Direct marketers are challenging Colorado’s new online sales tax law, claiming it violates free speech and privacy laws.

The Direct Marketing Association says it filed a lawsuit Wednesday in federal court in Denver asking that it be ruled unconstitutional.

Lawmakers passed the measure this year to help balance the budget. It requires out-of-state, online retailers to either collect sales tax or send customers an annual notice of how much tax they owe the state.

Retailers would also have to report that to the state.

The marketing association says the law is unconstitutional, unfairly discriminates against interstate commerce and is an invasion of consumer privacy.

“The new law and the regulations implementing it are an unconstitutional and blatant violation of Colorado consumers’ privacy,” said Jerry Cerasale, vice president for government affairs for the association, which represents companies that promote products online as well as by mail and telephone.

“The law may have been passed in the hope of balancing the state budget through increased use tax reporting by Colorado residents, but it has serious adverse consequences for consumers and businesses,” he said.

Earlier this year, Inc. cut ties with Colorado online businesses that help it sell products. In an e-mail to affiliates, Amazon said the new sales tax regulations were burdensome and incompatible with requirements in other states collecting sales taxes.

Rep. Amy Stephens, a Republican from Monument, said the lawsuit will determine if the new law is constitutional.

“We have said from the beginning that this proposal jeopardizes consumer privacy and gives the government a frightening amount of access to information about personal purchases and services. The bottom line is, it’s none of the government’s business what someone wants to buy online,” Stephens said.

via Direct marketers challenge Colo. online sales law – BusinessWeek.

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