Bennet Kelley

Amazon Tax Intro• Quill Corp. v. North Dakota, 504 U.S. 298 (1992) – Due Process

and Commerce Clauses limit state taxing authority to entities with a physical presence in state.

• Record state budget deficits plus Sen. Long’s Maxim (“don’t tax you, don’t tax me, tax the guy behind the tree”) led to passage of New York “Amazon Tax” in 2008. Statute found state nexus with out-of-state retailers if affiliate sales in excess of $10,000 in prior four quarters.

An Act Concerning the Collection of Sales and Use Taxes on Sales Made by Out-Of-State Retailers (2010)Colo. Rev. Stat. § 39-21-112(3.5)

• Applies to “non-collecting retailers”.• Must provide “transaction notice” to

purchasers that they may be subject to Colorado use tax(1) to send a “transactional notice” to purchasers informing them that they may be subject to Colorado’s use tax.• Send purchasers who buy in excess of $500

an annual purchase summary and remind the consumer of their obligation to pay use tax.• Send annual report to state listing names,

addresses and amounts sold.

Amazon Tax Timeline1992

Supreme Court sets physical presence test for state taxation in Quill Corp. v. North Dakota.

2008New York passes first “Amazon Tax” law.

2009New York trial court dismisses Amazon/Overstock complaint.

2010Colorado passes disclosure requirements on “non-collecting retailers”.New York Appellate Division Upholds Dismissal of Amazon/Overstock complaint.

2011Direct Mktg. Ass’n v. Brohl: DMA wins injunction against Colorado law in Colorado federal court.

2012Direct Mktg. Ass’n v. Brohl: DMA wins summary judgment on Commerce Clause claims.

2013Direct Mktg. Ass’n v. Brohl: Tenth Circuit reverses Colorado injunction. Preempted by federal Tax Injunction Act. DMA then files for injunction in state court in Direct Mktg. Ass’n v. Colo. Dep’t of Revenue.New York Court of Appeal upholds Amazon.com dismissal.Supreme Court denies Amazon.com petition for cert.

2014Direct Mktg. Ass’n v. Colo. Dep’t of Revenue: CO District Court enjoins enforcement of Colorado law.Direct Mktg. Ass’n v. Brohl: Supreme Court reverses 10th Circuit finds that restraining statute does not “enjoin, suspend or restrain the assessment, levy or collection” of Colorado tax as prohibited by Tax Injunction Act. In concurrence, Justice Kennedy suggests revisiting Quill.

The Kennedy Concurrence

• But in 1992, the Internet was in its infancy. By 2008, e-commerce sales alone totaled $3.16 trillion per year in the United States. Because of Quill and Bellas Hess, States have been unable to collect many of the taxes due on these purchases.

• Although online businesses may not have a physical presence in some States, the Web has, in many ways, brought the average American closer to most major retailers. A connection to a shopper’s favorite store is a click away—regardless of how close or far the nearest storefront. . . . As a result, a business may be present in a State in a meaningful way without that presence being physical in the traditional sense of the term.

• Given these changes in technology and consumer sophistication, it is unwise to delay any longer a reconsideration of the Court’s holding in Quill. . . . The legal system should find an appropriate case for this Court to reexamine Quill and Bellas Hess.

10th Circuit Reverses . . . Again

Limits Application of Quill• Quill applies only to the collection of sales and use taxes, and the Colorado Law

does not require the collection or remittance of sales and use taxes. Instead, it imposes notice and reporting obligations.

No Facial Discrimination• Law “does not distinguish between does not distinguish between in-state and

out-of-state economic interests. It instead imposes differential treatment based on whether the retailer collects Colorado sales or use taxes.”

• No explicit geographic distinctions drawn.• Glosses over statute title and fact that only out-of-state sellers will not collect

use tax because of Quill. No Discriminatory Effect or Undue Burden

• DMA does not point to any evidence establishing that the notice and reporting requirements for non-collecting out-of-state retailers are more burdensome than the regulatory requirements in-state retailers already face.

• Because the Colorado Law’s notice and reporting requirements are regulatory and are not subject to the bright-line rule of Quill, no undue burden analysis required.

• En Banc Review Denied

Judge Matheson

Marketplace Fairness Act

• Grants state the authority to collect from out-of-state retailers regardless of in-state presence, so long as they simplify sales tax collection either through the Streamlined Sales and Use Tax Agreement (SSUTA) or following certain mandated steps.

• Passed Senate in 2013 (69-27). No action in House.

• Senate vote likely this year, but no action anticipated in the House.