Colorado – DMA v Brohl 10th Circuit Court Decision Upholds “Notification Law” The Saga Continues

SALT Report 3786 – On February 22, 2016 the 10th Circuit Court of Appeals rendered their opinion that the notification requirements (Colo. Rev. Stat. § 39-21-112(3.5)(c)(I)) Colorado has placed upon “non-collecting retailers” does not violate the Commerce Clause of the United States Constitution. Previously challenged under the Tax Injunction Act the facts continue to flush out through the web of procedural technicalities over the last few years. Other states are following suit and other states are filing suits.

Some snippets…

The following introduction to this important opinion speaks volumes in this ongoing, online, paradigm shifting saga. A full read of this case (44 pages with big letters and big words) gives one a good perspective on a fraction of the controversy surrounding the quest to update, upset or uphold Quill (1992).


“When a neighborhood bookstore in Denver sells a book, it must collect sales tax from the buyer and remit that payment to the Colorado Department of Revenue (“Department”). When Barnes & Noble sells a book over the Internet to a Colorado buyer, it must collect sales tax from the buyer and remit. But when Amazon sells a book over the Internet to a Colorado buyer, it has no obligation to collect sales tax. This situation is largely the product of the Supreme Court’s decision in Quill Corp. v. North Dakota, 504 U.S. 298 (1992), which held that, under the dormant Commerce Clause doctrine, a state may not require a retailer having no physical presence in that state—e.g., Amazon as opposed to Barnes & Noble—to collect and remit sales tax on the sales it makes there. Faced with Quill, many states, including Colorado, rely on purchasers themselves to calculate and pay a use tax on their purchases from out-of-state retailers that do not collect sales tax. But few in Colorado or elsewhere pay the use tax despite their legal obligation to do so.1 With the explosive growth of e-commerce, the states’ inability…”

What the Colorado Notification Law says and does (page 7):

“To assist the state in collecting use tax from in-state purchasers, most seemingly unaware of their tax responsibility,3 the Colorado legislature passed a law in 2010 that imposes three obligations on retailers that do not collect sales taxes—“non-collecting retailers”4 : (1) to send a “transactional notice” to purchasers informing them that they may be subject to Colorado’s use tax, see Colo. Rev. Stat. § 39-21-112(3.5)(c)(I); 1 Colo. Code Regs. § 201-1:39-21-112.3.5(2);5 (2) to send Colorado purchasers who buy goods from the retailer totaling more than $500 an “annual purchase summary” with the dates, categories, and amounts of purchases, reminding them of their obligation to pay use taxes on those purchases, Colo. Rev. Stat. § 39-21-112(3.5)(d)(I); 1 Colo. Code Regs. § 201- 1:39-21-112.3.5(3); and (3) to send the Department an annual “customer information report” listing their customers’ names, addresses, and total amounts spent, Colo. Rev. Stat. § 39-21-112(3.5)(d)(II); 1 Colo. Code Regs. § 201-1:39-21-112.3.5(4). DMA objected to these requirements and brought suit against the Executive Director of the Department.”

An estimated $23 Billion dollars in annual tax collections is being missed by states and this number is rising. There is more controversy to come unless we all move away from the internet, electronic payments or electricity becomes un-invented. Otherwise we are on an inevitable course to collection. Somethings gotta give and something will – Quill?

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