All Internet Sellers, Beware: States May Tax You
Colorado is asking the court to enforce its law compelling marketers to turn over names and transactional data, as well as having marketers notify customers of their need to pay Colorado's sales tax. (Barbara Brohl, named in the case, is executive director of the Colorado Department of Revenue.)
"Justice Alito was quite concerned that if Colorado can fashion a statute that imposes obligations on a non-resident, non-taxpayer, out-of-state company, it is likely that there are going to be 50 other states that have similar initiatives," Isaacson says. "And he was expressing concern about the fact that what happens in one state sets a model for what may happen in other states, and that the court may be effectively unleashing states to enact that kind of legislation.
"There was similar concern expressed by Justice Scalia on that same kind of issue," he continues. "So one of the things that I found gratifying was the understanding the court demonstrated in regard to the boundless ramifications that its decision in favor of Colorado could lead to."
Matthew Schaefer, a partner with Brann & Isaacson who also argued before SCOTUS on Monday, says Justice Breyer cited a U.S. Court of Appeals Second Circuit precedent that more narrowly interpreted the term "tax collection" during his comments.
"Justice Breyer … expressed the concern that Colorado's view would, contrary to Judge Friendly's caution, result in a boundless understanding of the word 'collection,' " Schaefer says.
Speaking of broad definitions, Isaacson says there's nothing in the Tax Injunction Act that would limit states to taxing corporations.
"And so to the extent that a state may choose to use its tax code as a means for imposing various regulatory obligations on individuals and companies located outside of its borders, the Colorado position carries bad omens," he tells Target Marketing. "I think similarly, the DMA position would be protective of the right of both individuals and corporations to have access to federal court."