The National Federation of Independent Business says its Colorado Supreme Court case has exposed business licensing fees for what they are: Taxes.
And as taxes, they should be covered by the state constitution's Taxpayer's Bill of Rights, meaning the government can't raise them without a vote of the people.
The five-year-old lawsuit was heard by the state's high court Tuesday.
"We are confident in our position in this case and are anxiously awaiting the court’s decision," said Serena Woods, spokesperson for the Colorado Secretary of State's Office, which charges businesses fees for licensing and other filings.
A win for the NFIB could put Colorado's governing funds in a bind. Since taxpayers rarely approve new taxes on the statewide ballot, state government often turns to fees to pay its bills.
Voters this November are set to change TABOR, allowing the state to keep refunds when tax revenue exceeds the provision state spending cap.
Another proposed ballot question would eliminate TABOR completely.
“Colorado’s small-business owners should not be the honeypot for the secretary of state and the non-business programs it administers, like statewide elections,” Karen Harned, executive director of the NFIB Small Business Legal Center, said in a statement after Tuesday's hearing.
NFIB filed the suit in 2014, alleging the secretary of state's office was collecting about $20 million a year in fees, far more than the cost to provide the service. The case was first heard in a Denver District Court in 2014, which dismissed the suit in a summary judgment.
The case was later taken up by the state Court of Appeals, which in 2017 "reversed the summary judgment of the trial court in favor of the state, and directed the Colorado Secretary of State's office to compile information about any fee increases the office implemented since the Taxpayer's Bill of Rights went into effect on Dec. 31, 1992," the Secretary of State's Office said in a March 2, 2017, statement.
NFIB appealed the case to the state Supreme Court, which in June 2018 agreed to hear the case.
Then-Secretary of State Wayne Williams also filed a request for a high-court ruling, noting the office had the “authority to charge business filing fees long before TABOR” was put in the state Constitution by voters in 1992.
In a June 2018 statement, Williams said that the state's business fees had either been lowered or stayed the same since he took office in 2015.
"Colorado’s business renewal fees are the nation’s lowest. I’m proud that I’ve been able to permanently lower a number of fees while still providing excellent customer service," Williams said then. "Colorado’s legislature needs a declarative interpretation of fees and taxes as they set our office’s budget, so I appreciate the Supreme Court’s decision to hear these important issues."
In its lawsuit, NFIB argued that “The Department [of State] collects over $20 million annually from these charges. However, only a small portion of that revenue is used to cover the Department’s costs in collecting and managing these filings. Instead, the vast majority of the revenue – as much as 90% -- is used to fund other unrelated functions within the Department, most notably coordinating state elections and directly funding some local elections … these ‘fees’ are in reality a tax – money raised and spent for the general expenses of government. And, as such, the Colorado Constitution … requires that voters authorize this tax. Because no such approval was obtained, the charge amounts beyond that necessary to cover the costs of managing the business filings, along with their authorizing statutes are unconstitutional.”