• by Wendy Davis  @wendyndavis, August 30, 2016

The Direct Marketing Association is asking the U.S. Supreme Court to review a Colorado law requiring some online retailers to send information about consumers' purchases to the tax authorities.

The DMA argues in papers filed this week that the law is unconstitutional because it only applies to out-of-state companies, including e-commerce companies, that don't collect sales tax from consumers.

"State regulatory requirements that apply, by their terms, solely to out-of-state companies are virtually 'per se' unlawful," the DMA says in a petition seeking Supreme Court review.

The measure requires some out-of-state companies to send Colorado tax authorities annual reports with customers' names, addresses and total amounts spent. The Colorado law also requires companies to send annual reports notifying consumers about their obligations to pay state sales tax.

The DMA challenged the law in court, arguing that it was invalid due to a 1992 Supreme Court case dealing with catalog companies. The Supreme Court ruled in that case that state lawmakers can't require out-of-state retailers to collect sales tax unless they had a physical connection to the state -- like a brick-and-mortar storefront.

It's not clear whether the current Supreme Court would uphold its prior decision. Last year, Supreme Court Justice Anthony Kennedy suggested that state governments should be able to require out-of-state online retailers to collect sales tax.

Earlier this year, the 10th Circuit Court of Appeals rejected the DMA's position on the grounds that the 1992 decision only deals with tax collection, as opposed to reporting rules.

"In light of the Colorado consumers’ preexisting obligations to pay sales or use taxes whether they purchase goods from a collecting or non-collecting retailer, the reporting obligation itself does not give in-state retailers a competitive advantage," the judges wrote.

Colorado state residents are required to pay tax on merchandise even when retailers don't collect it. But state officials say that many residents don't do so. Colorado officials estimated in 2013 that state and local governments stood to lose around $173 million in tax revenue the prior year, because consumers failed to pay taxes on online purchases.

Colorado isn't the only state trying to impose new tax laws on Web companies. South Dakota and Pennsylvania also recently set out new obligations for online companies.

In South Dakota, a new law requires some e-commerce retailers to report and collect sales tax from state residents. That law is facing a legal challenge by NetChoice -- which counts eBay, Google, Overstock, and Facebook among its members and the American Catalog Mailers Association. Pennsylvania recently imposed its version of a "Netflix tax," which requires residents who purchase electronic media, including subscriptions to Netflix and Hulu, to pay an additional 6% sales tax.