US Supreme Court issues decision in Colorado remote seller case

Multistate tax alert | March 5, 2015

This tax alert summarizes the opinion of the US Supreme Court and Justice Kennedy’s concurring opinion in ‘Direct Marketing Association v. Brohl’ and provides some taxpayer considerations.

US Supreme Court unanimous decision

On March 3, 2015, the US Supreme Court issued a unanimous decision for the petitioner in Direct Marketing Association v. Brohl, reversing the decision of the US Court of Appeals for the Tenth Circuit (the “10th Circuit”).1 The 10th Circuit had held that the Tax Injunction Act (“TIA”) (28 U.S.C. § 1341) deprived the US District Court of jurisdiction to enjoin Colorado from enforcing its remote seller sales and use tax notice and reporting requirements.2 In the opinion of the US Supreme Court, delivered by Justice Thomas, the Court held that the TIA does not bar the suit brought by the Direct Marketing Association (“DMA”) because the relief sought would not enjoin, suspend, or restrain the assessment, levy or collection of Colorado’s sales and use taxes.3 The Court remanded the case to the 10th Circuit for further proceedings.4

Also, in a concurring opinion Justice Kennedy agreed in full with the Court’s opinion but also emphasized that in light of the “far-reaching systemic and structural changes in the economy[,]”5 “it is unwise to delay any longer a reconsideration of the Court’s holding in Quill.”6 Justice Kennedy also suggested that the “legal system should find an appropriate case for this Court to reexamine Quill and Bellas Hess.”7

In this Tax Alert we summarize the opinion of the Court and Justice Kennedy’s concurring opinion. We also provide some taxpayer considerations.

1 Direct Mktg. Ass’n v. Brohl, No. 13-1032, slip op. at 13 (Thomas, J., opinion of the Court) (U.S. Mar. 3, 2015), rev’g 735 F.3d 904 (10th Cir. 2013).
2 Direct Mktg. Ass’n v. Brohl, 735 F.3d 904.
3 No. 13-1032, slip op. at 1, 13 (Thomas, J., opinion of the Court).
4 Id. at 13.
5 Id. at 3 (Kennedy, J., concurring).
6 Id. As explained by Justice Kennedy, Quill is the US Supreme Court case that reaffirmed the physical presence requirement for use tax nexus as established in National Bellas Hess. See, id. at 1 (Kennedy, J., concurring) (citing Quill Corp. v. North Dakota, 504 U.S. 298, 311 (1992); National Bellas Hess, Inc v. Department of Revenue of Ill., 386 U.S. 753 (1967)).
7 No. 13-1032, slip op at 4 (Kennedy, J., concurring).

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