Supreme Court Considers Colorado Online Tax Law

DENVER (AP) - The U.S. Supreme Court is hearing arguments on Colorado's Internet tax law.

Monday's hearing focuses on whether a challenge by online retailers should be heard in state or federal court.

Federal law prohibits states from requiring online retailers that don't have stores in the state - such as Amazon - to charge sales tax. However, their customers are technically required to pay sales tax to the state annually but few know that or do it.

So Colorado passed a law requiring larger online retailers to tell customers that they owe sales tax on their purchases. They also have to send an annual list of purchases to customers who spent more than $500.

Online retailers challenged the law in 2010, claiming it violates protections for companies doing business in other states.