A three-member panel of the US Court of Appeals for the Tenth Circuit held that Colorado's remote seller notification statute does not violate the dormant Commerce Clause of the US Constitution. Direct Marketing Ass'n. v. Brohl, No. 12-1175 (10th Cir. Feb. 22, 2016).

The statute, enacted in 2010, requires remote sellers that lack physical presence within the state to file an annual statement with the Colorado Department of Revenue (the Department) showing the names and addresses of all of their Colorado purchases and the total amount paid by those purchasers during the preceding calendar year. The statute also requires remote sellers to notify their Colorado customers of their obligation to remit use tax on their remote purchases to the Department. Remote sellers that register for and collect Colorado sales and use tax are excluded from these notification obligations.

The Court found that neither Quill nor Complete Auto Transit (seminal US Supreme Court rulings in the dormant Commerce Clause area), applied since the statute involved a notification of a tax, rather than a tax. The ruling paves the way for all states to adopt similar provisions requiring online sellers that maintain a narrow "nexus footprint" to comply with significant state sales and use tax reporting requirements. This ruling could mark the first of many actions, judicial, legislative and administrative, involving sales and use tax on remote sellers during 2016. A Tax Alert is forthcoming.