The NCSL Blog

26

By Lisa Soronen

Not all internet sales tax cases are created equal.

mouse in shopping cartThe State and Local Legal Center (SLLC) filed an amicus brief encouraging the U.S. Supreme Court to not hear a case arguing that a Colorado law requiring remote sellers to inform Colorado purchasers annually of their purchases and send the same information to the Colorado Department of Revenue is unconstitutional.

In Quill Corp. v. North Dakota, decided in 1992, the Supreme Court held that states cannot require retailers with no in-state physical presence to collect sales tax. In 2010 the Colorado legislature passed the law described above to improve sales tax collection. The Direct Marketing Association sued Colorado, saying the law unconstitutionally discriminates against interstate commerce and is unconstitutional under Quill.   

In February 2016, in Direct Marketing Association v. Brohl, the 10th U.S. Circuit Court of Appeals concluded the Colorado law doesn’t discriminate against interstate commerce. DMA was unable to point to any evidence that the notice and reporting requirements imposed on out-of-state retailers are more burdensome than the sales tax collection and administration requirements imposed on in-state retailers.

Quill does not apply to the law, the 10th Circuit reasoned, because it “applies narrowly to sales and use tax collection.”

DMA filed a petition for certiorari asking the Supreme Court to review the 10th Circuit’s ruling that Colorado’s law discriminates against interstate commerce.

The SLLC amicus brief argues that the 10th Circuit ruled correctly on the interstate commerce question and that the only “interesting and important” question lurking in this case is whether the Supreme Court should overrule Quill.

In March 2015, the Supreme Court held unanimously that the Tax Injunction Act did not bar the 10th Circuit, instead of a state court, from deciding whether Colorado’s law was unconstitutional. Justice Anthony Kennedy wrote a concurring opinion, which appeared to rely on the SLLC’s amicus brief, stating that the “legal system should find an appropriate case for this court to reexamine Quill.”

DMA’s cert petition doesn’t raise the question of whether Quill should be overturned. However, the SLLC amicus brief points out that if the court is interested in taking on this question it will be before the court in no time.

“Three states have already taken affirmative steps to challenge Quill head on, passing carefully tailored legislation or administrative rules that precisely frame the question whether [Quill’s] ‘physical presence’ standard should be replaced with an ‘economic nexus’ rule under which sellers can be required to collect state sales tax if they transact a large amount of business in a given state.”

The SLLC urges the Supreme Court to wait and accept one of these cases when they are ready for Supreme Court review and overrule Quill.

Eric Citron, Goldstein & Russell and Ron Parsons, Johnson Janklow Abdallah Zeiter & Parsons wrote the SLLC brief which the following organizations joined: the National Governors Association, NCSL, the Council of State Governments, the National Association of Counties, the National League of Cities, the United States Conference of Mayors, the International City/County Management Association, the International Municipal Lawyers Association, and the Government Finance Officers Association.  

Lisa Soronen is executive director of the State and Local Legal Center and writes frequently about the Supreme Court for the NCSL Blog.

 

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This blog offers updates on the National Conference of State Legislatures' research and training, the latest on federalism and the state legislative institution, and posts about state legislators and legislative staff. The blog is edited by NCSL staff and written primarily by NCSL's experts on public policy and the state legislative institution.