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On February 22, 2016, the U.S. Court of Appeals for the Tenth Circuit upheld the Colorado statute requiring out-of-state vendors that do not collect sales tax on sales to Colorado customers to notify those customers that they may be subject to Colorado’s use tax and to send the state each year a list of Colorado purchasers with purchases of more than $500, with their addresses and the total amount spent, against a Commerce Clause challenge by the Direct Marketing Association (“DMA”) claiming the statute discriminated against and unduly burdened interstate commerce. The Circuit Court reversed a District Court decision granting summary judgment to DMA.
The Court held that the statute did not distinguish between in-state and out-of-state interests and thus did not discriminate against interstate commerce. Rather, the Court found, the statute imposed differential treatment based on whether the out-of-state vendor collected Colorado sales tax.
The Court also rejected the argument that the notice and reporting requirements imposed by the statute unduly burdened interstate commerce. DMA’s argument and the District Court’s holding relied on Quill Corp. v. North Dakota. The Circuit Court first found that Quill applied narrowly to sales and use tax collection requirements and held that it did not extend to the notice and reporting requirements under the Colorado statute.
The next step would be a discretionary appeal to the U.S. Supreme Court. Given the history of this case, it is likely that such an appeal will be filed.