U.S. top court takes up challenge to Colorado sales tax law

WASHINGTON, July 1 Tue Jul 1, 2014 10:41am EDT

WASHINGTON, July 1 (Reuters) - The U.S. Supreme Court on Tuesday agreed to weigh a challenge to a Colorado law that requires out-of-state retailers to provide data on sales they make to customers in the state in an effort to encourage the payment of sales tax.

The court agreed to hear an appeal by the Direct Marketing Association, which is challenging an appeals court determination that federal courts did not have jurisdiction to hear the case.

The 10th U.S. Circuit Court of Appeals held in an August 2013 ruling that the direct marketing trade group could not sue under the federal Tax Injunction Act, which limits challenges to state taxes to state courts.

The 2010 law was enacted to encourage residents to pay the 2.9 percent sales tax on purchases they make out-of-state, including from online retailers. Companies operating within the state collect the sales tax themselves but out-of-state companies are not required to do so. The law requires them to notify consumers that they are required to pay the tax.

The association challenged the law on the grounds that it violated the U.S. Constitution's Commerce Clause, which prohibits undue burdens on interstate commerce.

The case is Direct Marketing Association v. Brohl, U.S. Supreme Court, No. 13-1032.

The Supreme Court on Tuesday also agreed to hear another tax case. It will weigh an appeal filed by the Alabama Department of Revenue in a case involving CSX Transportation Inc.

The state is challenging a July 2013 ruling by the 11th U.S. Circuit Court of Appeals, which said a state tax on fuel purchased in the state is discriminatory because rail carriers like CSX have to pay it but companies that transport freight via water and road do not have to.

The case is Alabama Department of Revenue v. CSX, U.S. Supreme Court, No. 13-553.

Both cases will be argued and decided in the court's next term, which begins in October and ends in June 2015. (Reporting by Lawrence Hurley; Editing by Will Dunham and Marguerita Choy)