Sometimes taking a case to the highest court in the land is only a stopping point on a long legal journey. While the Direct Marketing Association hailed the Supreme Court ruling in its battle with the state of Colorado as a victory, the fight between states and online-only merchants is far from over.
To summarize the case: Colorado enacted legislation in 2010 imposing notice and reporting obligations on non-collecting retailers whose gross sales in Colorado exceed $100,000.
The law required non-collecting (i.e. out-of-state) retailers to notify Colorado buyers that sales or use tax was due with each transaction; they had to send a report each year to every buyer who purchased over $500 in goods from them that year; and they had to send an annual report to the state containing detailed information about their customers and their purchases.
Not surprisingly, the law was unpopular with the Direct Marketing Association, and they sued.
Here’s an extremely abbreviated summary of what happened next.
- The District Court permanently enjoined enforcement of the notice and reporting requirements (retailers didn’t have to follow the law).
- The Tenth Circuit Appeals court said the District Court lacked jurisdiction over the suit because of the Tax Injunction Act (TIA) – this is what is at the heart of the Supreme Court ruling.
- The Supreme Court reversed the Court of Appeals “because the TIA does not bar petitioner’s suit.”
In other words, the Supreme Court did not say Colorado did or did not have the right to make and enforce that law – it simply said the Appeals Court made an error in how it ruled in the case by using the TIA for the basis of its ruling.
Justice Clarence Thomas wrote the opinion, stating, “Like the Court of Appeals, we express no view on the merits of those claims and remand the case for further proceedings consistent with this opinion.”
However, he brought up the “comity doctrine,” indicating Colorado could have sought comity from either the District Court or Court of Appeals. “Accordingly, we leave it to the Tenth Circuit to decide on remand whether the comity argument remains available to Colorado.”
So the case goes back to the Appeals Court.
If you skim the ruling, be sure to pay attention to Justice Kennedy’s concurring opinion. He went much further than Justice Thomas in expressing his feelings about the case, actually suggesting a redefinition of nexus. (We will go into this in more detail on the AuctionBytes Blog.)
Comment on the AuctionBytes Blog.