file this report can be found on the department’s Web site under “Sales tax” for “Non-collecting
retailers”.

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D152
Exh.7, Exh.A

INTERNET ACCESS SERVICES
Colorado does not tax Internet access services. Internet access (general use of the Internet), e-mail services, Web
site hosting and domain name registration are nontaxable services.
However, if service providers sell tangible personal property to customers in Colorado, then sales tax must be
charged on those items. [§ 39-26-104 , C.R.S.]
FEDERAL RESTRICTIONS ON INTERNET TAXATION
It is sometimes argued that federal law does not allow states to impose sales tax on items purchased via the Internet.
This is not the case. The Internet Tax Nondiscrimination Act restricts the following through November 1, 2003:
(1) taxes on Internet access, unless the tax was generally imposed and actually enforced prior to October 1, 1998;
and
(2) multiple or discriminatory taxes on electronic commerce.
Colorado is in compliance with these requirements as there is no Colorado sales tax on Internet access and the
sales and use taxes imposed are not discriminatory (at a higher rate than that imposed on other businesses or
applied solely to online computer services or Internet access).
Definitions
“Internet” means the international computer network consisting of federal and nonfederal, interoperable, packetcontrolled, switched data networks. [§24-79-102(2)(a) and §29-1-1001(3)(a), C.R.S. ]
“Internet access services” means services that provide or enable computer access by multiple users to the Internet,
but shall not include that portion of packaged or bundled services providing phone or television cable services when
the package or bundle includes the sale of internet access services. [§24-79-102(2)(b) and §29-1-1001(3)(b), C.R.S.]

FYIs provide general information concerning a variety of Colorado tax topics in simple and straightforward language. Although the FYIs represent
a good faith effort to provide accurate and complete tax information, the information is not binding on the Colorado Department of Revenue, nor
does it replace, alter, or supersede Colorado law and regulations. The Executive Director, who by statute is the only person having the authority to
bind the Department, has not formally reviewed and/or approved these FYIs.

Page 3 of 3

D153
Exh.7, Exh.A

TEMPLATE FOR TRANSACTIONAL NOTICE
In an effort to assist non-collecting retailers in complying with their notice obligations to
consumers, the Department of Revenue has created a sample notice that retailers may use,
which complies with DOR’s regulations. Retailers need not use this notice, however, and are
free to provide any form of notice that meets the requirements outlined in Regulation 39-21112.3.5.
SAMPLE NOTICE TO CONSUMERS:
[COMPANY NAME] is not required to, and does not, collect Colorado sales or use tax. Under
Colorado law, purchases are not tax-exempt merely because they were made over the Internet
or because a seller is not required to collect Colorado tax. Colorado law requires Colorado
purchasers to review untaxed purchases and, if any tax is owed, file a Colorado use tax return
and pay any tax due.
OPTIONAL ADDITIONAL LANGUAGE (RETAILERS MAY INCLUDE ALL OR SOME OF THE
POINTS BELOW):
•
In order to assist you in filing your Colorado use tax form, if you
purchase more than $500 worth of goods from us, we will send you a summary at the
end of the year of all of your purchases from us.
•
Details of how and when to file your Colorado use tax return may
be found at www.taxcolorado.com under the topic “use tax”.
•
Please be aware that we are required to provide the Colorado
Department of Revenue with an annual report of the total dollar amount of your
purchases. We will not provide any details about your purchases, only the total dollar
amount that you spent on goods purchased from us.

D154
Exh.7, Exh.B

SAMPLE ANNUAL CUSTOMER NOTICE
In an effort to assist non-collecting retailers in complying with their notice
obligations to consumers, the Department of Revenue has created a sample annual
notice to consumers that retailers may use, which complies with DOR’s regulations.
Retailers need not use this notice, however, and are free to provide any form of notice
that meets the requirements outlined in Regulation 39-21-112.3.5.
TEXT OF SAMPLE ANNUAL NOTICE TO CONSUMERS:

During 2010 you purchased items from us that you had shipped to the State of
Colorado. Because we did not collect any tax on those purchases, Colorado law
requires that we send you the attached summary of your purchases to assist you in
filing your Colorado use tax/sales tax form.
If you made taxable purchases during the year on which no sales tax was collected,
Colorado law requires that you file a use/sales tax return and pay any tax due on your
taxable purchases.
[OPTIONAL LANUGAGE: You may find details of how and when you must file your
return at the Colorado Department of Revenue’s website: www.taxcolorado.com.]
Colorado law requires that we also provide the Colorado Department of Revenue with
the total amount of your purchases from us. We will not provide any details of what
your purchases were or include any description of the type of items that you purchased.
The attached detailed notice is provided only to you.
SAMPLE ANNUAL NOTICE LAYOUT:
Purchase date
1/12/2010
2/17/2010
12/20/2010
12/28/2010

Item type
Books
Electronics
Kitchen utensils and
gardening tools
Electronics

Amount paid*
$27.50
$560.00
$200.00
$600.00

*Shipping and handling charges may be separately stated or may be included in the
item amount.

D155
Exh.7, Exh.C