10th Circuit upholds Colorado’s “Amazon” tax reporting statute

Last week the Tenth Circuit issued an important decision affecting the realm of online commerce. In Direct Marketing Association v. Brohl, the Court rejected a Dormant Commerce Clause challenge to a Colorado statute requiring certain online retailers to report sales in Colorado, so that state authorities might attempt to recover use taxes from Colorado residents who buy merchandise online.

Under the U.S. Supreme Court’s 1992 decision in Quill Corporation v. North Dakota, states may not require out-of-state retailers with no physical presence in the state to collect and remit sales taxes.

As Judge Scott Matheson’s opinion explains, Colorado’s reporting statute does not interfere with, or discriminate against, interstate commerce, and the Court declined to expand Quill beyond its application to the collection of sales taxes.

In a concurring opinion, Judge Gorsuch explains that Quill is something of an anomaly, because the Supreme Court has allowed states to impose regulatory and tax burdens on out-of-state companies that are comparable to sales tax collection duties. Thus, while the Tenth Circuit is obligated to respect Quill, it is under no duty to expand it. Judge Gorsuch  compared it to baseball’s antitrust exemption, which “now applies only to baseball itself, having lost every away game it has played.”

In the wake of this decision, I think other states will follow Colorado’s lead and enact similar statutes in an effort to collect more use tax revenues from their residents.

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