Federal Court Grants Preliminary Injunction Against Colorado’s Reporting Regime


On January 26, 2011, a U.S. District Court granted the Direct Marketing Association’s (DMA) motion for a preliminary injunction preventing the state of Colorado from enforcing its recently enacted sales tax notice and reporting regime. The Direct Marketing Association v. Roxy Huber, Civil Case No. 10-cv-01546-REB-CBS, Order Granting Motion for Preliminary Injunction (U.S. Dist.Ct. Colorado, January 26, 2011). The DMA had filed its motion in August requesting an expedited hearing process to get a ruling before January 31, when the reporting requirements were scheduled to take effect.

The court concluded that the DMA had established the four elements required to obtain a preliminary injunction: (1) the plaintiff has a substantial likelihood of success on the merits, (2) the plaintiff has an irreparable injury, (3) the injury to the plaintiff outweighs the injury to the defendant, and (4) that the preliminary injunction is in the best interests of the public. The DMA’s amended complaint asserted a number of grounds for relief, including violations of the Commerce Clause, the First Amendment, the Due Process Clause, and state privacy law.

Substantial Likelihood of Success on the Commerce Clause Claims

The DMA asserted two claims that the Colorado reporting regime violated the Commerce Clause: (1) the regime discriminates against out-of-state retailers, and (2) the regime imposes an undue burden on out-of-state retailers. The second claim relied heavily on the Supreme Court’s decision in Quill Corp. v. North Dakota, 504 U.S. 298 (1992).

First, the court determined that the impact of the regime was going to be felt only by out-of-state retailers, because in-state retailers are already required under other laws to collect and remit taxes. The court thus determined that, even though the statute did not target out-of-state retailers on its face, the DMA was likely to prevail that the statute was unconstitutionally discriminatory. The court also determined that there were other non-discriminatory methods to achieve the legislature’s goal of collecting tax on sales by out-of-state retailers, specifically, the alternative method of having taxpayers remit use tax on personal income tax returns. Thus the court concluded that the DMA is likely to succeed on the merits that the statute is discriminatory, and that there are non-discriminatory alternatives available to achieve the state’s goal.

Please see full article below for more information.

LOADING PDF: If there are any problems, click here to download the file.

Written by:

Published In:


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Sutherland Asbill & Brennan LLP | Attorney Advertising

Don't miss a thing! Build a custom news brief:

Read fresh new writing on compliance, cybersecurity, Dodd-Frank, whistleblowers, social media, hiring & firing, patent reform, the NLRB, Obamacare, the SEC…

…or whatever matters the most to you. Follow authors, firms, and topics on JD Supra.

Create your news brief now - it's free and easy »

All the intelligence you need, in one easy email:

Great! Your first step to building an email digest of JD Supra authors and topics. Log in with LinkedIn so we can start sending your digest...

Sign up for your custom alerts now, using LinkedIn ›

* With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name.