04.04.2012 | by

Colorado’s Nexus Tax Law Overturned

On Tuesday, a federal court struck down the Colorado nexus tax law that was passed in early 2010. The “Amazon tax law” was similar to those passed in other states, and just eight days after the original law was enacted, Amazon dropped more than 4,000 affiliates in the Centennial State.

Now, a federal judge has ruled that the law “will, by definition, discriminate against the out-of-state retailers by imposing unique burdens,” a sentiment that’s been echoed by many in the online marketing industry.

Colorado’s Uphill Battle

The law was passed in 2010, but Colorado has been unable to collect sales tax because of an injunction was put in place in 2011, after the Direct Marketing Association sued to overturn the state. That did little to help affiliates who were no longer able to work in the state, but it slowed down the process and allowed the matter to be solved on a federal level.

The final version of the law targeted advertisers rather than affiliates, but the costly burden placed on retailers ultimately trickled down to affiliates, who were easily expendable for Amazon and other merchants.

Will More States Follow Suit?

The rejection of the Colorado law is just one victory in the battle between the performance marketing industry and the states looking to pass these laws in order to improve their state budgets. For now, it remains to be seen how this ruling will affect upcoming laws in other states, and if states with existing nexus laws will have the chance to see their original ruling overturned.

According to the Performance Marketing Association, only two states – Maryland and Minnesota – are currently considering affiliate nexus laws, but many others have passed nexus laws in the last few years.

small business states

The Tax Foundation ranks states based on their tax systems for businesses. This can be useful for affiliates looking to relocate because of nexus laws and other tax issues.

If Tuesday’s ruling is any indication, these laws may not be so unavoidable after all, and with any hope, the lawmakers in these states can find other opportunities to help their budgets without having to require sales taxes for online retailers. In the end, avoiding nexus laws helps not only affiliates, but the states as well, by allowing them to foster environments that encourage the success of startups and other businesses that focus on online commerce.

With the law overturned, do you think Amazon and other advertisers will change their stance on Colorado? Do you think this will impact how other states consider future nexus laws? Let us know!

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