Marketers Ask U.S. High Court to Strike Online Sales Tax Law

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By Tripp Baltz

Aug. 29 — Colorado's law imposing reporting and notice requirements on out-of-state retailers that don't collect the state's sales tax facially discriminates against such vendors and is unconstitutional, the Direct Marketing Association said ( Direct Mktg. Ass'n v. Brohl, U.S., 15A1259, petition for certiorari review 8/29/16 ).

The group filed a much-anticipated petition for review Aug. 29 with the U.S. Supreme Court, asking it to overturn an April ruling by the U.S. Court of Appeals for the Tenth Circuit.

In the 160-page petition, the association said it’s undisputed that Colorado’s 2010 law imposing notice and reporting requirements on retailers that don’t collect state sales tax applies solely to “out-of-state” sellers.

The petition said the law discriminates on its face, or in its effect, and can't pass the strict scrutiny test under the dormant commerce clause.

Questions Presented

In April, the Tenth Circuit denied a petition for rehearing of a panel's February ruling that the Colorado law doesn't discriminate against or unduly burden interstate commerce (66 DTR K-2, 4/6/16).

The questions DMA presented in the case are as follows:

  • 1. Whether a state statute that imposes regulatory obligations that apply solely to out-of-state companies, but doesn't use “language explicitly identifying geographical distinctions” in its text, discriminates against interstate commerce;
  • 2. Whether the Tenth Circuit erred in adopting a “comparative burdens” test for discrimination, under which the burden of regulatory requirements imposed solely on out-of-state retailers may be offset by different obligations imposed on in-state retailers; and,
  • 3. Whether the Tenth Circuit erred in concluding that out-of-state retailers that don't collect Colorado sales tax are “not similarly situated” to their direct instate competitors who collect Colorado sales tax.

Contrary to Precedent

George Isaacson of Brann & Isaacson told Bloomberg BNA the chief issue in the case is that the “10th Circuit got it wrong,” issuing a ruling that was “totally contrary to established Supreme Court precedent” regarding interstate commerce.

“The 10th Circuit ruling goes far beyond catalog companies and internet purchases,” he said. “It has given a green light to states to be able to pass discriminatory laws as long as they are phrased in a way that does not identify geographical distinctions.”

The Colorado law, approved by the Colorado General Assembly in 2010, requires retailers that don't collect and remit the state's sales tax to report sales meeting a certain threshold to the Colorado Department of Revenue and to notify consumers they are obligated to pay the tax.

During legislative debate on the bill, some supporters of the measure said they intended for out-of-state vendors to find the notice and reporting obligations more onerous that simply collecting and remitting taxes.

‘Tattle-Tale' Law

Steve DelBianco, executive director of NetChoice, said the DMA's appeal to the Supreme Court was “simple.”

“Do not allow state tax collectors to know the personal details of where we shop and what we bought,” he said in an Aug. 29 statement. “We’ll continue to support the DMA as it fights against Colorado's Orwellian tattle-tale reporting law.”

Kennedy Concurrence

When an earlier phase of the case reached the Supreme Court, Justice Anthony M. Kennedy issued a concurrence that raised the question of whether the high court should revisit its threshold rule for when out-of-state retailers may be taxed.

Kennedy’s concurrence addressed the court’s 1992 ruling in Quill Corp. v. North Dakota, which said that only those vendors with a physical presence in a state are obligated to remit sales and use taxes. Given changes in technology and consumer sophistication, the high court should reconsider Quill, he wrote. However, Kennedy said, the earlier version of DMA v. Brohl doesn’t raise the Quill issue in a manner appropriate for the court to address it.

Alabama is leading a flurry of activity from states to capture more e-retailer tax dollars and to overturn Quill.

Some want Congress to intervene, and a series of pending bills indicates a nonpartisan divide on the issue (142 DTR G-7, 7/25/16).

To contact the reporter on this story: Tripp Baltz in Denver at

To contact the editor responsible for this story: Ryan Tuck at

For More Information

The DMA petition is at

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