Supreme Court Declines To Hear DMA Challenge To Colorado Notice And Reporting Statute, Turns Down State’s Invitation To Revisit Quill

On Monday, December 12, 2016, the Supreme Court denied the petition for a writ of certiorari filed by Senior Partner George Isaacson and partner Matthew Schaefer on behalf of the Data & Marketing Association, previously known as the Direct Marketing Association (“DMA”), in one of the key state tax-related disputes presented to the Court this term. The DMA sought Supreme Court review of the constitutionality of a Colorado statute that requires out–of–state retailers that do not collect Colorado sales tax to notify their customers of a purchaser’s obligation to self-report use tax and to provide information about their customers to the Colorado Department of Revenue. The DMA had challenged the statute on the ground that it violates the Commerce Clause of the U.S. Constitution by discriminating against out–of–state retailers in favor of Colorado retailers, who are not required to give customer notifications or file reports with the DOR. The Court also denied the State of Colorado’s cross-petition asking the Court to use the case as an opportunity to revisit the physical presence “substantial nexus” test for state taxes reaffirmed by the Court in Quill v. North Dakota, 504 U.S. 298 (1992), which requires that a business have a physical presence in a state before it can be required to collect and remit state or local sales or use taxes for that state. After a federal district court ruled in favor of the DMA, the Tenth Circuit Court of Appeals reversed that ruling, prompting the parties’ respective petitions for review. The Supreme Court’s denial of the petitions effectively brings to a close the federal court proceedings regarding the law.

In an article published by Internet Retailer, Schaefer was quoted saying, “We are disappointed, as are retailers potentially affected by the Colorado notice and reporting law, that the U.S. Supreme Court decided not to grant review the 10th Circuit’s decision upholding the Colorado law, which we believe, as did the federal district court, discriminates against interstate commerce by treating out-of-state retailers differently from their in–state competitors.” It remains unclear what steps the Colorado Department of Revenue will take to enforce the law, although additional developments regarding the State’s enforcement position are expected soon.

Isaacson and Schaefer previously prevailed before the U.S. Supreme Court on the question of federal court jurisdiction over the DMA’s challenge to the Colorado statute in Direct Marketing Association v. Brohl, __ U.S. __ (Mar. 3, 2015).