## Facts

- Colorado imposed a sales tax on in-state retail sales and a complementary use tax on in-state use of goods purchased from out-of-state sellers; consumers generally self-reported use tax.
- Under existing doctrine, Colorado could not require out-of-state retailers lacking in-state physical presence to collect and remit Colorado sales/use tax.
- Colorado enacted Colo. Rev. Stat. § 39-21-112(3.5) and regulations applying to certain “non-collecting retailers” (generally out-of-state sellers without a Colorado tax-collection duty) with more than $100,000 in annual Colorado sales.
- The law required covered retailers to (1) provide point-of-sale notices that Colorado tax was not collected and use tax might be owed, (2) mail annual purchase summaries to certain Colorado customers, and (3) submit annual customer-and-purchase-total reports to the Colorado Department of Revenue.
- Covered retailers could avoid these notice/reporting obligations by voluntarily collecting and remitting Colorado sales tax.
- The Direct Marketing Association (representing out-of-state direct marketers) challenged the law and sought declaratory and injunctive relief; the court previously entered a preliminary injunction against enforcement.
- On cross-motions for summary judgment, the court addressed the dormant Commerce Clause claims and whether permanent injunctive relief was warranted.

## Issues

1. Whether Colorado’s notice and reporting duties imposed only on non-collecting (typically out-of-state) retailers discriminated against interstate commerce in violation of the dormant Commerce Clause.
2. Whether the law imposed an undue burden on interstate commerce under Pike balancing, including in light of the limits on state power reflected in Quill’s physical-presence rule.
3. Whether a permanent injunction should issue barring enforcement of the statute and regulations against non-collecting retailers.

## Decision

- The court granted summary judgment for the Direct Marketing Association on its Commerce Clause claims.
- The court denied the Executive Director’s cross-motion for summary judgment.
- The court held the notice and reporting regime violated the dormant Commerce Clause.
- The court permanently enjoined enforcement of the statute and regulations against non-collecting retailers.

## Legal Principles

- State laws that impose differential regulatory burdens on interstate sellers, while imposing no comparable obligations on in-state sellers, may constitute discrimination against interstate commerce under the dormant Commerce Clause.
- Even when a law is framed as reporting rather than tax collection, it may be invalid if it functionally pressures out-of-state sellers to act as tax collectors in a manner inconsistent with constitutional limits on state regulation of interstate vendors.
- Under Pike v. Bruce Church, Inc., a nondiscriminatory state measure affecting interstate commerce is invalid if the burdens on interstate commerce are clearly excessive in relation to the asserted local benefits; substantial compliance costs and market effects may establish undue burden.

## Conclusion

The district court concluded that Colorado’s notice-and-reporting requirements for non-collecting retailers improperly targeted interstate sellers and imposed burdens that violated the dormant Commerce Clause, warranting summary judgment for the plaintiff and a permanent injunction against enforcement.


Direct Mktg. Ass’n v. Huber, No. 10-cv-01546-RB-CBS, 2012 WL 1079175 (D. Colo. Mar. 30, 2012)