SCOTUS Punts Internet Sales Tax Dispute Back to States

Chris Gaetano
Published Date:
Dec 13, 2016

The Supreme Court of the United States declined to hear a case over whether a Colorado law requiring online retailers provide customer information to tax authorities was constitutional, booting the matter back to the states, according to Bloomberg. The Colorado rule specifically required Internet retailers doing business in Colorado to provide the state tax department with customer names, address and purchase amounts, as well as remind consumers of their obligation to pay taxes and provide a purchase summary to people who spend more than $500 in a year. 

The Direct Marketing Association challenged the rule, saying that it violated the constitution's commerce clause as it affects only out-of-state companies. The organization brought its petition to the Supreme Court after the 10th Circuit Court ruled that the law was not unconstitutional, because while it only affects out of state retailers, the law does not discriminate on its face by explicitly identifying geographical distinctions and, further, that the burdens faced by out-of-state companies can be balanced out by those imposed on in-state companies. 

In its own brief, however, the Colorado Department of Revenue argued that the current sales tax regime, which requires a physical presence in the state, makes no sense with the growth of e-commerce. It said that the court accepting the Direct Marketing Association's claims would transform discrimination claims under the commerce clause into their own unique category separate from all other comparable forms of discrimination analysis. It also argued that there is no circuit split or other disagreement among lower courts meriting SCOTUS review. With this in mind, it asked the Supreme Court to decline hearing the case. 

With the SCOTUS siding with Colorado, the matter is now back in the hands of the state. 

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