Judges will finally rule on whether secretary of state’s business licensing “fees” are hidden taxes
FOR IMMEDIATE RELEASE
Contact: Tony Gagliardi, Colorado State Director, [email protected], or Karen Harned, NFIB Small Business Legal Center, [email protected], or Luke Wake, Senior Staff Attorney, [email protected]
DENVER, Colo., June 26, 2018—The representative association for Colorado’s small businesses is delighted with yesterday’s announcement that the Colorado Supreme Court will hear arguments in NFIB’s lawsuit challenging illegal business licensing taxes.
The Colorado Secretary of State’s office argues that it imposes only legitimate “fees,” but the Supreme Court will soon settle this on-going dispute. NFIB argues that business licensing charges violate the Colorado Taxpayer Bill of Rights.
NFIB had petitioned the court last year to take up the case, Colorado Department of State, State of Colorado, and Wayne W. Williams v. National Federation of Independent Business, after the Court of Appeals failed to address the fundamental issue at stake.
“In plain English, we hope the Supreme Court rules that state government cannot skirt our Taxpayers Bill of Rights law,” said Tony Gagliardi, NFIB’s Colorado state director. “We want the court to send a strong, reverberating message throughout state government and the Colorado General Assembly that the people’s will as expressed through TABOR cannot be cavalierly ignored through slight-of-hand name changes. Government simply can’t be allowed to label taxes as ‘fees’ to avoid the constitutional requirement to seek voter approval.”
At issue is whether the Secretary of State violated TABOR by imposing excessive licensing fees on small businesses to finance programs entirely unrelated to the provision of any service to those companies. For example, the Secretary has increased business filing fees over the years to cover the costs of administering general elections.
“Most states throughout the country have some form of taxpayer protection—though Colorado’s protections are, we think, a model to emulate,” said Karen Harned, executive director for the NFIB Legal Center. “But even the strongest constitutional protections are meaningless if states are allowed to circumvent the law by dubbing exactions as “fees” when in fact they are taking money for general government expenses. To be legitimate, a fee must be related and proportional to the costs government incurs in providing a service. In this case, the charges imposed on Colorado’s small-business community are astronomically out of proportion to the funds needed to administer business licenses. Instead, the majority of monies are used to fund programs wholly unrelated to the state’s business licensing program.”
Background
The case was first heard in a Denver District Court in 2014, which dismissed NFIB’s suit. It was later taken up by the Court of Appeals for further review. The Court of Appeals held that the case was improperly dismissed, but nonetheless declined to rule on the fundamental tax question at issue.
“The Department collects over $20 million annually from these charges,” according to NFIB’s lawsuit “However, only a small portion of that revenue is used to cover the Department’s costs in collecting and managing these filings. Instead, the vast majority of the revenue – as much as 90% — is used to fund other unrelated functions within the Department, most notably coordinating state elections and directly funding some local elections … these ‘fees’ are in reality a tax – money raised and spent for the general expenses of government. And, as such, the Colorado Constitution … requires that voters authorize this tax. Because no such approval was obtained, the charge amounts beyond that necessary to cover the costs of managing the business filings, along with their authorizing statutes are unconstitutional.”
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For more than 75 years, NFIB has been advocating on behalf of America’s small and independent business owners, both in Washington, D.C., and in all 50 state capitals. NFIB is nonprofit, nonpartisan, and member-driven. Since our founding in 1943, NFIB has been exclusively dedicated to small and independent businesses and remains so today. For more information, please visit nfib.com.
National Federation of Independent Business/Colorado
1580 Logan St. Suite 520
Denver, CO 80203
303-831-6099
www.nfib.com/colorado
Twitter: @NFIB_CO
