A federal judge has ruled in favor of Amazon in a case it filed against the state of Colorado for trying to collect sales tax under a new law. The court found that because the company didn't have a physical presence in the state that Colorado didn't have a right to collect and that its new law ran afoul of the Interstate commerce clause in the Constitution – specifically, legislation forcing out-of-state retailers to report their customers' purchases to the state's tax authority.
Under the commerce clause, only Congress can pass laws that regulate commerce between states, and the Supreme Court has ruled that forcing retailers to collect out-of-state sales taxes creates a burden on interstate commerce. The business of interstate sales tax collection is under the purview of national lawmakers, who have entertained the idea in the past but have yet to act.
Last Friday Judge Robert Blackburn ruled that the reporting requirement discriminated against out-of-state retailers. While the Colorado law doesn't specifically target out of state businesses, it does target businesses that do not collect Colorado sales tax, which the court has ruled amounts to the same thing.
Colorado's reporting law "imposes a differential burden on out-of-state retailers because the different burden is imposed precisely because the retailer is an out-of-state retailer" who is exempted by the Supreme Court from paying sales tax in Colorado, Blackburn wrote. "Only a change in the law by the Supreme Court or action by Congress can change the situation" and allow states to reach out-of-state retailers, he concluded.
Source: Ars Technica