The Supreme Court ruled unanimously Tuesday that direct marketers can sue to block a Colorado law that requires remote sellers to notify the state about purchases that would be subject to the state’s sales or use tax, Outdoor Industry Association Policy Advisor Rich Harper reports.
The ruling in Direct Marketing Association v. Brohl reverses a lower court’s decision that the lawsuit violated federal law. Brohl is the last name of the executive director of the Colorado Department of Revenue.
But in a concurrence opinion, Supreme Court Justice Anthony Kennedy suggested it was time for the Court to revisit past precedent that prohibits states from collecting taxes from out-of-state sellers that lack a physical presence in that state. He noted that:
“California, for example, has estimated that it is able to collect about 4 percent of the use taxes due from sales from out-of-state vendors. The result has been a startling revenue shortfall in many States, with concomitant unfairness to local retailers and their customers who do pay taxes at the register.”
This is good news for bricks-and-mortar retailers who are at a competitive disadvantage against remote sellers who are not required to collect out-of-state sales taxes, wrote Harper.
Outdoor Industry Association (OIA) has supported e-fairness legislation that would level the playing field and authorize states to collect sales taxes from remote sellers. The Senate passed such a bill, the Marketplace Fairness Act, on a bipartisan basis in May 2013, but the House took no action. An updated version of the bill is likely to be introduced this year.
