On July 1, the United States Supreme Court announced the cases that it would consider in its next term. Among those cases is 13-1032, Direct Marketing Association v. Brohl, which challenges the State of Colorado’s so called “Amazon Law.” Colorado’s Amazon Law came into effect on March 1, 2010. Unlike Amazon laws in other states, the Colorado law did not attempt to create affiliate nexus. Instead, the law created an obligation for remote sellers to notify Colorado customers that sales or use tax is due on taxable purchases made from the seller, that Colorado customers are required to file a use tax return for purchases where sales tax was not paid, and created a separate obligation for the remote sellers to notify each individual customer the total amount of purchases in the calendar year, and finally provide that same information to the Colorado Department of Revenue.
The Direct Marketing Association, a trade association, brought the challenge to the law in July, 2010. DMA challenged the Colorado law on the grounds that it discriminated against interstate commerce, and violated the Commerce Clause of the United States Constitution. DMA v. Huber, Complaint (pg. 15). The complaint alleged that Colorado’s law imposed regulatory obligations on sellers who lacked the minimum connections to the state required by the Constitution. Id. at 17, see also Complete Auto Body Transit v. Brady. DMA further argued that the law violated the Colorado customers’ right of privacy and the remote seller’s free speech rights, along with violating the Due Process clause of the United States Constitution.
On March 30th, 2012, Federal District Court Judge Robert Blackburn issued an injunction against the State of Colorado from enforcing the notice and requirement provisions of the law. See Case No. 10-cv-01546-REB-CBS. Judge Blackburn found that the notice and reporting obligations created a burden on out-of-state retailers which was not similarly imposed on sellers completing in-state transactions. Colorado appealed the District Court injuntion, and the case headed to the 10th Circuit Court of Appeals as Direct Marketing Association v. Brohl. The Court of Appeals sidestepped the issue of whether Colorado’s law violated the Commerce Clause, instead finding that the District Court lacked jurisdiction to hear the case in the first place because of the Tax Injunction Act. Direct Marketing Association v. Brohl, No. 12-1175, 3 (August 20, 2013). The Tax Injunction Act prohibits a Federal District Court from enjoining, suspending, or restraining “the assessment, levy or collection of any tax under State law where a plain, speedy and efficient remedy may be had in the courts of such State.” 28 U.S. C. 1341. Because DMA was seeking to restrain Colorado’s collection of tax by challenging the way Colorado wished to collect the tax, and because there are both administrative and judicial remedies available to DMA within the state of Colorado, the Court of Appeals remanded the case. Id. at 17, 31-32.
It is unclear whether the United States Supreme Court has issued certiorari for Direct Marketing Association v. Brohl to decide the merits of the case, i.e. whether Colorado’s notice and reporting requirements violate the “dormant” Commerce Clause and the Due Process clause of the United States Constitution, or whether the Court will uphold or address the jurisdictional question presented in the Court of Appeals. Will the Court revisit its decision in Quill Corp. v. North Dakota, given the vast increase in e-commerce? Will the Court reaffirm the physical presence requirement? Whatever question the Court decides to answer, this will be a fascinating decision for tax practitioners.