No One Likes a Tattletale

SALT Chat

Wayne K. Berkowitz, Partner, Citrin Cooperman Advisors LLC / Berdon Advisors LLC

02.29.16 | SALT Chat

Whether you are referred to as a snitch, informant, rat, or other names not suitable for this blog, the U.S. Court of Appeals for the Tenth Circuit has held that tattling does not violate the Constitution’s dormant Commerce Clause.

Way back in 2010, Colorado enacted legislation stating that all retailers not collecting sales tax in Colorado must do three things if sales to Colorado customers exceed $100,000: they must tell Colorado purchasers that they owe use tax; they must provide an annual summary to the customer; and they must annually report the purchaser information to the Colorado Department of Revenue.

Now while the first two requirements seem like a good idea and are no more burdensome than your significant other reminding you of the speed limit, the third requirement is akin to that same significant other dragging you to the nearest precinct and turning you in for speeding.

Fortunately, the Department had been enjoined from enforcement, while the issue made its way through the courts. We haven’t yet had to tell our clients to rat out their customers, although we may have to tell you to do so soon. A search of the internet reveals an overwhelming amount of brilliant constitutional analysis and discussion on the subject, but unfortunately no one is telling you what you actually need to do. We will most certainly keep you posted.

The absurdity of forcing retailers to “turn in” their customers emphasizes the need for federal action in this area. We all recognize the need for a level playing field (for everyone or no one to have to pay and/or collect), but remember, no one likes a tattletale.

Questions about sales and use tax? Contact me at wberkowitz@berdonllp.com or your Berdon advisor.

Wayne Berkowitz, a tax partner and head of the State and Local Tax Group at Berdon LLP, advises on the unique requirements of governments and municipalities across the nation.