NFIB Sues State Over Excessive Fees On Small Businesses

Date: December 22, 2014

DENVER, Colo., Dec. 22, 2014—Seeking enforcement of the Taxpayer Bill of Rights under the state’s constitution, Colorado’s largest and leading small-business association today sued Secretary of State Scott Gessler in a filing with the District Court of the City and County of Denver.
According to the lawsuit, NFIB v. Scott Gessler, the State collects approximately $20 million per year from businesses that are required to file certain documents with the State. However, the Secretary of State’s office doesn’t just regulate businesses, it runs the State’s elections operations, regulates bingos and raffles, and conducts other functions not related to businesses, all of which is funded by the money collected from businesses small and large.  The office receives no money from the State’s general fund.  
According to the complaint, “As a general legal principle, a fee is intended to defray the costs of a particular government service, while a tax is designed to raise revenues to defray the general expense of government. Unlike a fee, a tax is subject to TABOR’s vote requirement, while a fee is not. Because a significant portion of the Business Licensing Charges are appropriated to defray the Department’s and the State’s General Expenses, the Business Licensing Charges are a tax and not a fee.”  Thus, the State is imposing an illegal tax on small businesses to fund obligations that should be a cost shared by everyone.  
Added Tony Gagliardi, NFIB’s Colorado state director, “We’re simply asking the court to order the secretary of state not to set licensing fees above the amount needed to regulate businesses, which he has unfettered discretion to do. Currently, they’re at a level beyond what it costs to regulate the businesses they were meant for and being used to pay for unrelated expenses, which makes them now a tax, not a fee. We are sensitive to the fact that the Legislature is complicit in this, by passing election-related laws forcing the money that comes from fees to be used for other purposes, but this is unconstitutional and needs to stop.”
As pointed out in the lawsuit, maybe the business and licensing department within the Secretary of State’s office became too much of a cash cow for lawmakers to resist milking for all its worth. “Businesses file approximately 750,000 corporate documents with the Department every year and pay a charge for each filing. Periodic reports are the most common business filings, with 29,000 to 42,000 submitted per month. Currently, the various charges range from $1 to $125 … The total charges from businesses has increased every year. For example, for fiscal year 1990-91, the Department collected $4.19 million, and in fiscal year 2013-2014, the Department collected $18.69 million, representing an increase of over 400% over that time period.”
For more than 70 years, the National Federation of Independent Business has been the Voice of Small Business, taking the message from Main Street to the halls of Congress and all 50 state legislatures. NFIB annually surveys its members on state and federal issues vital to their survival as America’s economic engine and biggest creator of jobs. NFIB’s educational mission is to remind policymakers that small businesses are not smaller versions of bigger businesses; they have very different challenges and priorities.
National Federation of Independent Business/Colorado
1580 Logan St. Suite 520
Denver, CO 80203

Related Content: Small Business News | Colorado

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You can read Secretary of State Scott Gessler’s response to NFIB’s lawsuit below.

"I recently told the legislature’s Joint Budget committee that sending nearly $2.5 million in business filing fees to Colorado counties to defray their elections cost was 'a dead bang loser in court.' ”

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