Direct Marketing Assn. v. Brohl
135 S. Ct. 1124
| SCOTUS | 2015Background
- Colorado imposes complementary sales (seller-collected) and use (buyer-paid) taxes; out-of-state retailers without a physical presence historically need not collect under Quill.
- Colorado enacted 2010 legislation requiring noncollecting retailers with >$100,000 Colorado sales to (1) notify purchasers of use-tax liability each transaction, (2) send annual purchase reports to purchasers who spent >$500, and (3) report purchaser names/addresses/amounts to the Colorado Department of Revenue; statutory penalties attach for noncompliance.
- Direct Marketing Association (DMA), representing out-of-state retailers, sued in federal district court challenging the notice and reporting requirements under the Commerce Clause; the district court enjoined enforcement of those provisions on partial summary judgment.
- The Tenth Circuit reversed for lack of jurisdiction, holding the Tax Injunction Act (TIA), 28 U.S.C. § 1341, barred the federal suit because enjoining the provisions would restrain tax assessment/collection.
- The Supreme Court reversed, holding the TIA does not bar this suit because the notice/reporting requirements are informational steps that precede assessment, levy, or collection and therefore are not actions the TIA protects against.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Tax Injunction Act bars DMA's federal suit to enjoin Colorado's notice/reporting requirements | TIA does not apply because the challenged provisions are informational and do not enjoin assessment, levy, or collection | TIA bars the suit because enjoining the provisions would "limit, restrict, or hold back" the State’s ability to assess and collect taxes | TIA does not bar the suit; the requirements are pre-assessment informational/reporting steps and not "assessment, levy, or collection," nor do they proscribe equitable relief that stops those acts |
| Proper scope of the word "restrain" in the TIA | N/A (plaintiff argued TIA inapplicable) | "Restrain" should be read broadly to include actions that inhibit assessment/collection | "Restrain" is read in its narrower equitable sense (to enjoin or stop assessment/levy/collection), not as any inhibition |
| Whether informational third-party reporting constitutes assessment, levy, or collection | Reporting is pre-assessment information-gathering and distinct from assessment/collection | Reporting facilitates collection and thus falls within TIA protection | Reporting and notices are information-gathering steps that precede assessment/collection and are not covered by TIA |
| Whether the Court should address comity or other nonjurisdictional doctrines | DMA: TIA jurisdictional question dispositive; comity not raised below | Colorado: comity may counsel dismissal despite TIA result | Court takes no position on comity; leaves comity argument to the Tenth Circuit on remand |
Key Cases Cited
- Quill Corp. v. North Dakota, 504 U.S. 298 (established physical-presence rule limiting states’ ability to compel out-of-state sellers to collect sales/use taxes)
- Hibbs v. Winn, 542 U.S. 88 (interpreting TIA by reference to federal tax statute phases; distinguished third-party challenges)
- Grace Brethren Church v. California, 457 U.S. 393 (TIA application to suits seeking to enjoin state tax collection; explained but distinguished on facts)
- Levin v. Commerce Energy, Inc., 560 U.S. 413 (clarified narrow reach of Hibbs and described comity doctrine as nonjurisdictional)
- Complete Auto Transit, Inc. v. Brady, 430 U.S. 274 (Commerce Clause framework referenced in discussion of Quill and taxing nexus)