DMA in Court in Suit against Colorado

On 26.02.11, In Legal Industry, by Blake

02/26/2011

The contention of Direct Marketing Association was favoured by the court in its case against the state of Colorado and its new tax law. The US District Court for the District of Colorado granted last January 26 the motion for preliminary injunction against the Colorado Department of Revenue.

The ruling means that the state is now barred from implementing the notice and reporting stipulations of Colorado law, H.B. 10-1193.

The Federal District Court in Denver acquiesced that DMA is likely to prevail on its assertion that the Colorado Reporting Law directly contravenes the US Constitution.

H.B. 10-1193 requires that purchase information of marketers that ship orders into the state be provided to the Colorado Department of Revenue. This is to establish who the customers were and the amount they spend. The provision regarding notification requirement is only applies to purchases on which no Colorado taxes were paid by the customer.

Furthermore, a year-end statement, covering the purchases of the previous calendar year, must be sent by the direct merchants to both the customer and the Department of Revenue.

The core of DMA’s argument is that the new legislation enacted by the state of Colorado is unconstitutional based on the Supreme Court’s decision in Quill v North Dakota.

The 1992 decision found that the state of North Dakota was not entitled to collect taxes on orders that are shipped into the state because Quill did not have a “substantial nexus” or physical presence in the state.

Jerry Cerasale, the DMA’s senior vice president of government affairs, stated that the DMA is pleased with the outcome of the case. He also said that the organization is “particularly encouraged that the judge believes the DMA would likely prevail” in its case against the state of Colorado.

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