Colorado Asks the Supreme Court to Overturn Quill

Written by

On August 29, the Direct Marketing Association (DMA) submitted a certiorari petition to the U.S. Supreme Court asking the Court to review the Tenth Circuit Court of Appeals’ decision in Direct Marketing Association v. Brohl (Brohl II). The case already made one trip to the Supreme Court (Brohl I), in which the Court held that the Tax Injunction Act did not bar federal-court review of the case. On remand, the Tenth Circuit held that Colorado’s use tax reporting regime did not violate the Commerce Clause.

(To refresh: Colorado’s regime requires out-of-state sellers to report sales to Colorado customers to the customers themselves and to the Colorado Department of Revenue. We’ve discussed use tax reporting laws like this one in a previous post.)

In its certiorari petition for Brohl II, DMA asked the Supreme Court to consider three questions, all of which center on whether the Tenth Circuit correctly decided that Colorado’s use tax law does not discriminate against interstate commerce. In a somewhat surprising turn of events, however, Colorado didn’t simply file a brief opposing DMA’s petition. Instead, on October 3, Colorado filed its own “Conditional Cross-Petition for Writ of Certiorari,” in which Colorado asks the Court to reframe the issues in the case.

As you would expect from the winner at the court below, Colorado wants the Supreme Court to deny DMA’s certiorari petition (for reasons Colorado will explain in a later brief). But Colorado also argues that if the Court grants DMA’s petition, the Court should answer only one question: “Should Quill be overturned?” (See p. 3).

In its cross-petition, Colorado presents a number of arguments why Quill’s days are numbered, focusing a great deal on the concerns of Supreme Court justices who have openly voiced opposition to Quill’s physical-presence (e.g., Justice Fortas in Bellas Hess, Justice White in Quill, and Justice Kennedy in Brohl I). But what is most interesting about Colorado’s petition is the reasons the state provides for why this case should be the vehicle for the Supreme Court to reconsider Quill. They are that:

  1. There is no tax liability is at stake. Colorado’s law doesn’t actually impose a collection obligation on out-of-state sellers, and the courts have suspended enforcement of the law until Brohl is resolved. The lack of a looming tax liability lets the Court ponder Quill without worrying about retroactive tax burdens on the parties.
  2. The Court is already familiar with the record in Brohl, and this record is well-developed, providing the Court with a “wealth of information.” (p. 34)
  3. Addressing Quill will fully resolve Brohl. If the Court overturns Quill, then DMA’s Commerce Clause claims are—according to the State of Colorado—mooted, because Quill is the only reason that the state requires out-of-state retailers to comply with a law that does not apply to in-state retailers.

We disagree that these considerations make Brohl II a good vehicle to review Quill (if the Supreme Court is so inclined). With respect to Colorado’s first contention, the Court has considered retroactive taxes extensively in past cases, so there is precedent available if that issue arises. And the other two considerations raised by Colorado are simply attempts to spin the central reason why Brohl II is a particularly bad vehicle for reviewing Quill: the validity of the physical-presence rule is not actually at issue in the case, meaning that the Court would be opining on an abstract question of law, rather than an actual dispute between the parties. Colorado admits as much when it notes that “[a]bsent Quill, Colorado would not have been required to enact the reporting law challenged here.” (p. 2). Moreover, the Tenth Circuit—which is bound to uphold Quill—affirmed Colorado’s use-tax notice and reporting provisions, agreeing that Quill did not create a constitutional bar to them.

Ultimately, we don’t expect Colorado’s cross-petition in Brohl II to be particularly compelling to the Supreme Court. Absent the Court’s refocusing the case, Brohl II does not present the question of whether Quill’s physical-presence rule should stand. What’s more, Brohl II’s timing is bad. As of yet, no appellate court has identified a facial conflict between Quill and a state sales and use tax law (though South Dakota and Alabama are working on it), and Congress continues to bat around ideas for creating a national system of remote-seller collection. At the end of the day, Colorado’s cross-petition may be just one more straw on the camel’s back. In the interim, we hasten to remind the states: the rule of law matters, and Quill is still good law.

NOTE: This post was updated to include a link to Colorado’s Conditional Cross-Petition for Writ of Certiorari.