On February 22, 2016, the U.S. Court of Appeals for the Tenth Circuit issued its decision in Direct Marketing Ass’n v. Brohl. 1 The Tenth Circuit reversed the federal district court and held that Colorado’s law imposing use tax notice and reporting obligations on retailers does not discriminate against or unduly burden interstate commerce and therefore does not violate the dormant Commerce Clause. The court’s determination rested on its interpretation of the U.S. Supreme Court’s holding in Quill Corp. v. North Dakota, 2 which the court concluded applies narrowly to sales and use tax collection and does not forbid states from imposing regulatory requirements on “retailers that are not otherwise required to comply with the greater burden of tax collection and reporting.” The decision is extremely important for taxpayers and consumers alike.

Background –

In an effort to increase Colorado residents’ voluntary payment of the state’s use tax on purchases made online, in 2010 the Colorado legislature passed H.B. 10-1193, which required “non-collecting retailers”3 to: (1) send a transactional notice to purchasers informing them that they might be subject to Colorado’s use tax; (2) provide Colorado purchasers who buy goods from the retailer totaling more than $500 an annual purchase summary; and (3) file an annual customer information report with the Department of Revenue.