County online sales tax idea unconstitutional, state says

Thursday, Aug. 2, 2018 8:58 PM
The Montezuma County Board of Commissioners has filed a letter of intent to participate in the upcoming November election with a sales tax question. The commissioners have until Sept. 7 to decide and submit the ballot language.

The Montezuma County Board of Commissioners is considering asking voters in November to approve a sales tax specifically for purchases made over the internet.

But the Colorado Department of Revenue says targeting only internet sales for a sales tax is unconstitutional.

On Monday, the commissioners submitted a letter of intent to the county Clerk and Recorder’s Office to participate in the upcoming election with a county sales tax ballot question. They have until Sept. 7 to approve and submit a ballot question to the clerk’s office.

During a special meeting Monday, commissioner Larry Don Suckla proposed the unusual method of a county levy on items purchased online by any resident within the county, including towns.

“From what I understand, this is unchartered territory, but I believe it levels the playing field because brick-and-mortar stores on Main Street have to collect sales taxes, but items bought online have not for years,” he said in an interview with The Journal.

Unincorporated Montezuma County currently does not have a sales tax.

Suckla said his idea stems from a U.S. Supreme Court ruling in June that now requires companies that ship products to collect state sales taxes on online purchases made by customers. The collected tax revenue is then sent to the state where the item was bought.

The Supreme Court’s 5-4 decision overturned previous rulings that required the customer to pay the sales tax if they received the item in a state where the business did not have a physical presence. That rarely occurred, and now the company is responsible for charging and collecting the state tax.

But for the county to charge a sales tax only for online sales would not be legal, said Lawrence Pacheco, Director of Communications for the Colorado Department of Revenue.

“Assessing sales tax only on online sales would be unconstitutional because it discriminates against interstate commerce,” Pacheco stated in an email to The Journal.

Suckla suggested a 5 percent tax on county online sales, and said that if voters approve the proposal, it would require companies to collect the county sales tax for online purchases in addition to collecting state taxes.

It was not known how much the county sales tax would generate, he said, because there was no data available on how many purchases are made online in the county.

Suckla said that he would want the additional tax revenues to go toward supporting the senior meals program and senior transportation needs in the county, with the remaining going into the general county fund.

As part of the ballot question, he said he would advocate for language that reduces mill levies for property taxes if voters approved the online sales tax.

“Property owners have been paying all of the county revenues, and I believe this proposal is more fair taxation,” he said.

The commissioners said they will work on the ballot language and can still decide whether to put it on the ballot.