U.S. Supreme Court lets Colorado sales tax law stand

Erik Wallin
December 14, 2016

This blog was last updated on June 26, 2021

Final Disposition of DMA v. Brohl Litigation Could Pave the Way for Vendor Notice Rules. On December 12, 2016 the United States Supreme Court denied certiorari to review the Tenth Circuit’s holding in Direct Marketing Association v. Brohl, No. 12-1175 (10th Cir. Feb. 22, 2016). By denying cert the Court essentially let stand the lower court decision that upheld a Colorado law requiring the reporting and notice of out of state sales made to Colorado residents by retailers outside the state. The Court also denied certiorari to review a cross-petition filed by the State of Colorado which sought to directly address whether Quill’s physical presence standard should be overruled.

The background

The Colorado rule at issue requires businesses that sell to Colorado customers but have no sales tax and collection responsibilities to:

  1. Notify purchasers that even though no tax is being collected, use tax may be due and payable by the purchaser to the Department of Revenue.
  2. Provide all Colorado customers who purchased more than $500 worth of goods in a given year, an annual report showing their purchases broken down by date, category and amount.
  3. Provide the Department of Revenue an annual report showing the names of all Colorado customers, their address, and the total dollar amount of purchases in the prior calendar year.

Penalties apply for failure to meet any of these requirements.

What does this mean for remote sellers into Colorado?

While the DMA v. Brohl case has been in litigation, Colorado has not moved to either enforce this requirement or provide regulatory guidance on how to best meet either the taxpayer or DOR notice provisions. As of the moment, Colorado is reviewing the implications of the Supreme Court’s decision. However, it is important to note that a state court injunction remains in place which continues to restrict enforcement of the law. This state court action must be resolved before the Colorado Department of Revenue will move forward on any enforcement action or issue any guidance. However, Colorado sellers should understand that this requirement is highly likely to come into effect in the near term.

What does this mean for the rest of the U.S.?

Colorado is not the only state to have enacted these types of notice requirements. Oklahoma, South Carolina, South Dakota and Kentucky all have notice laws on the books, but the rules do not apply any penalties for non-compliance. In the course of the last few months, Louisiana, Oklahoma, and Vermont have all enacted notice rules, each with their own unique flavor: Louisiana: The Louisiana law, like Colorado, imposes penalties for non-compliance and becomes effective on July 1, 2017. Oklahoma: The Oklahoma rule comes into effect on November 1, 2017. Vermont: The legislation provides that this rule comes into effect on July 1, 2017 but contains an express language that it will come into effect earlier than 7/1 if Colorado officially implements their rule.

With the legality of notice provisions finally settled, we fully expect to see additional states move to impose these requirements and to apply penalties for non-compliance.

Over the last few years, there has been a clear national trend towards states stretching (and sometimes outright breaking) the existing legal constraints on the taxation of remote commerce. With the legality of notice provisions finally settled, we fully expect to see additional states move to impose these requirements and to apply penalties for non-compliance. Sovos Compliance will continue to monitor any further developments relating to this decision and update our readers accordingly.

Next Steps

  • Learn more about Sovos Enterprise Sales Tax solutions.

Sign up for Email Updates

Stay up to date with the latest tax and compliance updates that may impact your business.

Author

Erik Wallin

Erik Wallin is a Senior Tax Counsel on the Tax Research Team at Sovos Compliance. Erik has been with Sovos Compliance since 2011, and his main areas of focus are on U.S. Transaction Tax Law which includes special expertise in the taxation of technology and the taxation mechanisms that apply throughout the Colorado home rule jurisdictions. Erik is a member of the Massachusetts Bar, has a B.A. from York College of Pennsylvania, a J.D. from New England School of Law, and an LL.M. in Taxation from Boston University.
Share this post

customer centric
North America Tax Compliance
January 7, 2025
“The first step to being customer centric is being with the client through thick and thin”

This blog was last updated on January 7, 2025 Interview with: Sergio Severo, Managing Director Sovos Latin America He was seriously considering retiring after an extensive and remarkable professional career when he received an invitation to lead our team in the region. Something about Sovos caught Sergio Severo’s attention, prompting him to abandon his retirement […]

agent of the consumer tnabc
North America ShipCompliant
January 6, 2025
TNABC Warns DtC Shippers Against ‘Agent of Consumer’ Sales

This blog was last updated on January 8, 2025 Learn why Tennessee’s Alcoholic Beverage Commission (TNABC) is cracking down on ‘agent of the consumer’ sales for DtC wine shippers. The Tennessee Alcoholic Beverage Commission (TNABC) recently sent a notice to licensed direct-to-consumer (DtC) wine shippers indicating that shipping as an “agent of the consumer” is […]

california unclaimed property notice
North America Unclaimed Property
January 6, 2025
California’s Unclaimed Property Crackdown: How to Respond to Notices

This blog was last updated on January 10, 2025 Learn how to respond to California’s unclaimed property notices. Avoid audits, penalties, and interest with timely actions and the Voluntary Compliance Program. Be aware! California is ramping up its enforcement of unclaimed property law, and businesses are in the crosshairs. Recently, the State Controller’s Office (SCO) […]

SAP Clean Core implementation
North America Tax Compliance
January 6, 2025
SAP: Your Business’ Path to Clean Core

This blog was last updated on January 10, 2025 In the first blog in our series, we introduced SAP Clean Core concept and how much is being made about its impact on business, specifically the ability to customize an ERP to meet operational needs. In part two, we addressed how businesses can use the SAP […]

alcohol deliveries
North America ShipCompliant
December 20, 2024
What if No One is Home to Sign for an Alcohol Delivery?

This blog was last updated on January 2, 2025 When no one is home to sign for an alcohol delivery, it becomes more than just a minor hiccup for direct-to-consumer (DtC) alcohol shippers. It’s a domino effect that transforms a perfectly curated product into a customer’s disappointment before it’s ever opened. This becomes an even […]