Alert: How Colorado’s “Rat Your Customer Out” Law Will Affect Marketers

by Bill McClellan on Jan 18, 2017 1:00:00 PM Government Relations

Last year, right before Christmas, a big thing happened that you really need to know about.


The U.S. Supreme Court declined the review of a case that requires marketers to either collect sales tax for purchases made by people in Colorado or report on customer’s purchases to the state.

The industry has been fighting against this outcome since 2011 when the DMA filed suit in Direct Marketing Association v. Brohl.  ERA along with its partners in the True Simplification of Taxation (TruST) coalition strongly supported this effort filing and Amicus Brief in support.

However, all the appeals have been exhausted so now Colorado will want you to report. 

Here is what you need to know to get ready:

What You Need to Know Now

First, this is only required from marketers who have gross sales of $100,000 in Colorado.  So that’s good news for small retailers and marketers. 

For everyone else it is - wait to see for now. Basically, Colorado wasn’t ready for the decision and hasn’t been able to provide the industry much guidance so far on how to comply. In fact, the Colorado Department of Revenue has not been responsive to multiple requests for comment on how the department intends to enforce the law from reporters and others.

Regardless, you should highlight these pending changes with your internal compliance and outside legal counsel to prepare.  After enforcement begins we expect the state to move quickly to identify marketers who are not in compliance to make examples of. 

Here is a great in-depth article from Internet Retailer that has more information regarding this matter.

What’s ERA Doing?

ERA continues to fight this and other online sales tax threats with our partners in the TRuST coalition. This coalition includes the Electronic Retailing Association, Direct Marketing Association, American Catalog Mailers Association and NetChoice.  Together we are exploring the various options that might work.  However, it’s a tough nut to crack now that the Supreme Court has ruled. 

Currently, one of the big problems in this fight is that the state claims that remote sellers will voluntarily register to collect instead of telling the state about their customer’s purchases.  Therefore, we are currently looking for companies that plan to report rather than collect.  We need people that are willing to go on the record to shine a bright light on the dark secret in Colorado’s new law.  So drop me a line if you are interested in assisting with this effort.   

Our working theory is that when Colorado voters learn that their legislators require retailers to report their personal purchasing info to the state it should be something of a “privacy surprise” that will generate a serious backlash.  We should find out very soon if this assessment is correct.

Who’s Next?

Drafting off the success this tattle tale legislation has had so far, we expect other states to follow Colorado’s lead soon. So far, Alabama, Kansas, Nebraska and Utah have mirror proposals that could soon become law. I think this is just the first wave of these state laws.  I expect more states to follow Colorado’s lead if they continue to find success.  So keep an eye out for more to come on this front soon.    


Bill McClellan.jpgBill McClellan joined ERA in January 2003 as director of government affairs. Prior to joining the association, Bill worked as a lobbyist at the Georgia Automobile Dealers Association, covering the state legislature and Georgia's congressional delegation. Before working for the GADA, Bill managed political campaigns at both the congressional and state constitutional levels

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