Direct Mktg. Ass'n v. Brohl

• Decision Date: 03 March 2015
• Docket Number: No. 13–1032.,13–1032.
• Citation: 135 S.Ct. 1124,575 U.S. 1,191 L.Ed.2d 97
• Parties: DIRECT MARKETING ASSOCIATION, Petitioner v. Barbara BROHL, Executive Director, Colorado Department of Revenue.
• Court: U.S. Supreme Court

575 U.S. 1

135 S.Ct. 1124

191 L.Ed.2d 97

DIRECT MARKETING ASSOCIATION, Petitioner

v.Barbara BROHL, Executive Director, Colorado Department of Revenue.

No. 13–1032.

Supreme Court of the United States

Argued Dec. 8, 2014.

Decided March 3, 2015.

George S. Isaacson, Lewiston, ME, for Petitioner.

Daniel D. Domenico, Solicitor General, for Respondent.

John W. Suthers, Attorney General, Daniel D. Domenico, Solicitor General, Melanie J. Snyder, Deputy Attorney General, Counsel of Record, Grant T. Sullivan, Michael Francisco, Assistant Solicitors General, Denver, CO, for Respondent.

George S. Isaacson, Counsel of Record, Matthew P. Schaefer, Brann & Isaacson, Lewiston, ME, for Petitioner.

Justice THOMAS delivered the opinion of the Court.

In an effort to improve the collection of sales and use taxes for items purchased online, the State of Colorado passed a law requiring retailers that do not collect Colorado sales or use tax to notify Colorado customers of their use-tax liability and to report tax-related information to customers and the Colorado Department of Revenue. We must decide whether the Tax Injunction Act, which provides that federal district courts "shall not enjoin, suspend or restrain the assessment, levy or collection of any tax under State law," 28 U.S.C. § 1341, bars a suit to enjoin the enforcement of this law. We hold that it does not.

I

A

Like many States, Colorado has a complementary sales-and-use tax regime. Colorado imposes both a 2.9 percent tax on the sale of tangible personal property within the State, Colo.Rev.Stat. §§ 39–26–104(1)(a), 39–26–106(1)(a)(II) (2014), and an equivalent use tax for any property stored, used, or consumed in Colorado on which a sales tax was not paid to a retailer, §§ 39–26–202(1)(b), 39–26–204(1). Retailers with a physical presence in Colorado must collect the sales or use tax from consumers at the point of sale and remit the proceeds to the Colorado Department of Revenue (Department). §§ 39–26–105(1), 39–26–106(2)(a). But under our negative Commerce Clause precedents, Colorado may not require retailers who lack a physical presence in the State to collect these taxes on behalf of the Department. See Quill Corp. v. North Dakota, 504 U.S. 298, 315–318, 112 S.Ct. 1904, 119 L.Ed.2d 91 (1992). Thus, Colorado requires its consumers who purchase tangible personal property from a retailer that does not collect these taxes (a "noncollecting retailer") to fill out a return and remit the taxes to the Department directly. § 39–26–204(1).

Voluntary compliance with the latter requirement is relatively low, leading to a significant loss of tax revenue, especially as Internet retailers have increasingly displaced their brick-and-mortar kin. In the decade before this suit was filed in 2010, e-commerce more than tripled. App. 28. With approximately 25 percent of taxes unpaid on Internet sales, Colorado estimated in 2010 that its revenue loss attributable to noncompliance would grow by more than $20 million each year. App. 30–31.

In hopes of stopping this trend, Colorado enacted legislation in 2010 imposing notice and reporting obligations on noncollecting retailers whose gross sales in Colorado exceed $100,000. Three provisions of that Act, along with their implementing regulations, are at issue here.

First, noncollecting retailers must "notify Colorado purchasers that sales or use tax is due on certain purchases ... and that the state of Colorado requires the purchaser to file a sales or use tax return." § 39–21–112(3.5)(c)(I) ; see also 1 Colo.Code Regs. § 201–1:39–21–112.3.5(2) (2014), online at http://www.sos.co.us/CRR (as visited Feb. 27, 2015, and available in the Clerk of Court's case file). The retailer must provide this notice during each transaction with a Colorado purchaser, ibid., and is subject to a penalty of $5 for each transaction in which it fails to do so, Colo.Rev.Stat. § 39–21–112(3.5)(c)(II).

Second, by January 31 of each year, each noncollecting retailer must send a report to all Colorado purchasers who bought more than $500 worth of goods from the retailer in the previous year. § 39–21–112(3.5)(d)(I) ; 1 Colo.Code Regs. §§ 201–1:39–21–112.3.5(3)(a), (c). That report must list the dates, categories, and amounts of those purchases. Colo.Rev.Stat. § 39–21–112(3.5)(d)(I) ; see also 1 Colo.Code Regs. §§ 201–1:39–21–112.3.5(3) (a), (c). It must also contain a notice stating that Colorado "requires a sales or use tax return to be filed and sales or use tax paid on certain Colorado purchases made by the purchaser from the retailer." Colo.Rev.Stat. § 39–21–112(3.5)(d)(I)(A). The retailer is subject to a penalty of $10 for each report it fails to send. § 39–21–112(3.5)(d)(III)(A) ; see also 1 Colo.Code Regs. § 201–1:39–21–112.3.5(3)(d).

Finally, by March 1 of each year, noncollecting retailers must send a statement to the Department listing the names of their Colorado customers, their known addresses, and the total amount each Colorado customer paid for Colorado purchases in the prior calendar year. Colo.Rev.Stat. § 39–21–112(3.5)(d)(II)(A) ; 1 Colo.Code Regs. § 201–1:39–21–112.3.5(4). A noncollecting retailer that fails to make this report is subject to a penalty of $10 for each customer that it should have listed in the report. Colo.Rev.Stat. § 39–21–112(3.5)(d)(III)(B) ; see also 1 Colo.Code Regs. § 201–1:39–21–112.3.5(4)(f).

B

Petitioner Direct Marketing Association is a trade association of businesses and organizations that market products directly to consumers, including those in Colorado, via catalogs, print advertisements, broadcast media, and the Internet. Many of its members have no physical presence in Colorado and choose not to collect Colorado sales and use taxes on Colorado purchases. As a result, they are subject to Colorado's notice and reporting requirements.

In 2010, Direct Marketing Association brought suit in the United States District Court for the District of Colorado against the Executive Director of the Department, alleging that the notice and reporting requirements violate provisions of the United States and Colorado Constitutions. As relevant here, Direct Marketing Association alleged that the provisions (1) discriminate against interstate commerce and (2) impose undue burdens on interstate commerce, all in violation of this Court's negative Commerce Clause precedents. At the request of both parties, the District Court stayed all challenges except these two, in order to facilitate expedited consideration. It then granted partial summary judgment to Direct Marketing Association and permanently enjoined enforcement of the notice and reporting requirements. App. to Pet. for Cert. B–1 to B–25.

Exercising appellate jurisdiction under 28 U.S.C. § 1292(a)(1), the United States Court of Appeals for the Tenth Circuit reversed. Without reaching the merits, the Court of Appeals held that the District Court lacked jurisdiction over the suit because of the Tax Injunction Act (TIA), 28 U.S.C. § 1341. Acknowledging that the suit "differs from the prototypical TIA case," the Court of Appeals nevertheless found it barred by the TIA because, if successful, it "would limit, restrict, or hold back the state's chosen method of enforcing its tax laws and generating revenue." 735 F.3d 904, 913 (2013).

We granted certiorari, 573 U.S. ––––, 134 S.Ct. 2901, 189 L.Ed.2d 855 (2014), and now reverse.

II

Enacted in 1937, the TIA provides that federal district courts "shall not enjoin, suspend or restrain the assessment, levy or collection of any tax under State law where a plain, speedy and efficient remedy may be had in the courts of such State." § 1341. The question before us is whether the relief sought here would "enjoin, suspend or restrain the assessment, levy or collection of any tax under State law." Because we conclude that it would not, we need not consider whether "a plain, speedy and efficient remedy may be had in the courts of" Colorado.

A

The District Court enjoined state officials from enforcing the notice and reporting requirements. Because an injunction is clearly a form of equitable relief barred by the TIA, the question becomes whether the enforcement of the notice and reporting requirements is an act of "assessment, levy or collection." We need not comprehensively define these terms to conclude that they do not encompass enforcement of the notice and reporting requirements at issue.

In defining the terms of the TIA, we have looked to federal tax law as a guide. See, e.g., Hibbs v. Winn, 542 U.S. 88, 100, 124 S.Ct. 2276, 159 L.Ed.2d 172 (2004). Although the TIA does not concern federal taxes, it was modeled on the Anti–Injunction Act (AIA), which does. See Jefferson County v. Acker, 527 U.S. 423, 434–435, 119 S.Ct. 2069, 144 L.Ed.2d 408 (1999). The AIA provides in relevant part that "no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person." 26 U.S.C. § 7421(a). We assume that words used in both Acts are generally used in the same way, and we discern the meaning of the terms in the AIA by reference to the broader Tax Code. Hibbs, supra, at 102–105, 124 S.Ct. 2276 ; id., at 115, 124 S.Ct. 2276 (KENNEDY, J., dissenting). Read in light of the Federal Tax Code at the time the TIA was enacted (as well as today), these three terms refer to discrete phases of the taxation process that do not include informational notices or private reports of information relevant to tax liability.

To begin, the Federal Tax Code has long treated information gathering as a phase of tax administration procedure that occurs before assessment, levy, or collection. See §§ 6001–6117; §§ 1500–1524 (1934 ed.); see also § 1533 ("All provisions of law for the ascertainment of liability to any tax, or the assessment or collection thereof, shall be held to apply ..."). This step includes private reporting of information used to determine tax liability, see, e.g., § 1511(a), including reports by third parties who do not owe the tax, see, e.g.,...