Therefore, it may be more sensible to see the TIA as Congress narrowing comity.Direct Marketing Association v. Brohl As noted below, in Direct Marketing Association v. Brohl, the Tenth Circuit held that the TIA prohibited a federal district court from ruling on the constitutionality of Colorado’s remote seller use tax reporting laws despite the provisions neither imposing nor requiring the collection of a tax. 735 F.3d 904 (10th Cir. 2013). Colorado’s use tax requires Colorado purchasers that have not paid sales tax on the purchase of tangible goods to pay a 2.
§ 201-1:39-21-112.3.5.Direct Marketing Ass’n v. Brohl, 735 F.3d 904 (2013). Id.Direct Marketing Ass’n v. Brohl, 575 U.S. __ (2015).
5)(c), (d).4Id.;1 Colo. Code Regs. § 201-1:39-21-126.96.36.199Direct Marketing Ass’n v. Huber, 2012 WL 1079175 (Mar. 30, 2012).6 Direct Marketing Ass’n v. Brohl, 735 F.3d 904 (2013).7 28 U.S.C. § 7421(a).8Direct Marketing Ass’n, 575 U.S. at 5 (Slip Op.).9 Id. at 6.
On appeal, however, the Tenth Circuit overturned the injunction and held that the TIA barred DMA’s challenge in federal court. Direct Marketing Ass’n v. Brohl, 735 F.3d 904 (2013). In a footnote, the Tenth Circuit also held that even if the TIA did not apply, “comity” prevents the federal courts from hearing DMA’s case.
On December 8, 2014, the United States Supreme Court will hear oral argument in a case that could have significant implications for the ability to use the federal courts to challenge state attempts to tax remote sellers of goods. In Direct Marketing Association v. Brohl, 735 F.3d 904 (10th Cir. 2013), the Tenth Circuit Court of Appeals found that the Direct Marketing Association’s (DMA) challenge to a Colorado revenue statute was barred by the federal Tax Injunction Act (TIA). Current Commerce Clause precedent bans a state from requiring a retailer with no in-state presence from collecting sales or use taxes, seeQuill Corp. v. North Dakota, 504 U.S. 298 (1992), an important shield against state taxation of remote online and catalogue sellers of goods.
It is doubtful that the Court will consider the broader question of whether Colorado’s use tax reporting requirements are constitutional. It is expected that the Court’s decision will clarify protections provided by the TIA and be instructive to out-of-state taxpayers on nexus issues.Direct Marketing Ass’n v. Brohl, 735 F.3d 904 (10th Cir. 2013);cert. grantedU.S.
While it remains to be seen how the Supreme Court will rule in Direct Marketing, it is highly unlikely that the doors to federal courts for litigants seeking to challenge state taxes will be opened widely. 735 F.3d 904 (10th Cir. 2013). Colo. Rev. Stat. § 39-21-112(3.