State Court Suspends Colorado Notice and Reporting Law

On Tuesday, February 18, 2014, Judge Morris Hoffman of the Colorado District Court for the City and County of Denver granted the motion for a preliminary injunction filed by the Direct Marketing Association (“DMA”) in its suit challenging the 2010 Colorado statute that imposes onerous notice and reporting obligations upon out-of-state retailers that do not collect Colorado sales tax. The Court suspended, effective immediately, all of the Colorado law’s requirements (referred to in the ligation as the “Transactional Notice,” the “Annual Purchase Summary,” and the “Customer Information Report”). Judge Hoffman explained that “Plaintiff has proved to my satisfaction at this stage that each of the Act’s three notification and reporting requirements are facially discriminatory” in violation of the Commerce Clause of the United States Constitution. As a result, remote sellers that do not collect Colorado sales tax are not required to comply with the law’s provisions, pending further action by the Court as the case proceeds.

Readers will recall that the DMA previously obtained both a preliminary and permanent injunction against the Colorado law’s enforcement from the federal District Court for the District of Colorado. The injunction was dissolved in late 2013 after the federal Court of Appeals for the Tenth Circuit ruled that the Tax Injunction Act (“TIA”) deprived the federal District Court of jurisdiction to enter the injunction. In response, the DMA filed an action in state court in November 2013, challenging the law.

The DMA is represented in the case by Brann & Isaacson partners George Isaacson and Matthew Schaefer.

The state court will hold a status conference in the next few weeks to determine further proceedings in the case. We will keep readers apprised of further developments in the case.