A Colorado bill aims to repeal a law requiring e-retailers to report consumers' purchases, and an Arkansas measure fails to advance.

Online sales tax measures are springing up in several states.

In the Colorado General Assembly, a Senate Finance Committee was scheduled to hold a hearing Tuesday to consider the repeal of Colorado law that requires online retailers that sell in the state to turn over their customers’ personal and purchase information for sales tax collection purposes.

The Senate bill (SB 17-238) aims to eliminate the requirement for online retailers that sell more than $100,000 annually in the state to notify the state’s Department of Revenue about each shopper who lives in Colorado who spent more than $500 per year with them. The bill also proposes notifying Colorado purchasers via the email address used to complete the purchase; the current law calls for notification by first-class mail.

Colorado lawmakers originally passed legislation in 2010 to require the online sales tax reporting and notification measures, which enforces a “use tax” on shoppers based on their online purchase information. But, because the law has been held up in court, it has not been enforced. Under the current law, retailers risk being fined $10 for each customer whose information the retailer does not provide to the state. Colorado’s state sales tax rate is 2.9%.

Late last year, the U.S. Supreme Court declined to hear an appeal from the Data & Marketing Association, or DMA (formerly the Direct Marketing Association), seeking to overturn the law. The DMA settled in late February with the state of Colorado, and as a result of that agreement, Colorado is set to start enforcing the law on July 1. A DMA spokesman tells Internet Retailer the association will not be involved in any further attempts to repeal the law.

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Even without the DMA’s involvement, a number of other organizations are voicing support for the proposed repeal of Colorado’s law, often referred to as a “tattletale reporting” law. Trade association NetChoice is chief among them, along with online retailer Overstock.com Inc., No. 30 in the forthcoming Internet Retailer 2017 Top 500 Guide.

NetChoice senior policy counsel Carl Szabo, slated to testify Tuesday during the Senate Finance Committee hearing, writes in prepared testimony that requiring retailers to turn over personal information about Colorado’s citizens could put consumers at risk of having sensitive information exposed and violates their privacy.

“In many cases, linking a particular retailer to a specific customer will reveal information on that Coloradan’s health issues, political leanings, sexual orientation, personal tastes, and financial circumstances,” Szabo writes. “By collecting shipping addresses, the state government will learn when a Colorado citizen has their gift purchases delivered to a different address, revealing what could be personal and very private relationships. Moreover, the law has no provision for protecting the confidentiality of the information collected by the Department of Revenue, meaning it might be shared with other government agencies and used for purposes other than collection of use taxes.”

For the state of Colorado, the legislation is an attempt to recoup what it estimates to be hundreds of millions of dollars in lost revenue annually. A Department of Revenue spokeswoman told Internet Retailer in December the state lost out on an estimated $170 million in 2012 by not collecting sales tax on online purchases, a figure she said was growing by more than $20 million annually.

Overstock, which has long been vocal in its opposition to this and similar online tax measures, issued a statement supporting a repeal of the Colorado law before it takes effect.

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“We regard Overstock’s customer transaction data as some of the most sensitive in the world,” Overstock chairman Jonathan Johnson said. “Thus, we employ costly and highly advanced technical measures to prevent unlawful access. But when states pass unwise bills, forcing us to turn over the very data we work hard to protect, all that goes out the window and all bets are off.”

Meanwhile, a bill that would force online retailers that don’t have a physical presence in the state of Arkansas failed to pass the state House of Representatives by a vote of 50-43 on Tuesday. SB140, which was filed in January and read three times before passing the state Senate in February, would have required anyone selling online to Arkansas residents to collect sales tax from them and remit it to the state, regardless of where the seller is located.

Arkansas has a 6.5% statewide sales tax rate. The bill claims that not being able to collect sales tax from online retailers selling to state residents causes serious harm because “state and use tax revenues are essential in funding state and local services.”

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