Officials from a small business advocacy group welcome a decision by the Colorado Supreme Court to hear a challenge that business filing fees charged by the state are actually a tax subject to constitutional limits.
“In plain English, we hope the Supreme Court rules that state government cannot skirt our Taxpayers Bill of Rights law,” said Tony Gagliardi, state director of the National Federation of Independent Business.
Karen Harned, executive director of the NFIB Legal Center, said taxpayer protections in Colorado offer a national model. “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.”
The case was first heard in 2014 in a Denver district court that dismissed a lawsuit brought by the NFIB. The Colorado Court of Appeals subsequently ruled the case was improperly dismissed, but declined to consider the issue.
According to the lawsuit brought by the NFIB, the secretary of state collects more than $20 million a year in business filing fees. But as much as 90 percent of the revenue has been used to fund unrelated functions, among them coordinating state elections and directly funding some local elections.
Gagliardi said money raised and spent on the general expenses of government are a tax, which the Taxpayers Bill of Rights amendment to the state constitution requires that voters approve. Because no such approval was obtained, fees beyond those necessary to cover the costs of managing business filings, along with their authorizing statutes, are unconstitutional. Secretary of State Wayne Williams argued his office had authority to charge business filing fees before voters approved TABOR in 1992.
Gagliardi said he hopes the Colorado Supreme Court will send a message. “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.”