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Colorado has issued guidance on whether certain lease payments for vehicles used in interstate commerce are subject to sales or use tax and has clarified the procedure to document the exemption. Generally, a new or used trailer, semitrailer, truck, truck tractor, or truck body purchased for use exclusively outside Colorado or in interstate commerce and delivered by a Colorado manufacturer or dealer within Colorado that is subsequently driven or moved by the buyer outside the state within 30 days after the delivery date is not subject to sales tax at the time of purchase. The exemption applies only to purchases of vehicles used in interstate commerce.  Long Term Leases which are leases greater than 3 years are considered purchases and therefore this exemption will apply.  For leases less than 3 years, the lessor is generally considered the user and is liable for payment of use tax on the purchase of the vehicles unless the lessor has been granted permission to treat the leases as sales.  If this has been granted then the leases will qualify for the interstate commerce exemption.  For sales or tax exempt motor vehicle purchases, the Colorado Department of Revenue recommends that purchasers use DR 0780. (GIL 14-021, Colorado Department of Revenue, October 9, 2014, released December 2014)


Pipeline and fittings purchased by a Colorado company for a natural gas gathering system qualified as exempt manufacturing machinery for the enterprise zone sales tax exemption. Under the enterprise zone exemption statute, extracting and processing were considered "manufacturing" activities. These activities are not included in the general state-wide manufacturing exemption.  The pipelines and fittings moved natural gas from wells, a direct production step of extracting natural gas, and were therefore considered directly used in the manufacturing of natural gas.(Pioneer Natural Resources USA, Inc. v. Colorado Department of Revenue, Colorado Court of Appeals, No. 12CA1703, August 14, 2014)


The U.S. Supreme Court has held that a federal district court has jurisdiction over the lawsuit challenging the constitutionality of Colorado’s reporting requirements legislation for out-of-state retailers and may enjoin enforcement of the requirements.


What was being challenged in this case was the Tax Injunction Act, which is a federal provision that restricts a taxpayer from challenging state tax cases in federal courts. The federal district court’s enjoinder of the law would not prevent the state from assessing, levying, or collecting tax, as prohibited under the federal Tax Injunction Act because the notice and reporting requirements involve information gathering, not tax assessment, levy or collection. The lawsuit would not restrain assessment, levy or collection of tax merely because it might inhibit those activities.


The case raises the question of how close a state law can get to the tax administration process before it is covered by the Tax Injunction Act which prohibits federal court challenges.


In the Supreme Court’s decision, Justice Kennedy concurred with an unqualified opinion, but included a surprising statement.He explained the National Bellas Hess and Quill decisions then said “Given these challenges in technology and consumer sophistication, it is unwise to delay any longer a reconsideration of the Court’s holding in Quill.  A case questionable even when decided, Quill now harms States to a degree far greater than could have been anticipated earlier”.  He closed his opinion by saying “The instant case does not raise this issue in a manner appropriate for the Court to address it. It does provide, however, the means to note the importance of reconsider­ing doubtful authority. The legal system should find an appropriate case for this Court to reexamine Quill and Bellas Hess.” It is unclear if this could be a request for a nexus case to come before the Court. 


It remains to be seen if the Colorado reporting requirements statute is constitutional. The case has been remanded to the Tenth Circuit to decide whether comity argument remains available to Colorado. For now, the Colorado reporting requirement is on hold and in limited situations, taxpayers can now bring state tax cases into Federal Courts.


For our previous news item on this case, see Injunction Blocking Colorado Reporting Requirements For Out-of-State Retailers is Lifted.


For an update on this news item, see Colorado Use Tax Notice and Reporting Requirements Become Effective July 1, 2017


(Direct Marketing Association v. Brohl, U.S. Supreme Court, No. 13-1032, March 3, 2015)


On March 10, 2015, a bipartisan group of senators introduced the Marketplace Fairness Act of 2015. Similar legislation – the Marketplace Fairness Act of 2013 – was previously introduced in February 2013 and passed by the Senate on May 6, 2013. That legislation failed to be enacted. If passed, the Marketplace Fairness Act of 2015 would authorize states meeting certain requirements to require remote sellers that do not meet a "small seller exception" to collect their state and local sales and use taxes. For more information on the previous legislation, visit Federal Government Introduces New Remote Seller Bill. (Marketplace Fairness Act of 2015, March 10, 2015)


UPDATE: This bill failed to pass during the 114th Congressional Session running from January 3, 2015 to January 3, 2017.  Therefore, this bill has died and would need to be reintroduced to be considered and voted on.


On December 16, 2014, President Barack Obama signed the Consolidated and Further Continuing Appropriations Act, 2015, for sales and use tax purposes. The Act includes a provision that extends the Internet Tax Freedom Act (ITFA) until October 1, 2015 with all provisions unchanged.


On January 9, 2015, the House of Representative introduced a bill (un-numbered) that would permanently extend the ITFA, banning states and local jurisdictions from imposing any new tax on internet access. The proposed bill removes the current effective dates of November 1, 2003 through October 1, 2015 and changes the effective date to be effective for new taxes imposed after the date of the enactment.  It is not clear if states that have been grandfathered under the existing provision could retain their current tax on internet access but it appears that may be the case.  No formal legislation has been introduced that would incorporate the Marketplace Fairness Act into this bill. The bill is sponsored by House Judiciary Committee Chairman Bob Goodlatte, among others.


For our previous news item on this topic, see Internet Tax Freedom Act is Extended Through December 11, 2014.


For an update on this news item, see Internet Tax Freedom Act Extended Until December 11, 2015.


(Consolidated and Further Continuing Appropriations Act, 2015; H.R. 235)



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