Supreme Court allows challenge to Colorado Internet tax law

WASHINGTON (AP) — A unanimous Supreme Court ruled today that federal courts can hear a dispute over Colorado's Internet tax law. One justice suggested it was time to reconsider the ban on state collection of sales taxes from companies outside their borders.

The ruling is a win for business groups that want to challenge the state's so-called "Amazon tax," which requires extensive reporting by out-of-state retailers that don't collect the state's 2.9 percent sales tax from Colorado customers.

Online retailers claim Colorado is violating protections for companies doing business in other states. A federal court agreed that the law violates the Commerce Clause of the U.S. Constitution.

But a federal appeals court ruled that cases challenging state laws about tax collection can only be filed in state court.

The high court reversed, finding that retailers were not challenging the actual collection of taxes, only a law giving state officials information about people who owe taxes.

Writing for the court, Justice Clarence Thomas said the federal law barring state taxes from being challenged in federal court does not cover "notice and reporting requirements" that might improve Colorado's ability to collect sales taxes from consumers. He said the lawsuit is also not seeking to restrain tax collection.