Two lawyers from a Lewiston law firm will appear before the U.S. Supreme Court on Monday representing the interests of online retailers in what’s become a national battle between business interests and state and local governments over the question of when a state law can be challenged in federal court on federal constitutional grounds.

George Isaacson and Matthew Schaefer of Brann & Isaacson are scheduled to present oral arguments on behalf of their client, Direct Marketing Association, before the Supreme Court in a case that’s drawing national attention. The case, Direct Marketing Association v. Brohl, concerns the proper interpretation and application of the federal Tax Injunction Act, which limits federal court jurisdiction over suits concerning state tax laws, according to a news release from the law firm.

Direct Marketing Association is the country’s largest trade association representing online retailers and data-driven marketing. According to its website, the data-driven marketing economy generated $156 billion in revenue in the U.S. in 2012 and supported more than 675,000 jobs.

The case arises out of a federal court challenge brought by the marketing association against a 2010 Colorado law that would require out-of-state retailers that do not collect Colorado sales tax from customers in Colorado to start reporting information such as their customers’ purchasing activity to the Colorado Department of Revenue – a requirement not imposed on in-state retailers.

The Colorado law is similar to those adopted by other states that try to collect sales taxes from out-of-state retailers such as Under a law enacted in 1992, online retailers have been exempted from collecting sales taxes in states where they do not have a physical presence or employees.

The Direct Marketing Association successfully challenged the Colorado law, and a federal district judge in Denver issued an injunction barring enforcement of it. But that was overturned on appeal, also by a federal judge, who concluded that the lower court did not have jurisdiction to rule on the Tax Injunction Act. The act precludes federal courts from restraining states to collect their taxes.


Although the Colorado law did not impose a tax or the obligation to collect a tax, the appeals court ordered the Direct Marketing Association’s suit to be dismissed and refiled in Colorado state court to challenge the law.

“So that’s exactly what we did,” said Schaefer in the release. “We went to state court in Colorado on behalf of the DMA and secured a preliminary injunction on the basis that the law would likely be held unconstitutional, just as the federal District Court had concluded.”

At the same time, the Direct Marketing Association asked the U.S. Supreme Court to review the appeals court jurisdictional issue, which the highest court agreed to do in July.

“The Court of Appeals’ decision unduly expanded the reach of the (Tax Injunction Act’s) bar on federal court jurisdiction far beyond any prior court ruling,” said Isaacson. “The DMA’s members believe the ruling presents an unreasonable restriction on their access to federal courts in cases having only a tangential relationship to state taxes, and that the Supreme Court’s guidance regarding the proper scope of the (Tax Injunction Act) is important.”

The Direct Marketing Association’s battle over jurisdiction in the case has drawn support of the U.S. Chamber of Commerce, the National Federation of Independent Businesses and three other organizations that have filed amicus briefs. On the other side of the battle, the state of Colorado has received the support of the National Governors Association and the National Council of State Legislatures.

“There is no doubt that businesses throughout the country that are engaged in interstate commerce feel it is important to be able to challenge over-reaching state laws in federal court. At the same time, states prefer that challenges to their laws, even if only remotely connected to their tax systems, be brought exclusively before state agencies and state courts. So there are many people on both sides who are watching this case closely,” said Schaefer.

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