February 24, 2010: Governor Bill Ritter signs a raft of new tax bills into law, including the controversial HB 1193, which forces online retailers to inform consumers of the state taxes owed on purchases made or shipped from Colorado.

March 1: New tax laws take effect.

March 8: Amazon dumps Colorado associates.

March 8: Rasmussen reports McInnis 6 points ahead of HIckenlooper in CO gubernatorial race.

March 8-10: Howls of protest, on all sides of the Amazon sales tax issue. One. Two. Three. Four. More.

There are a couple crucial factors to consider in all this. First, the notion of collecting state taxes on purchases made online is not in itself novel. New York, North Carolina, and Rhode Island have adopted similar legislation. Virginia appears poised to do the same.

Two very salient political dynamics motivate the statehouses to challenge the online status quo: State budgets are busting, and brick-and-mortar businesses are crying foul that online businesses don’t have to play by the same taxation rules as everyone else.

Where the argument could have been made that the Colorado legislature was a) improving state services by collecting taxes that are already due and b) leveling the playing field for all Colorado businesses, Amazon’s response Monday undermines both those points. By dumping Colorado affiliates, the state won’t see its taxes and the state business sector as a whole loses out, because consumers will still buy goods online, but those goods will come from vendors in other states.

Enter the governors race, and issues like this one get even thornier. Hickenlooper will campaign on jobs creation, but he’s stuck in the unfortunate position of losing (potentially) Frontier Airlines under his watch and making no comment on the Ritter tax laws, which hurt his position as a member of the (current) majority party. McInnis and Co. are wise to stomp on these issues.

Unfortunately, the state is losing face, state businesses are losing revenues, and John Hickenlooper is losing ground (for now). Not a happy situation in Colorado.

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