A federal appeals court has upheld the legality of Colorado's sales tax on products purchased over the Internet, which had been challenged by the Direct Marketing Association.

On Monday, the 10th U.S. Circuit Court of Appeals in Denver reversed a lower court ruling that blocked Colorado from enforcing the state's tax on online sales, the news service Reuters reported. States currently have little legal authority to collect sales taxes on products purchased over the Internet if the retailer does not have a physical presence in the state. So-called "Amazon taxes"—which take their name from the online retailer Amazon.com—are attempts by states like Colorado to fix what they view as a major loophole in current tax law. http://reut.rs/1mTCnrX

Colorado estimated that it lost $170 million in tax revenue in 2012 alone because of the loophole. Nationwide, states may be losing out on as much as $11 billion annually, Reuters reported. However, DMA argues Colorado's law violates the Commerce Clause by interfering with interstate commerce.

DMA won a small victory last year when the U.S. Supreme Court overturned a ruling by the appeals court finding that federal courts lacked jurisdiction in the matter. The high court's decision allowed the association's lawsuit to move forward.

However, the Supreme Court didn't weigh in on the merits of the law itself, leaving that for the lower courts to decide. And Justice Anthony Kennedy said in a concurrence that it might be time to revisit the 1992 Supreme Court case that created the loophole, given the growth in Internet sales.

Now that the appeals court has upheld the Colorado law, DMA said it is reviewing the decision "for its implications on our members."

"DMA's five-year battle on behalf of its membership and the entire marketing industry has been grounded on the idea that the Colorado notice-and-reporting requirements are unconstitutional under the Commerce Clause and unduly break the bond of trust between marketers and their customers," said Christopher Oswald, vice president of advocacy for DMA. http://bit.ly/1Q6Hei4

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