Seeking enforcement of the Taxpayer Bill of Rights under the state’s constitution, Colorado’s largest and leading small-business association Monday sued Colorado 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, according to a news release from the NFIB.
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.”
“Businesses file approximately 750,000 corporate documents with the department every year and pay 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 percent over that time period,” the release said.