Colorado has passed House Bill 1193 to add a 2.9% sales tax to Internet purchases made by Coloradans.

The measure voted on in the state Senate will require e-businesses with an annual turnover of more than USD100,000 in Colorado to inform Colorado customers at the point of sale and at the end of the year, the amount they owe in taxes on their purchases and submit an annual statement of their Colorado customers' total purchases, so that the Department of Revenue can collect any outstanding sales taxes.

Sen. Rollie Heath, (D-Boulder) said only a dollar amount was needed, not an itemized list of purchases. The Senator also wished that the law would induce e-commerce giants to opt to collect the tax directly. Heath emphasized that the bill did not represent a new tax. People who bought goods online were supposed to fill out an annual form and pay tax at the usual rate applied in their local shops, he added.

Initially the bill had been drafted to tax Coloradan purchases clicked through via affiliate marketers. This was dropped on the grounds that online retailers such as Amazon and Overstock had cut ties with affiliate marketers in three other states where this was tried.

Christopher Howes, president of the Colorado Retail Council (CRC), told the Denver Daily News that local retailers were forced to charge the state sales tax and put at a disadvantage against out-of-state retailers that did not charge the tax. He said that the CRC would support any effort that created more of a level playing field with those internet retailers who don’t employee Coloradans.

This bill was agreed together with eight other bills designed to increase tax revenues by up to USD140m in the next next fiscal year and help plug a USD1bn gap in the 2010-11 fiscal year finances. 12 existing tax credits and exemptions were either modified or eliminated, approximately 6% of the USD2.1bn cost of exemptions and credits currently in place in Colorado.

A comprehensive report in our Intelligence Report series examining the new possibilities that offshore e-commerce open up for business, and analysing the offshore jurisdictions that have led the way in offering professional e-commerce regimes for international business, with a particular focus on e-gaming, is available in the Lowtax Library at http://www.lowtaxlibrary.com/asp/subs_reports.asp and a description of the report can be seen at http://www.lowtaxlibrary.com/asp/description_report6.asp