A federal appeals court looked at Colorado’s so-called Amazon Tax law and said overturning it would create a tax shelter for online retailers, according to a decision published Monday by the 10th U.S. Circuit Court of Appeals.

The state law passed in 2010 doesn’t force Internet retailers to charge sales tax on purchases made by Colorado residents. But those that don’t must notify customers to pay sales tax and report customer purchases to the state’s revenue department.

Judge Neil M. Gorsuch said the now 5-year-old case hinges on the requirement the law places on retailers. Colorado brick-and-mortar retailers have their own burden to report sales and collect taxes.

“If anything, by asking us to strike down Colorado’s law, out-of-state mail order and Internet retailers don’t seek comparable treatment to their in-state, brick-and-mortar rivals, they seek more favorable treatment, a competitive advantage, a sort of judicially sponsored arbitrage opportunity or ‘tax shelter,’ ” Judge Neil M. Gorsuch wrote.

The ruling could lead to a national effort to make all Internet retailers collect sales tax, policy experts said.

READ: The 10th Circuit Court of Appeals decision in Direct Marketing Association v. Brohl

Colorado Attorney General Cynthia H. Coffman called the ruling a victory for state residents. “The law we successfully defended will promote the collection of tax revenue owed to the state and level the economic playing field for businesses based in Colorado,” she wrote in an e-mail.

At issue was a law that targeted out-of-state Internet retailers, such as Amazon, that did not collect sales tax on online purchases by Colorado residents. The law required such companies to advise customers of taxable items and give them an annual notice of taxes owed. The retailer also must share customer information and purchases with the state revenue department.

The Direct Marketing Association called the law unconstitutional because it put an undue burden on Internet retailers. DMA challenged the law using the 1992 U.S. Supreme Court decision in a case known as Quill Corp. vs. North Dakota, which ruled that states cannot require retailers with no physical presence in the state to collect sales taxes.

Seattle-based Amazon cut off its affiliate program in Colorado at the same time. Affiliates received commissions for referring customers from their own websites to the online retailer.

BLOG: How Amazon charges sales tax on Colorado purchases

The DMA on Tuesday said it was reviewing the decision and has not decided whether to appeal. If it does, the case could end up at the U.S. Supreme Court.

“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,” DMA’s vice president of advocacy, Christopher Oswald, said.

Retailer Amazon, which has not had a physical presence in Colorado, began collecting taxes from local shoppers Feb. 1 but would not say why. It also welcomed Colorado residents back to its affiliate program, effective Feb. 3 .

On Tuesday, a spokeswoman declined to comment beyond the statement she provided earlier in the month acknowledging the company had begun collecting taxes.

The state doesn’t know what triggered Amazon’s decision either.

But Michael Mazerov, a senior fellow at the Center on Budget and Policy Priorities, who has followed the Colorado case for years, says it could be many things.

“They may be putting some kind of facility in the state. Or they may have seen the handwriting on the wall based on the oral arguments, and they thought there was a good chance for the state to prevail,” Mazerov said.

But another trigger could be a recent move to hire in Colorado. Amazon posted a job for a position based in Colorado on Feb. 12.

“If they have employees in the state, that’s sufficient knowledge that they have to collect the tax,” Mazerov said.

The implications of the court ruling likely will trigger similar laws in other states where Amazon and other Internet retailers currently do not collect sales tax.

“The decision has national significance. Retailers, both local and national retail chains, are very frustrated that federal legislation to address this problem has been pending for many years,” Mazerov said.

“I think a lot of states will enact this legislation, and it will help move the federal legislation forward.”

Consumers won’t be happy if they find they must self-report online purchases and pay sales tax each year.

“With consumers saying ‘I don’t want to be burdened with paying this tax myself, I want the retailer to charge it to me,’ that could have the political effect of putting more pressure on legislators,” Mazerov said.

Tamara Chuang: tchuang@denverpost.com or visit dpo.st/tamara