Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-12-01175/USCOURTS-ca10-12-01175-1/pdf.json

Nature of Suit Code: 950
Nature of Suit: Constitutionality of State Statutes
Cause of Action: 

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PUBLISH 

UNITED STATES COURT OF APPEALS 

FOR THE TENTH CIRCUIT 

_________________________________ 

DIRECT MARKETING ASSOCIATION, 

The 

 Plaintiff - Appellee, 

v. 

BARBARA BROHL, in her capacity as 

Executive Director, Colorado Department 

of Revenue, 

 Defendant - Appellant, 

and 

MULTISTATE TAX COMMISSION; 

INTERESTED LAW PROFESSORS; THE 

RETAIL INDUSTRY LEADERS 

ASSOCIATION; RETAIL LITIGATION 

CENTER, INC.; COLORADO RETAIL 

COUNCIL; NATIONAL GOVERNORS 

ASSOCIATION; NATIONAL 

CONFERENCE OF STATE 

LEGISLATURES; COUNCIL OF STATE 

GOVERNMENTS; NATIONAL 

ASSOCIATION OF COUNTIES; 

NATIONAL LEAGUE OF CITIES; 

UNITED STATES CONFERENCE OF 

MAYORS; INTERNATIONAL 

CITY/COUNTY MANAGEMENT 

ASSOCIATION; INTERNATIONAL 

LAWYERS ASSOCIATION; 

GOVERNMENT FINANCE OFFICERS 

ASSOCIATION; TAX FOUNDATION, 

 Amicus Curiae. 

No. 12-1175 

FILED 

United States Court of Appeals 

Tenth Circuit 

February 22, 2016

Elisabeth A. Shumaker 

Clerk of Court

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_________________________________ 

APPEAL FROM THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF COLORADO 

(D.C. NO. 1:10-CV-01546-REB-CBS)

_________________________________ 

Frederick R. Yarger, Solicitor General (Cynthia H. Coffman, Attorney General, 

Stephanie Lindquist Scoville, Senior Assistant Attorney General, Grant T. Sullivan, 

Assistant Solicitor General, Claudia Brett Goldin, First Assistant Attorney General, 

Daniel D. Domenico, Solicitor General, and Melanie J. Snyder, Chief of Staff, with him 

on the briefs), Office of the Attorney General for the State of Colorado, Denver, 

Colorado, appearing for Defendant-Appellant. 

George S. Isaacson (Matthew P. Schaefer, with him on the briefs), Brann & Isaacson, 

Lewiston, Maine, appearing for Plaintiff-Appellee. 

Darien Shanske, University of California, Davis School of Law, Davis, California, Kirk J. 

Stark, University of California, Los Angeles, School of Law, Los Angeles, California, 

and Alan B. Morrison, George Washington University School of Law, Washington, DC, 

for Amicus Curiae Interested Law Professors. 

Lisa Soronen, Executive Director, State & Local Legal Center, Washington, DC, and 

Ronald A. Parsons, Jr., Johnson, Abdallah, Bollweg & Parsons, LLP, Sioux Falls, South 

Dakota, for Amicus Curiae National Governors Association, National Conference of 

State Legislatures, Council of State Governments, National Association of Counties, 

National League of Cities, United States Conference of Mayors, International 

City/County Management Association, International Municipal Lawyers Association, and 

Government Finance Officers Association. 

Helen Hecht, Lila Disque, and Sheldon Laskin, Multistate Tax Commission, Washington, 

DC, for Amicus Curiae Multistate Tax Commission. 

Deborah White, Retail Industry Leaders Association and Retail Litigation Center, 

Arlington, Virginia; Tom Goldstein and Eric Citron, Goldstein & Russell, P.C., Bethesda 

Maryland, for Amicus Curiae Retail Industry Leaders Association, Retail Litigation 

Center, Inc. and Colorado Retail Council. 

Joseph D. Henchman, Tax Foundation, Washington, DC, and Joseph P. Kennedy, 

Kennedy Kennedy & Ives, LLC, Albuquerque, New Mexico, for Amicus Curiae Tax 

Foundation. 

_________________________________ 

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Before BRISCOE, GORSUCH, and MATHESON, Circuit Judges. 

_________________________________ 

MATHESON, Circuit Judge. 

_________________________________ 

I. INTRODUCTION 

When a neighborhood bookstore in Denver sells a book, it must collect sales tax 

from the buyer and remit that payment to the Colorado Department of Revenue 

(“Department”). When Barnes & Noble sells a book over the Internet to a Colorado 

buyer, it must collect sales tax from the buyer and remit. But when Amazon sells a book 

over the Internet to a Colorado buyer, it has no obligation to collect sales tax. This 

situation is largely the product of the Supreme Court’s decision in Quill Corp. v. North 

Dakota, 504 U.S. 298 (1992), which held that, under the dormant Commerce Clause 

doctrine, a state may not require a retailer having no physical presence in that state—e.g., 

Amazon as opposed to Barnes & Noble—to collect and remit sales tax on the sales it 

makes there. 

Faced with Quill, many states, including Colorado, rely on purchasers themselves 

to calculate and pay a use tax on their purchases from out-of-state retailers that do not 

collect sales tax. But few in Colorado or elsewhere pay the use tax despite their legal 

obligation to do so.1

 With the explosive growth of e-commerce, the states’ inability to 

 1

 The parties dispute the precise rate of non-compliance. As the Department 

points out, the 75% compliance rate that DMA cites encompasses both sales and use 

taxes on all Internet sales, including those by retailers with a physical presence that must 

collect taxes. It reports the compliance rate on remote retail sales with no collection 

Continued . . . 

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compel out-of-state retailers to collect sales tax has cost state and local governments 

significant revenue and disadvantaged in-state retailers, who must collect sales tax at the 

point of sale. Justice Kennedy recently said this “may well be a serious, continuing 

injustice faced by Colorado and many other States.” Direct Mktg. Ass’n v. Brohl (“Brohl 

II”), 135 S. Ct. 1124, 1134 (2015) (Kennedy, J., concurring). 

 In 2010, Colorado attempted to address use tax non-compliance by enacting a law 

(“Colorado Law”) that imposes notice and reporting obligations on retailers that do not 

collect sales tax. Plaintiff-Appellee Direct Marketing Association (“DMA”)—a group of 

businesses and organizations that market products via catalogs, advertisements, broadcast 

media, and the Internet—has challenged this law as violating the dormant Commerce 

Clause. 

DMA argues the Colorado Law unconstitutionally discriminates against and 

unduly burdens interstate commerce. The district court agreed with both arguments, 

granted summary judgment to DMA, and permanently enjoined the Department from 

enforcing the Colorado Law. See Direct Mktg. Ass’n v. Huber, No. 10-cv-01546-REB-

 

obligation is, as Justice Kennedy recently pointed out, only 4%. See Direct Mktg. Ass’n 

v. Brohl (“Brohl II”), 135 S. Ct. 1124, 1135 (2015) (Kennedy, J., concurring); see also 

Brief of National Governors Ass’n et al. as Amici Curiae in Support of DefendantAppellant Supporting Reversal at 10, Direct Mktg. Ass’n v. Brohl, No. 12-1175 (10th Cir. 

argued Sept. 29, 2015) (estimating household use-tax compliance at 0-5%, excluding 

motor vehicle purchases). As the Department notes, any figure in the record would be 

significantly lower than the 98.3% compliance rate for sales taxes. 

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CBS, 2012 WL 1079175, at *10-11 (D. Colo. Mar. 30, 2012). Defendant-Appellant 

Barbara Brohl, Executive Director of the Department, appeals.2

 

We have jurisdiction under 28 U.S.C. § 1291. We reverse because the Colorado 

Law does not discriminate against nor does it unduly burden interstate commerce. 

II. BACKGROUND 

A. Factual History 

Colorado has imposed a sales tax since 1935 and a use tax since 1937. The taxes 

are complementary. The sales tax is paid at the point of sale and the use tax is paid when 

property is stored, used, or consumed within Colorado but sales tax was not paid to a 

retailer. See Colo. Rev. Stat. §§ 39-26-104, -202, -204(1). In approving the sales-use 

tax system under the dormant Commerce Clause, the Supreme Court described it as 

follows: 

The practical effect of a system thus conditioned is readily perceived. One 

of its effects must be that retail sellers in Washington will be helped to 

compete upon terms of equality with retail dealers in other states who are 

exempt from a sales tax or any corresponding burden. Another effect, or at 

least another tendency, must be to avoid the likelihood of a drain upon the 

revenues of the state, buyers being no longer tempted to place their orders 

in other states in the effort to escape payment of the tax on local sales. 

Henneford v. Silas Mason Co., 300 U.S. 577, 581 (1937). 

The methods for collecting sales and use taxes vary. In-state retailers subject to 

sales tax collection are tasked with assorted requirements—for example, obtaining a 

 2

 When this lawsuit was filed in district court, the executive director was Roxy 

Huber. Ms. Brohl was later substituted as the defendant. 

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license, calculating state and local taxes, accounting for exemptions, collecting the tax, 

filing a return, remitting the tax to the state, and keeping certain records. In-state retailers 

are also liable for any sales taxes they do not collect and may be subject to fines or 

criminal penalties for non-compliance. 

Because Colorado cannot compel out-of-state retailers without a physical presence 

in the state to collect taxes, the state requires purchasers themselves to calculate and remit 

use taxes on their purchases from out-of-state retailers. The regimes differ greatly in 

effectiveness—compliance with the sales tax is extremely high, and compliance with the 

use tax is extremely low. 

To assist the state in collecting use tax from in-state purchasers, most seemingly 

unaware of their tax responsibility,3

 the Colorado legislature passed a law in 2010 that 

imposes three obligations on retailers that do not collect sales taxes—“non-collecting 

retailers”4

: (1) to send a “transactional notice” to purchasers informing them that they 

may be subject to Colorado’s use tax, see Colo. Rev. Stat. § 39-21-112(3.5)(c)(I); 1 Colo. 

 3 See David Gamage & Devin J. Heckman, A Better Way Forward for State 

Taxation of E-Commerce, 92 B.U. L. Rev. 483, 489 (2012). 

4

 A “non-collecting retailer” is defined as “a retailer that sells goods to Colorado 

purchasers and that does not collect Colorado sales or use tax.” 1 Colo. Code Regs. 

§ 201-1:39-21-112.3.5(1)(a)(i). Retailers who made less than $100,000 in total gross 

sales in Colorado in the previous calendar year, and who reasonably expect gross sales in 

the current calendar year to be less than $100,000, are exempt from the notice and 

reporting obligations. Id. § 201-1:39-21-112.3.5(1)(a)(iii).

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Code Regs. § 201-1:39-21-112.3.5(2);5

 (2) to send Colorado purchasers who buy goods 

from the retailer totaling more than $500 an “annual purchase summary” with the dates, 

categories, and amounts of purchases, reminding them of their obligation to pay use taxes 

on those purchases, Colo. Rev. Stat. § 39-21-112(3.5)(d)(I); 1 Colo. Code Regs. § 201-

1:39-21-112.3.5(3); and (3) to send the Department an annual “customer information 

report” listing their customers’ names, addresses, and total amounts spent, Colo. Rev. 

Stat. § 39-21-112(3.5)(d)(II); 1 Colo. Code Regs. § 201-1:39-21-112.3.5(4). DMA 

objected to these requirements and brought suit against the Executive Director of the 

Department. 

B. Procedural History 

DMA filed a facial challenge to the Colorado Law in federal district court in 2010. 

Among other claims,6

 it contended that the Colorado Law violates the dormant 

Commerce Clause because it discriminates against and unduly burdens interstate 

commerce. 

On March 30, 2012, the district court granted summary judgment to DMA on both 

grounds. Huber, 2012 WL 1079175, at *10-11. The court permanently enjoined the 

Department from enforcing the Colorado Law. Id. 

 5

 The transactional notice requirement can be satisfied in various ways, including 

an online pop-up window, a packing slip, or other methods. 

6

 DMA originally brought eight claims for relief, including First and Fourteenth 

Amendment challenges, but its motion for summary judgment included only the two 

dormant Commerce Clause challenges. We are presented only with those challenges on 

this appeal.

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On August 20, 2013, this panel held that the district court lacked jurisdiction to 

hear DMA’s challenge under the Tax Injunction Act (“TIA”). See Direct Mktg. Ass’n v. 

Brohl (“Brohl I”), 735 F.3d 904, 906 (10th Cir. 2013); 28 U.S.C. § 1341. We remanded 

the case to the district court to dismiss DMA’s claims and dissolve the permanent 

injunction. Brohl I, 735 F.3d at 921. The Tenth Circuit rejected a request for en banc 

review. Direct Mktg. Ass’n v. Brohl, No. 12-1175 (10th Cir. Oct. 1, 2013) (unpublished). 

On December 10, 2013, the district court dismissed DMA’s claims and dissolved 

the permanent injunction. Shortly thereafter, it dismissed the remainder of DMA’s eight 

claims without prejudice. 

DMA then sued the Department in state court. It also petitioned for certiorari to 

the Supreme Court, seeking review of the Tenth Circuit’s dismissal of its claims based on 

the TIA. 

On February 18, 2014, the state district court preliminarily enjoined enforcement 

of the Colorado Law based on DMA’s argument that it facially discriminated against 

interstate commerce in violation of the dormant Commerce Clause. Direct Mktg. Ass’n v. 

Colo. Dep’t of Revenue, No. 13CV34855, at 1, 22-23 (Dist. Ct. Colo. Feb. 18, 2014) 

(unpublished). It rejected DMA’s argument that the Colorado Law placed an undue 

burden on interstate commerce, declining to extend Quill’s holding regarding tax 

collection to regulatory measures. Id. at 24-30. 

On July 1, 2014, the Supreme Court granted DMA’s petition for certiorari. In 

response to this development, the Colorado state court stayed its proceedings and did not 

resolve the parties’ cross-motions for summary judgment. On March 3, 2015, the 

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Supreme Court held the TIA did not strip the federal courts of jurisdiction to hear DMA’s 

challenge and reversed Brohl I. Brohl II, 135 S. Ct. at 1131. It remanded the case for 

further proceedings. 

In the wake of Brohl II’s determination that the TIA’s jurisdictional bar is 

inapplicable, we are now squarely presented with the two dormant Commerce Clause 

challenges decided by the federal district court before our decision in Brohl I. The parties 

have submitted supplemental briefs, and we heard oral argument on September 29, 2015. 

III. DISCUSSION 

 Our discussion proceeds in three parts. First, we present an overview of the 

dormant Commerce Clause doctrine. Second, we analyze the bright-line rule recognized 

in Quill and determine it is limited to tax collection. Third, we review DMA’s dormant 

Commerce Clause claims and conclude the Colorado Law does not discriminate against 

or unduly burden interstate commerce.7

 

 7

 In Brohl II, the Supreme Court noted this court’s discussion of the “comity 

doctrine” in Brohl I and left “it to the Tenth Circuit to decide on remand whether the 

comity argument remains available to Colorado.” 135 S. Ct. at 1134. The Department 

argues “this Court should not dismiss this case based on comity. Consistent with U.S. 

Supreme Court precedent, the Department has affirmatively waived reliance on the 

comity doctrine.” Aplt. Supp. Br. at 23. DMA agrees. Aplee. Supp. Br. at 59. On this 

non-jurisdictional prudential matter, we do not dismiss this case on comity grounds. 

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A. Dormant Commerce Clause 

The Constitution does not contain a provision called the dormant Commerce 

Clause.8

 The doctrine derives from Article I, Section 8, Clause 3—the Commerce Clause 

itself—which provides that “Congress shall have [the] power . . . [t]o regulate commerce 

. . . among the several States.” As to matters within the scope of the Commerce Clause 

power, Congress may choose to regulate, thereby preempting the states from doing so, 

see Gade v. Nat’l Solid Wastes Mgmt. Ass’n, 505 U.S. 88, 96-98 (1992); Rice v. Santa Fe 

Elevator Corp., 331 U.S. 218, 230 (1947), or to authorize the states to regulate, see In re 

Raher, 140 U.S. 545, 555-56 (1891); Prudential Ins. Co. v. Benjamin, 328 U.S. 408, 429-

31 (1946). 

If Congress is silent—neither preempting nor consenting to state regulation—and 

a state attempts to regulate in the face of that silence, the Supreme Court, going back to 

Gibbons v. Ogden, 22 (9 Wheat) U.S. 1, 231-32, 238-39 (1824) (Johnson, J., concurring), 

and Cooley v. Bd. of Port Wardens, 53 U.S. (12 How.) 299, 318-19 (1851), has 

interpreted the Commerce Clause to limit state regulation of interstate commerce by 

applying the negative implications of the Commerce Clause—“these great silences of the 

Constitution,” H.P. Hood & Sons, Inc. v. Du Mond, 336 U.S. 525, 535 (1949); see White 

v. Mass. Council of Constr. Emp’rs, Inc., 460 U.S. 204, 213 (1983). Accordingly, the 

Commerce Clause is both an express grant of power to Congress and an implicit limit on 

 8

 Nowhere does the Constitution explicitly limit state interference with interstate 

commerce except very specific limitations in Article I, Section 10, which prevent states 

from coining money or imposing duties on exports and imports.

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the power of state and local government. See Comptroller of the Treasury of Md. v. 

Wynne, 135 S. Ct. 1787, 1794 (2015); Kleinsmith v. Shurtleff, 571 F.3d 1033, 1039 (10th 

Cir. 2009). 

The focus of a dormant Commerce Clause challenge is whether a state law 

improperly interferes with interstate commerce. The primary concern is economic 

protectionism. See W. Lynn Creamery, Inc. v. Healy, 512 U.S. 186, 192 (1994) 

(quotations omitted) (“Th[e] ‘negative’ aspect of the Commerce Clause prohibits 

economic protectionism—that is, regulatory measures designed to benefit in-state 

economic interests by burdening out-of-state competitors.”); City of Philadelphia v. New 

Jersey, 437 U.S. 617, 624 (1978) (“The crucial inquiry, therefore, must be directed to 

determining whether [a state law] is basically a protectionist measure, or whether it can 

fairly be viewed as a law directed to legitimate local concerns, with effects upon 

interstate commerce that are only incidental.”); Kleinsmith, 571 F.3d at 1039 (“The 

Supreme Court’s jurisprudence under the dormant Commerce Clause ‘is driven by 

concern about economic protectionism.’” (quoting Dep’t of Revenue of Ky. v. Davis, 553 

U.S. 328, 337-38 (2008)). 

As to the state regulation at issue in this case, up to now Congress has been 

silent—it has not preempted or consented to the Colorado Law.9

 The question then is 

 9

 As DMA has noted in its supplemental brief, “since the parties first filed their 

briefs in this case in 2012, Congress has increased its already active scrutiny of the 

issue.” Aplee. Supp. Br. at 50. 

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whether the Constitution’s affirmative grant of the commerce power to Congress should 

be interpreted to circumscribe the Colorado Law. The judiciary’s answer to this question 

need not be final. If we uphold the law, Congress can pass its own law and preempt the 

Colorado Law. Or if we decide the law is unconstitutional under the dormant Commerce 

Clause doctrine, Congress can enact legislation authorizing Colorado to do what we have 

struck down. In that sense, the judicial decision determines which party would need to 

go to Congress to seek a different result. 

The Supreme Court has produced an extensive body of dormant Commerce 

Clause case law.10 As a general matter, state regulation that discriminates against 

interstate commerce will survive constitutional challenge only if the state shows “it 

advances a legitimate local purpose that cannot be adequately served by reasonable 

nondiscriminatory alternatives.” Camps Newfound/Owatonna, Inc. v. Town of Harrison, 

520 U.S. 564, 581 (1997) (quotations omitted). The Court has “required that 

justifications for discriminatory restrictions on commerce pass the ‘strictest scrutiny.’” 

Or. Waste Sys., Inc. v. Dep’t of Envtl. Quality, 511 U.S. 93, 101 (1994) (quoting Hughes 

v. Oklahoma, 441 U.S. 322, 337 (1979)). 

Nondiscriminatory state laws also can be invalidated when they impose an undue 

burden on interstate commerce. See Bibb v. Navajo Freight Lines, Inc., 359 U.S. 520, 

529 (1959). “Where the statute regulates even-handedly to effectuate a legitimate local 

 10 A WestLawNext search of “Dormant Commerce Clause” on February 9, 2016, 

produced a list of 56 United States Supreme Court decisions. 

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public interest, and its effects on interstate commerce are only incidental, it will be 

upheld unless the burden imposed on such commerce is clearly excessive in relation to 

the putative local benefits.” Pike v. Bruce Church, Inc., 397 U.S. 137, 142 (1970). 

“State laws frequently survive this Pike scrutiny . . . .” Davis, 553 U.S. at 339.11

Finally, the Supreme Court has adapted its dormant Commerce Clause 

jurisprudence to review state taxes on interstate commerce. In Complete Auto Transit, 

Inc. v. Brady, 430 U.S. 274 (1977), the Court stated that a tax on interstate commercial 

activity is constitutional if it “[1] is applied to an activity with a substantial nexus with 

the taxing State, [2] is fairly apportioned, [3] does not discriminate against interstate 

commerce, and [4] is fairly related to the services provided by the State.” Id. at 279. As 

discussed more fully below, Complete Auto does not apply here because this case 

involves a reporting requirement and not a tax. 

B. Scope of Quill

The outcome of this case turns largely on the scope of Quill. We conclude it 

applies narrowly to sales and use tax collection. The following discussion explains how 

we arrive at this conclusion, which affects both DMA’s claim for discrimination and for 

undue burden. 

 11 In Energy & Env’t Legal Inst. v. Epel, 793 F.3d 1169, 1172 (10th Cir. 2015), 

cert. denied, 136 S. Ct. 595 (2015), this court recently acknowledged a third type of 

dormant Commerce Clause cases: those involving “certain price control and price 

affirmation laws that control ‘extraterritorial’ conduct.” This category does not apply to 

this appeal. 

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In National Bellas Hess, Inc. v. Department of Revenue, 386 U.S. 753 (1967), the 

Supreme Court addressed whether Illinois could require a Delaware-based mail-order 

business with no physical presence in Illinois to pay use taxes on sales to Illinois 

customers. Id. at 753-54. The seller’s only connection with Illinois was through 

common carrier and U.S. mail. Id. at 754. The Court concluded that such a requirement 

violated the Commerce Clause. 

In Quill, the Supreme Court revisited the holding of Bellas Hess. The Court 

addressed whether North Dakota could “require an out-of-state mail-order house that has 

neither outlets nor sales representatives in the State to collect and pay a use tax on goods 

purchased for use within the State.” 504 U.S. at 301. Quill sold office supplies “through 

catalogs and flyers, advertisements in national periodicals, and telephone calls.” Id. at 

302. The Supreme Court of North Dakota had determined that this requirement was 

constitutional because “the tremendous social, economic, commercial, and legal 

innovations of the past quarter-century have rendered” the holding of Bellas Hess 

“obsolete.” Id. (quotations omitted). The Supreme Court disagreed.12 

In Quill, the Supreme Court applied the four-part test from Complete Auto Transit, 

430 U.S. at 279. The test focuses on a statute’s “practical effect” rather than its “formal 

 12 The Court did overrule Bellas Hess on a separate issue. Bellas Hess had held 

that the Illinois use tax requirement had violated due process principles. The Quill court 

held that, “to the extent that our decisions have indicated that the Due Process Clause 

requires physical presence in a State for the imposition of duty to collect a use tax, we 

overrule those holdings as superseded by developments in the law of due process.” 504 

U.S. at 308. 

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language,” and, as noted above, sustains a tax under the dormant Commerce Clause when 

the tax: (1) “is applied to an activity with a substantial nexus with the taxing State,” (2) 

“is fairly apportioned,” (3) “does not discriminate against interstate commerce,” and (4) 

“is fairly related to the services provided by the State.” Id. The Court decided Quill 

based on the first step of the Complete Auto test. 504 U.S. at 311-15.13 It determined the 

dormant Commerce Clause and Bellas Hess create a safe harbor wherein “vendors whose 

only connection with customers in the taxing State is by common carrier or the United 

States mail . . . are free from state-imposed duties to collect sales and use taxes.” Id. at 

315 (quotations and brackets omitted). The Quill Court relied on Bellas Hess to make a 

stare decisis decision that recognized the physical presence rule as a “bright-line” test. Id. 

at 314-18. 

In Brohl II, the Supreme Court characterized Quill as establishing the principle 

that a state “may not require retailers who lack a physical presence in the State to collect

these taxes on behalf of the [state].” 135 S. Ct. at 1127 (emphasis added). Justice 

Kennedy’s concurrence in Brohl II, 135 S. Ct. at 1135, echoed the numerous 

commentators who have criticized Quill’s bright-line physical presence test.14 Even 

 13 The Court did not address whether the North Dakota use tax violated the third 

step of the Complete Auto test, which asks whether a state tax discriminates against 

interstate commerce. 

14 See, e.g., H. Beau Baez III, The Rush to the Goblin Market: The Blurring of 

Quill’s Two Nexus Tests, 29 Seattle U. L. Rev. 581, 581-82 (2006); Walter Hellerstein, 

Deconstructing the Debate Over State Taxation of Electronic Commerce, 13 Harv. J.L. & 

Tech. 549, 549-50 (2000). 

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though the Supreme Court has not overruled Quill, it has not extended the physical 

presence rule beyond the realm of sales and use tax collection. 

This court’s discussion in American Target Advertising, Inc. v. Giani is instructive 

on this point: 

Both Bellas Hess and Quill concern the levy of taxes upon out-of-state 

entities. The Supreme Court in Quill repeatedly stressed that it was 

preserving Bellas Hess’ bright-line rule ‘in the area of sales and use taxes.’ 

The Utah Act imposes licensing and registration requirements, not tax 

burdens. The Bellas Hess/Quill bright-line rule is therefore inapposite. 

199 F.3d 1241, 1255 (10th Cir. 2000) (quoting Quill, 504 U.S. at 316) (citations 

omitted).15

 15 Other circuits have recognized that Quill is limited to state taxes. See Sam 

Francis Found. v. Christies, Inc., 784 F.3d 1320, 1324 (9th Cir. 2015); Ferndale Labs., 

Inc. v. Cavendish, 79 F.3d 488, 490, 494 (6th Cir. 1996). 

Moreover, the weight of state authority limits Quill’s physical presence 

requirement to sales and use taxes, as opposed to other kinds of taxes. See, e.g., Lamtec 

Corp. v. Dep’t of Revenue, 246 P.3d 788, 794 (Wash. 2011) (en banc) (stating in dicta 

“[t]here is also extensive language in Quill that suggests the physical presence 

requirement should be restricted to sales and use taxes” as opposed to business and 

occupation taxes); KFC Corp. v. Iowa Dep’t of Revenue, 792 N.W.2d 308, 328 (Iowa 

2010) (“[W]e hold that a physical presence is not required under the dormant Commerce 

Clause of the United States Constitution in order for the Iowa legislature to impose an 

income tax on revenue earned by an out-of-state corporation arising from the use of its 

intangibles by franchisees located within the State of Iowa.”); Geoffrey, Inc. v. Comm’r 

of Revenue, 899 N.E.2d 87, 94-95 (Mass. 2009) (explaining “[t]he Supreme Court’s 

decision in Quill discussed a ‘physical-presence’ requirement under the commerce clause 

only in the context of sales and use taxes,” not taxes on royalty income); Tax Comm’r v. 

MBNA Am. Bank, N.A., 640 S.E.2d 226, 232 (W. Va. 2006) (“[W]e conclude that Quill’s 

physical-presence requirement for showing a substantial Commerce Clause nexus applies 

only to use and sales taxes and not to business franchise and corporation net income 

taxes.”); Lanco, Inc. v. Dir., Div. of Taxation, 908 A.2d 176, 176-77 (N.J. 2006) 

(concluding Quill does not prohibit a state from imposing a corporation business tax on 

physically non-present businesses); Geoffrey, Inc. v. S.C. Tax Comm’n, 437 S.E.2d 13, 18 

Continued . . . 

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DMA argues the Supreme Court has cited Quill in three cases reviewing state laws 

that did not impose a tax collection obligation, but these decisions merely describe points 

of law in Quill and do not actually extend its holding to other contexts. See Polar 

Tankers, Inc. v. City of Valdez, 557 U.S. 1, 11 (2009) (invoking Quill’s due process 

analysis in a Tonnage Clause case to support the assertion that “a nondomiciliary 

jurisdiction may constitutionally tax property when that property has a substantial nexus 

with that jurisdiction, and such a nexus is established when the taxpayer avails itself of 

the substantial privilege of carrying on business in that jurisdiction” (quotations 

omitted)); MeadWestvaco Corp. v. Ill. Dep’t of Revenue, 553 U.S. 16, 24-25 (2008) 

(invoking Quill to support the proposition that “[t]he Commerce Clause and the Due 

Process Clause impose distinct but parallel limitations on a State’s power to tax out-ofstate activities,” then relying on Quill’s due process holding); Camps 

Newfound/Owatonna, Inc., 520 U.S. at 572 n.8 (citing Quill in a string-cite for the 

 

& n.4 (S.C. 1993) (concluding the physical-presence requirement of Bellas Hess and 

Quill applies only to sales and use taxes). But see J.C. Penney Nat’l Bank v. Johnson, 19 

S.W.3d 831, 839 (Tenn. Ct. App. 1999) (“Any constitutional distinctions between the 

franchise and excise taxes presented here and the use taxes contemplated in Bellas Hess

and Quill are not within the purview of this court to discern.”). 

These cases generally interpret Quill to apply exclusively to sales and use taxes for 

two reasons relevant here. First, they emphasize the language in Quill itself, which stated 

“we have not, in our review of other types of taxes, articulated the same physicalpresence requirement that Bellas Hess established for sales and use taxes.” 504 U.S. at 

314. Second, they highlight Quill’s stare decisis rationale rooted in the mail order 

industry’s reliance on Bellas Hess—a reliance interest absent in the context of other 

taxes. See KFC Corp., 792 N.W.2d at 324. 

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proposition that Congress may “repudiate or substantially modify” Commerce Clause 

jurisprudence). 

None of the foregoing cases actually invokes Quill’s dormant Commerce Clause 

analysis—only its due process analysis and discussion of congressional authority—and 

they do not demonstrate that Quill extends beyond the actual collection of taxes by outof-state retailers. Indeed, the cases cited by DMA suggest that Quill has not been 

extended beyond that context. 

In sum, we conclude Quill applies narrowly to and has not been extended beyond 

tax collection. The district court erred in holding otherwise. In the following section, we 

address how this conclusion affects DMA’s claims. 

C. DMA’s Claims 

 The district court granted summary judgment on two grounds: the Colorado Law 

(1) impermissibly discriminates against and (2) unduly burdens interstate commerce. As 

to both grounds, we review a district court’s grant of summary judgment de novo, 

evaluating the evidence “in the light most favorable to the non-moving party.” Sabourin 

v. Univ. of Utah, 676 F.3d 950, 957 (10th Cir. 2012) (quotations omitted). We also 

review challenges to the constitutionality of a statute de novo. Shivwits Band of Paiute 

Indians v. Utah, 428 F.3d 966, 972 (10th Cir. 2005). 

 When, as here, the target of state regulation alleges discrimination and undue 

burden, the analysis proceeds as follows: 

When a state statute directly regulates or discriminates against interstate 

commerce, or when its effect is to favor in-state economic interests over 

out-of-state interests, we have generally struck down the statute without 

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further inquiry. When, however, a statute has only indirect effects on 

interstate commerce and regulates evenhandedly, we have examined 

whether the State’s interest is legitimate and whether the burden on 

interstate commerce clearly exceeds the local benefits. . . . In either 

situation the critical consideration is the overall effect of the statute on both 

local and interstate activity. 

Brown-Forman Distillers Corp. v. N.Y. State Liquor Auth., 476 U.S. 573, 579 (1986) 

(citations omitted). 

1. Discrimination

We turn first to DMA’s discrimination claim. A state law generally violates the 

dormant Commerce Clause if it discriminates—either on its face or in its practical 

effects—against interstate commerce. Hughes, 441 U.S. at 336. 

a. District court order 

The district court determined the Colorado Law discriminates against interstate 

commerce in violation of the Commerce Clause. It determined that “the Act and the 

Regulations directly regulate and discriminate against out-of-state retailers and, therefore, 

interstate commerce.” Huber, 2012 WL 1079175, at *4.16 It noted that under state law, 

 16 The district court stopped short of saying the law was facially discriminatory, 

noting: 

On their face the Act and the Regulations do not distinguish between instate retailers (those with a physical presence—a brick and mortar 

presence—in the state) and out-of-state retailers (those with no physical 

presence in the state who make sales to customers in the state). Rather, the 

Act focuses on the distinction between retailers who collect Colorado sales 

tax and those who do not collect Colorado sales tax. 

Id.

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“all retailers doing business in Colorado and selling to Colorado purchasers must obtain a 

sales tax license and must collect and remit the sales tax applicable to each sale,” id.

(citing Colo. Rev. Stat. §§ 39-26-103, -104, -106, -204), and face civil and criminal 

penalties for non-compliance, id. (citing Colo. Rev. Stat. §§ 39-21-118(2), 39-26-

103(1)(a), (4)). It further noted that Quill precludes the state from imposing these 

requirements and penalties on out-of-state retailers without a physical presence in 

Colorado. Id. (citing Quill, 504 U.S. at 315). 

The district court recognized that, although the Colorado Law refers only to “any 

retailer that does not collect Colorado sales tax,” Colo. Rev. Stat. § 39-21-112, the 

combination of state law and Quill guarantees that this provision applies only to out-ofstate retailers. Huber, 2012 WL 1079175, at *4-5. The court concluded, “the veil 

provided by the words of the Act and the Regulations is too thin to support the conclusion 

that the Act and the Regulations regulate in-state and out-of-state retailers evenhandedly.” Id. at *4. 

Although the Department pointed out that some out-of-state retailers voluntarily 

collect and remit Colorado sales tax and therefore are not subject to the Colorado Law, 

the district court determined the Department “may not condition an out-of-state retailer’s 

reliance on its rights on a requirement that the retailer accept a different burden, 

particularly when that burden is unique to out-of-state retailers.” Id. (citing Bendix 

Autolite Corp. v. Midwesco Enters., Inc., 486 U.S. 888, 893 (1988)). 

The district court therefore subjected the law to strict scrutiny, at which stage “the 

burden falls on the State to justify [the statute] both in terms of the local benefits flowing 

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from the statute and the unavailability of nondiscriminatory alternatives adequate to 

preserve the local interests at stake.” Id. at *6 (quoting Hughes, 441 U.S. at 336). The 

court briefly canvassed the interests identified by the Department and the proposed nondiscriminatory alternatives identified by DMA, and ultimately concluded “[t]he record 

contains essentially no evidence to show that the legitimate interests advanced by the 

defendant cannot be served adequately by reasonable nondiscriminatory alternatives.” Id. 

The court concluded the Department failed to carry its burden on the discrimination 

analysis and granted summary judgment to DMA. Id. at *7. 

b. Analysis 

A statute may discriminate against interstate commerce on its face or in 

practical effect. See C & A Carbone, Inc. v. Town of Clarkstown, 511 U.S. 383, 

402 (1994). “The burden to show discrimination rests on the party challenging the 

validity of the statute . . . .” Hughes, 441 U.S. at 336. If the party challenging the 

state law meets its burden to show that the statute is discriminatory, the law “is 

virtually per se invalid.” Or. Waste, 511 U.S. at 99. When the Colorado Law is 

properly viewed in its factual and legal context, DMA has not carried its burden of 

showing discrimination against interstate commerce. 

We consider: (1) whether the Colorado Law facially discriminates against 

interstate commerce, and (2) whether the Colorado Law’s direct effect is to favor in-state 

economic interests over out-of-state interests. 

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i. The Colorado Law Does Not Facially Discriminate Against Interstate 

Commerce 

The Colorado Law is not facially discriminatory. It applies to certain retailers that 

sell goods to Colorado purchasers but do not collect Colorado sales or use taxes. Colo. 

Rev. Stat. § 39-21-112(3.5)(c)(I); 1 Colo. Code Regs. § 201-1:39-21-112.3.5(1)(a)(i). On 

its face, the law does not distinguish between in-state and out-of-state economic interests. 

It instead imposes differential treatment based on whether the retailer collects Colorado 

sales or use taxes. Some out-of-state retailers are collecting retailers, some are not. 

Although the title of the statute—An Act Concerning the Collection of Sales and 

Use Taxes on Sales Made by Out-Of-State Retailers—mentions out-of-state retailers, the 

Supreme Court has cautioned that “[t]he title of a statute cannot limit the plain meaning 

of the text. For interpretive purposes, it is of use only when it sheds light on some 

ambiguous word or phrase.” Pa. Dep’t of Corr. v. Yeskey, 524 U.S. 206, 212 (1998) 

(quotations and alterations omitted). Here, the words of the statute are not ambiguous. 

The text refers to “[e]ach retailer that does not collect Colorado sales tax,” which 

distinguishes between those entities that collect Colorado sales tax and those that do not. 

See Colo. Rev. Stat. §§ 39-21-112(c)(I), (d)(I)(A), (II)(A). We will not rely on the 

statute’s title to limit the plain meaning of the text. 

Moreover, when the Supreme Court has concluded a law facially discriminates 

against interstate commerce, it has done so based on statutory language explicitly 

identifying geographical distinctions. See, e.g., General Motors Corp. v. Tracy, 519 U.S. 

278, 307 n.15 (1997) (“[I]f a State discriminates against out-of-state interests by drawing 

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geographical distinctions between entities that are otherwise similarly situated, such 

facial discrimination will be subject to a high level of judicial scrutiny even if it is 

directed toward a legitimate health and safety goal.”). For example, the Court said the 

statute at issue in Oregon Waste was facially discriminatory because it imposed a higher 

surcharge on disposal of solid waste “generated out-of-state” than solid waste generated 

in-state. 511 U.S. at 96, 99-100. The Colorado Law makes no such geographic 

distinction. See, e.g., Exxon Corp. v. Governor of Md., 437 U.S. 117 (1978) (concluding 

a statute did not facially discriminate by prohibiting producers or refiners of petroleum 

products from operating retail service stations in Maryland, even though no producers or 

refiners were located in the state); Hunt v. Wash. State Apple Advert. Comm’n, 432 U.S. 

333, 352 (1977) (finding facially neutral a law requiring “all closed containers of apples 

sold, offered for sale, or shipped into the State bear no grade other than the applicable 

U.S. grade or standard” (quotations omitted)). As explained above, the Colorado Law 

distinguishes between those retailers that collect Colorado sales and use tax and those 

that do not.17

 17 DMA contends the Colorado Law fails the internal consistency test. The test 

“looks to the structure of the tax at issue to see whether its identical application by every 

State in the Union would place interstate commerce at a disadvantage as compared with 

commerce intrastate.” Comptroller of Treasury of Md. v. Wynne, 135 S. Ct. 1787, 1802 

(2015) (quotations omitted). The test has been confined to dormant Commerce Clause 

review of state taxes. It is therefore inapplicable here because, again, the Colorado Law 

imposes a reporting requirement, not a tax. 

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In the absence of facial discrimination, a state law may nonetheless discriminate 

against interstate commerce in its direct effects. See Kleinsmith, 571 F.3d at 1040 (noting 

a law “may be neutral in its terms and still discriminate against interstate commerce”); 

Hunt, 432 U.S. at 350-52. We therefore next consider the direct effects of the Colorado 

Law. 

ii. The Colorado Law Is Not Discriminatory In Its Direct Effects 

A state law may violate the dormant Commerce Clause “when its effect is to favor 

in-state economic interests over out-of-state interests.” Brown-Forman, 476 U.S. at 579. 

In this inquiry, “the critical consideration is the overall effect of the statute on both local 

and interstate activity.” Id. We conclude the Colorado Law does not favor in-state 

economic interests and is not discriminatory in its effects. 

We have previously said, “‘The Supreme Court has not directly spoken to the 

question of what showing is required to prove discriminatory effect where, as here, a 

statute is evenhanded on its face,” Kleinsmith, 571 F.3d at 1040 (quoting Cherry Hill 

Vineyard, LLC v. Baldacci, 505 F.3d 28, 36 (1st Cir. 2007)). But we have held “the party 

claiming discrimination has the burden to put on evidence of a discriminatory effect on 

commerce that is ‘significantly probative, not merely colorable.’” Id. at 1040-41 

(quoting All. of Auto Mfrs. v. Gwadosky, 430 F.3d 30, 40 (1st Cir. 2005)). The party 

claiming discrimination must show that the state law benefits local actors and burdens 

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out-of-state actors, and the result must “alter[] the competitive balance between in-state 

and out-of-state firms.” Id. at 1041 (quotations omitted).18 

1) DMA’s arguments on differential treatment 

As a preliminary matter, DMA is incorrect that (a) “any differential treatment” 

between in-state and out-of-state entities establishes a violation of the dormant 

Commerce Clause, and (b) the Colorado Law should be viewed in isolation. Three 

principles are instructive. 

First, the Supreme Court has repeatedly indicated that differential treatment must 

adversely affect interstate commerce to the benefit of intrastate commerce to trigger 

dormant Commerce Clause concerns. In that regard, “‘discrimination’ simply means 

differential treatment of in-state and out-of-state economic interests that benefits the 

former and burdens the latter.” Or. Waste, 511 U.S. at 99; Kleinsmith, 571 F.3d at 1040 

(“Discriminatory laws are those that ‘mandate differential treatment of in-state and outof-state economic interests that benefits the former and burdens the latter.’” (quoting 

Granholm v. Heald, 544 U.S. 460, 472 (2005)). For that reason, differential treatment 

that benefits or does not affect out-of-state interests is not a violation of the dormant 

Commerce Clause. North Dakota v. United States, 495 U.S. 423, 439 (1990) (“A 

 18 In Kleinsmith, we determined the plaintiff had not presented evidence sufficient 

to establish a discriminatory effect because he had failed to show how the state law at 

issue “alters the competitive balance between resident and nonresident attorneys.” Id. at 

1042. “In light of Exxon, Mr. Kleinsmith should at least have produced evidence that the 

work he had performed was now being done by attorneys who are residents of Utah.” Id. 

at 1043. DMA bears a similar burden here. 

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regulatory regime which so favors the Federal Government cannot be considered to 

discriminate against it.”). 

In light of the Colorado consumers’ preexisting obligations to pay sales or use 

taxes whether they purchase goods from a collecting or non-collecting retailer, the 

reporting obligation itself does not give in-state retailers a competitive advantage. We 

further note the Supreme Court has upheld differential tax reporting obligations and 

apportionment formulas for non-resident corporations, see, e.g., Underwood Typewriter 

Co. v. Chamberlain, 254 U.S. 113, 118-20 (1920); Container Corp. of Am. v. Franchise 

Tax Bd., 463 U.S. 159, 169-70 (1983), and administrative mechanisms to facilitate tax 

collection, see, e.g., Travis v. Yale & Towne Mfg. Co., 252 U.S. 60 (1920).19

Second, equal treatment requires that those similarly situated be treated alike. See

City of Cleburne v. Cleburne Living Ctr., 473 U.S. 432, 439 (1985) (stating that under the 

Equal Protection Clause, “all persons similarly situated should be treated alike”). 

Conversely, disparate treatment is not unequal treatment or discrimination if the subjects 

of the treatment are not similarly situated. This basic principle of equal protection law 

applies to whether a state law discriminates against out-of-state actors relative to in-state 

actors. In General Motors Corp. v. Tracy, 519 U.S. 278 (1997), the Supreme Court 

upheld an Ohio statute that exempted local natural gas distribution companies (“LDCs”) 

 19 Although Travis involved a claim under the Privileges and Immunities Clause, 

the Supreme Court in Wynne recently relied on Travis to resolve a claim under the 

Commerce Clause. See Wynne, 135 S. Ct. at 1799-1800 (citing Travis, 252 U.S. at 75, 

79-80). 

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from sales and use tax while out-of-state producers and marketers had to collect it. Id. at 

281-82. The Court said the in-state and out-of-state companies were not similarly 

situated and did not have to be treated the same. Id. at 298-99, 310. Here, the noncollecting out-of-state retailers are not similarly situated to the in-state retailers, who 

must comply with tax collection and reporting requirements that are not imposed on the 

out-of-state non-collecting retailers. 

Third, despite DMA’s myopic view to the contrary, the Supreme Court has 

repeatedly stressed that laws are not to be understood in isolation, but in their broader 

context. In West Lynn Creamery, the Court expressly declined to “analyze separately two 

parts of an integrated regulation,” and said it is “the entire program . . . that 

simultaneously burdens interstate commerce and discriminates in favor of local 

producers.” 512 U.S. at 201; see also Ala. Dep’t of Revenue v. CSX Transp., Inc. (“CSX 

II”), 135 S. Ct. 1136, 1143 (2015) (“It is undoubtedly correct that the ‘tax’ (singular) 

must discriminate—but it does not discriminate unless it treats railroads differently from 

other similarly situated taxpayers without sufficient justification.”);20 North Dakota, 495 

U.S. at 435 (“[T]he question whether a state regulation discriminates against the Federal 

Government cannot be viewed in isolation. Rather, the entire regulatory system should 

be analyzed to determine whether it is discriminatory with regard to the economic 

 20 CSX II was not a dormant Commerce Clause case, but in analyzing the 4-R Act, 

the Court borrowed from dormant Commerce Clause precedent to explain a law should 

be assessed in context to determine whether it discriminates. Id. at 1143 (citing Gregg 

Dyeing Co. v. Query, 286 U.S. 472, 479-80 (1932)). 

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burdens that result.” (quotations omitted)); Gregg Dyeing Co. v. Query, 286 U.S. 472, 

479-80 (1932) (“What is required is that state action, whether through one agency or 

another, or through one enactment or more than one, shall be consistent with the 

restrictions of the Federal Constitution. There is no demand in that Constitution that the 

state shall put its requirements in any one statute. It may distribute them as it sees fit, if 

the result, taken in its totality, is within the state’s constitutional power.”). 

The broader context helps determine whether a law “alters the competitive balance 

between in-state and out-of-state firms.” Kleinsmith, 571 F.3d at 1041 (quotations 

omitted). Here, the reporting requirements are designed to increase compliance with 

preexisting tax obligations, and apply only to retailers that are not otherwise required to 

comply with the greater burden of tax collection and reporting. DMA has not shown the 

Colorado Law imposes a discriminatory economic burden on out-of-state vendors when 

viewed against the backdrop of the collecting retailers’ tax collection and reporting 

obligations. And as discussed more fully below, even if we limit our comparative 

analysis to the notice and reporting obligations imposed on collecting and non-collecting 

vendors, DMA has failed to show the Colorado Law unconstitutionally discriminates 

against interstate commerce. 

2) Quill and discriminatory effect 

Whether the Colorado Law works a discriminatory effect on interstate commerce 

turns on the reach of Quill. The Department contends the law is not discriminatory 

because out-of-state retailers can either (a) comply with the notice and reporting 

requirements or (b) collect and remit taxes like in-state retailers. DMA contends this 

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argument fails because Quill protects out-of-state retailers from having to collect and 

remit taxes, making the Colorado Law’s only function to impose new notice and 

reporting responsibilities on out-of-state retailers that in-state retailers need not perform. 

As an initial matter, we disagree with the Department that out-of-state retailers’ 

having the option to collect and remit sales taxes makes the Colorado Law nondiscriminatory. Quill unequivocally holds that out-of-state retailers without a physical 

presence in the state need not collect sales tax. See Quill, 504 U.S. at 301-02. Quill 

privileges out-of-state retailers in that regard, and the possibility that they might choose 

to give up that privilege rather than comply with the challenged Colorado Law does not 

make the Colorado Law constitutional. Bendix, 486 U.S. at 893. 

But Quill applies only to the collection of sales and use taxes, and the Colorado 

Law does not require the collection or remittance of sales and use taxes. Instead, it 

imposes notice and reporting obligations. Those notice and reporting obligations are 

discriminatory only if they constitute “differential treatment of in-state and out-of-state 

economic interests that benefits the former and burdens the latter,” Or. Waste, 511 U.S. at 

99, and thereby “alter[] the competitive balance between in-state and out-of-state firms,” 

Kleinsmith, 571 F.3d at 1041 (quotations omitted). DMA has not produced significant 

probative evidence establishing such discriminatory treatment. 

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3) Comparative regulation and DMA’s burden 

Even if we limit our comparative analysis to the regulatory requirements imposed 

on in-state retailers and out-of-state retailers, DMA has not demonstrated the Colorado 

Law unconstitutionally discriminates against interstate commerce. 

In addition to collecting sales taxes, holding them in trust, and remaining liable for 

any sales and use tax due on a transaction, see Colo. Rev. Stat. §§ 39-26-105, -118(1), instate retailers must comply with numerous requirements, including obtaining a license; 

calculating the state and local tax due while accounting for any tax exemptions; filing a 

return; remitting the tax to the State; and maintaining various records. See Colo. Rev. 

Stat. §§ 39-26-101 to -129. 

Of these notice and reporting requirements, in-state retailers can be compelled to 

collect and remit sales taxes while non-collecting out-of-state retailers cannot. Quill, 504 

U.S. at 301-02. But Quill does not establish that out-of-state retailers are free from all 

regulatory requirements—only tax collection and liability. See id. at 315 (“Under Bellas 

Hess, . . . vendors [without a physical presence in the state] are free from state-imposed 

duties to collect sales and use taxes.” (emphasis added)). 

As the Supreme Court recently explained in CSX II: 

It does not accord with ordinary English usage to say that a tax 

discriminates against a rail carrier if a rival who is exempt from that tax 

must pay another comparable tax from which the rail carrier is exempt. If 

that were true, both competitors could claim to be disfavored—

discriminated against—relative to each other. Our negative Commerce 

Clause cases endorse the proposition that an additional tax on third parties 

may justify an otherwise discriminatory tax. We think that an alternative, 

roughly equivalent tax is one possible justification that renders a tax 

disparity nondiscriminatory. 

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135 S. Ct. at 1143 (citations omitted)); see also Travis, 252 U.S. at 76 (“The contention 

that an unconstitutional discrimination against noncitizens arises out of the provision of 

section 366 confining the withholding at source to the income of nonresidents is 

unsubstantial. That provision does not in any wise increase the burden of the tax upon 

nonresidents, but merely recognizes the fact that as to them the state imposes no personal 

liability, and hence adopts a convenient substitute for it.”). 

DMA does not point to any evidence establishing that the notice and reporting 

requirements for non-collecting out-of-state retailers are more burdensome than the 

regulatory requirements in-state retailers already face. Because DMA has not carried its 

burden and identified significant probative evidence of discrimination, see Kleinsmith, 

571 F.3d at 1040, it has not established that the Colorado Law discriminates in its direct 

effects. 

* * * 

Because we conclude the Colorado Law is not discriminatory, “it is [not] virtually 

per se invalid,” and it need not survive strict scrutiny. Or. Waste, 511 U.S. at 99. State 

laws that are not discriminatory must nevertheless not unduly burden interstate 

commerce. See Davis, 553 U.S. at 353. 

D. Undue Burden 

Whether a state law unduly burdens interstate commerce is a separate inquiry from 

whether a state law discriminates against interstate commerce. In Quill, the Supreme 

Court explained that the first step of the Complete Auto test—whether a tax “is applied to 

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an activity with a substantial nexus with the taxing State”—the step on which the Quill 

decision was based, “limit[s] the reach of state taxing authority so as to ensure that state 

taxation does not unduly burden interstate commerce.” 504 U.S. at 311, 313. 

The district court decided the undue burden issue on the basis that Quill’s brightline rule applied. DMA limits its undue burden argument to Quill and also states that 

“[b]ecause the Act is discriminatory, the test generally applied to even-handed 

regulations plainly does not apply in this case,” Aplee. Supp. Br. at 23 n.8 (citing Pike, 

397 U.S. at 142).21 We therefore address undue burden based on Quill and do not reach a 

balancing analysis under Pike, 397 U.S. at 142. 

1. District Court Order

The district court determined the Colorado Law unduly burdens interstate 

commerce in violation of the dormant Commerce Clause. It noted Quill counsels looking 

beyond the formal language of a statute and considering its practical effect. See Quill, 

504 U.S. at 310. Although Quill itself narrowly focused on sales and use taxes, the 

 21 In the same footnote, DMA argues Colorado’s expert testimony shows the 

burdens imposed on non-collecting retailers—“an estimated $25 million to $60 million in 

the first year, and $10 million annually thereafter”—are “grossly excessive” compared to 

the initial annual revenue of $12.5 million estimated to result from the Colorado Law. 

Aplee. Supp. Br. at 23 n.8. The district court did not analyze DMA’s claims under the 

Pike balancing test, and DMA’s single sentence is inadequate to present a Pike balancing 

argument on appeal. DMA also “refers the Court” to DMA’s argument section of its 

brief filed in 2012, id. at 2 n.1, but when we granted DMA’s motion to file supplemental 

briefs after the case was remanded by the Supreme Court, we “direct[ed] the parties to 

provide full briefing on the Commerce Clause claims . . . and any other issues the parties 

consider pertinent to this appeal on remand.” Direct Mktg. Ass’n v. Brohl, No. 12-1173, 

at *1 (10th Cir. Apr. 13, 2015) (unpublished) (emphasis added). 

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district court noted that the Colorado Law “require[s] out-of-state retailers to gather, 

maintain, and report information, and to provide notices to their Colorado customers and 

to the [Department],” and “[t]he sole purpose of these requirements is to enhance the 

collection of use taxes by the State of Colorado.” Huber, 2012 WL 1079175, at *8. As a 

result, the district court concluded “that the burdens imposed by the Act and the 

Regulations are inextricably related in kind and purpose to the burdens condemned in 

Quill.” Id. On that basis, the court determined the Colorado Law imposed an undue 

burden on interstate commerce. Id. at *9. 

2. Analysis

 DMA relies solely on Quill for its undue burden claim, and the district court 

limited its analysis of undue burden to Quill. We conclude that the Colorado Law does 

not impose an undue burden on interstate commerce.22 Quill is not binding in light of 

Supreme Court and Tenth Circuit decisions construing it narrowly to apply only to the 

duty to collect and remit taxes. 

As explained earlier, Quill is limited to the narrow context of tax collection. In 

Brohl II, the Supreme Court not only characterized Quill as establishing the principle that 

a state “may not require retailers who lack a physical presence in the State to collect these 

taxes on behalf of the Department,” 135 S. Ct. at 1127 (emphasis added), it also 

 22 We note that the Colorado state district court that addressed whether the 

Colorado Law imposes an undue burden under Quill came to the same conclusion. 

Direct Mktg. Ass’n, No. 13CV34855, at 28-30. 

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concluded that the notice and reporting requirements of the Colorado Law do not 

constitute a form of tax collection, id. at 1130-31. As the Court repeatedly stated in its 

TIA analysis, the Colorado Law does not require out-of-state retailers to assess, levy, or 

collect use tax on behalf of Colorado. Id. at 1131 (“The TIA is keyed to the acts of 

assessment, levy, and collection themselves, and enforcement of the notice and reporting 

requirements is none of these.”). The Court determined “the notice and reporting 

requirements precede the steps of ‘assessment’ and ‘collection,’” in part because “[a]fter 

each of these notices or reports is filed, the State still needs to take further action to assess 

the taxpayer’s use-tax liability and to collect payment from him.” Id.23 

As a result, Quill—confined to the sphere of sales and use tax collection—is not 

controlling. The Brohl II Court’s logic for reversing Brohl I precludes any other result. 

It reversed the panel’s TIA determination precisely because it determined the relief 

sought in this litigation—invalidating the Colorado Law—would not “enjoin, suspend or 

restrain the assessment, levy or collection of any tax under State law.” Id. at 1127 

(quoting 28 U.S.C. § 1341). The holding in Brohl II cannot be squared with the district 

court’s determination that the Colorado Law functionally compels the collection of taxes, 

see Huber, 2012 WL 1079175, at *8. The Court’s conclusion in Brohl II controls. 

DMA’s success in Brohl II leads to the demise of its undue burden argument here. 

 23 The Department did not “seriously contend” the notice and reporting 

requirements constituted a levy. Id.

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- 35 - 

Having determined Quill is not controlling in the instant case, we cannot identify 

any good reason to sua sponte extend the bright-line rule of Quill to the notice and 

reporting requirements of the Colorado Law. Because the Colorado Law’s notice and 

reporting requirements are regulatory and are not subject to the bright-line rule of Quill, 

this ends the undue burden inquiry.24

IV. CONCLUSION 

Applying the law to the record, we hold the Colorado Law does not violate the 

dormant Commerce Clause because it does not discriminate against or unduly burden 

interstate commerce. We therefore reverse the district court’s order granting summary 

judgment and remand for further proceedings consistent with this opinion. We conclude 

by noting the Supreme Court’s observation in Quill that Congress holds the “ultimate 

power” and is “better qualified to resolve” the issue of “whether, when, and to what 

extent the States may burden interstate [retailers] with a duty to collect [sales and] use 

taxes.” 504 U.S. at 318.25

 24 At this point, the regulatory requirements must only satisfy due process 

requirements, and DMA has not made a due process challenge in its motion for summary 

judgment or its arguments on appeal. 

25 We grant the motions for leave to file amici briefs and the motion for leave to 

file a joint reply in support of the motions for leave to file amici briefs.

Appellate Case: 12-1175 Document: 01019574558 Date Filed: 02/22/2016 Page: 35 
No. 12-1175, Direct Marketing Association v. Brohl

GORSUCH, Circuit Judge, concurring.

I agree with everything the court has said and write only to acknowledge a

few additional points that have influenced my thinking in this case. 

In our legal order past decisions often control the outcome of present

disputes. Some criticize this feature of our law, suggesting that respect for

judicial precedent invests dead judges with too much authority over living

citizens. They contend, too, that it invites current judges to avoid thinking for

themselves and to succumb instead in “judicial somnambulism.” Jerome Frank,

Law and the Modern Mind 171 (1930). But in our legal order judges distinguish

themselves from politicians by the oath they take to apply the law as it is, not to

reshape the law as they wish it to be. And in taking the judicial oath judges do

not necessarily profess a conviction that every precedent is rightly decided, but

they must and do profess a conviction that a justice system that failed to attach

power to precedent, one that surrendered similarly situated persons to wildly

different fates at the hands of unconstrained judges, would hardly be worthy of

the name.

At the center of this appeal is a claim about the power of precedent. In

fact, the whole field in which we are asked to operate today — dormant

commerce clause doctrine — might be said to be an artifact of judicial precedent. 

After all, the Commerce Clause is found in Article I of the Constitution and it

grants Congress the authority to adopt laws regulating interstate commerce. 

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Meanwhile, in dormant commerce clause cases Article III courts have claimed the

(anything but dormant) power to strike down some state laws even in the absence

of congressional direction. See, e.g., Comptroller of Treasury of Md. v. Wynne,

135 S. Ct. 1787, 1808 (2015) (Scalia, J., dissenting); Camps Newfound/Owatonna,

Inc. v. Town of Harrison, 520 U.S. 564, 614-17 (1997) (Thomas, J., dissenting). 

And the plaintiffs’ attempt in this case to topple Colorado’s statutory scheme

depends almost entirely on a claim about the power of a single dormant commerce

clause decision: Quill Corp. v. North Dakota, 504 U.S. 298 (1992). 

Everyone before us acknowledges that Quill is among the most contentious

of all dormant commerce clause cases. Everyone before us acknowledges that it’s

been the target of criticism over many years from many quarters, including from

many members of the Supreme Court. See Maj. Op. at 15 n.14 (citing scholarly

literature); Quill, 504 U.S. at 319-20 (Scalia, J., concurring in part and concurring

in the judgment); id. at 321-33 (White, J., concurring in part and dissenting in

part); Direct Mktg. Ass’n v. Brohl, 135 S. Ct. 1124, 1134-35 (2015) (Kennedy, J.,

concurring). But, the plaintiffs remind us, Quill remains on the books and we are

duty-bound to follow it. And about that much the plaintiffs are surely right: we

are obliged to follow Quill out of fidelity to our system of precedent whether or

not we profess confidence in the decision itself. For while a court may in rare

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circumstances overrule a decision of its own devise, this court may of course

never usurp the power to overrule a decision of the Supreme Court. 

With that much plain enough, the question remains what exactly Quill

requires of us. Later (reading) courts faced with guidance from earlier (writing)

courts sometimes face questions how best to interpret that guidance. And the

parties before us today offer wildly different accounts of Quill. Most narrowly,

everyone agrees that Quill’s holding forbids states from imposing sales and use

tax collection duties on firms that lack a physical presence in-state. And

everyone agrees that Colorado’s law doesn’t quite go that far. While Colorado

requires in-state brick-and-mortar firms to collect sales and use taxes, it asks outof-state mail order and internet firms only to supply reports designed to enable

the state itself to collect the taxes in question. Indeed, Colorado suggests that its

statutory scheme carefully and consciously stops (just) short of doing what

Quill’s holding forbids.

But as the plaintiffs note, that is hardly the end of it. Our obligation to

precedent obliges us to abide not only a prior case’s holding but also to afford

careful consideration to the reasoning (the “ratio decidendi”) on which it rests. 

And surely our respect for a prior decision’s reasoning must be at its zenith when

the decision emanates from the Supreme Court. Indeed, our court has said that it

will usually defer even to the dicta (not just the ratio) found in Supreme Court

decisions. See, e.g., Tokoph v. United States, 774 F.3d 1300, 1303-04 (10th Cir.

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2014). And building on this insight the plaintiffs argue that respect for Quill’s

ratio, if not its holding, requires us to strike down Colorado’s law. After all, the

plaintiffs note, Colorado’s regulatory scheme seeks to facilitate the collection of

sales and use taxes by requiring out-of-state firms to satisfy various notice and

reporting obligations — burdens comparable in their severity to those associated

with collecting the underlying taxes themselves. 

It’s a reasonable argument, but like my colleagues I believe there’s a reason

it’s wrong. The reason lies in the exceptional narrowness of Quill’s ratio. If the

Court in Quill had suggested that state laws commanding out-of-state firms to

collect sales and use taxes violated dormant commerce clause doctrine because

they are too burdensome, then I would agree that we would be obliged to ask

whether Colorado’s law imposes a comparable burden. But Quill’s ratio doesn’t

sound in the comparability of burdens — it is instead and itself all about the

respect due precedent, about the doctrine of stare decisis and the respect due a

still earlier decision. See Quill, 504 U.S. at 317; id. at 320 (Scalia, J., concurring

in part and concurring in the judgment); Brohl, 135 S. Ct. at 1134 (Kennedy, J.,

concurring). 

This distinction proves decisive. Some years before Quill, in National

Bellas Hess, Inc. v. Department of Revenue of Illinois, 386 U.S. 753 (1967), the

Supreme Court held that states could not impose use tax collection duties on outof-state firms. In Quill, the Court openly reconsidered that decision and

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ultimately chose to retain its rule — but did so only to protect the reliance

interests that had grown up around it. Indeed, the Court expressly acknowledged

that Bellas Hess very well might have been decided differently under

“contemporary Commerce Clause jurisprudence” and cases like Complete Auto

Transit, Inc. v. Brady, 430 U.S. 274 (1977). Quill, 504 U.S. at 311; cf. Billy

Hamilton, Remembrance of Things Not So Past: The Story Behind the Quill

Decision, 59 St. Tax Notes Mag. 807 (2011). The Court also expressly

acknowledged that states can constitutionally impose tax and regulatory burdens

on out-of-state firms that are more or less comparable to sales and use tax

collection duties. See Quill, 504 U.S. at 311-12, 314-15. And the Court

expressly acknowledged that this dichotomy — between (impermissible) sales and

use tax collection obligations and (permissible) comparable tax and regulatory

burdens — is pretty “artificial” and “formalistic.” Id. Given all this, respect for

Quill’s reasoning surely means we must respect the Bellas Hess rule it retained. 

But just as surely it means we are under no obligation to extend that rule to

comparable tax and regulatory obligations. 

In fact, this much is itself a matter of precedent for this court and many

others have already held Quill does nothing to forbid states from imposing

regulatory and tax duties of comparable severity to sales and use tax collection

duties. See, e.g., Am. Target Advert., Inc. v. Giani, 199 F.3d 1241, 1255 (10th

Cir. 2000), cert. denied, 531 U.S. 811 (2000); KFC Corp. v. Iowa Dep’t of

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Revenue, 792 N.W.2d 308, 324-28 (Iowa 2010), cert. denied, 132 S. Ct. 97 (2011)

(mem.); Capital One Bank v. Comm’r of Revenue, 899 N.E.2d 76, 84-86 (Mass.

2009), cert. denied, 557 U.S. 919 (2009); Tax Comm’r v. MBNA Am. Bank, N.A.,

640 S.E.2d 226, 232-34 (W. Va. 2006), cert. denied sub nom FIA Card Servs.,

N.A. v. Tax Comm’r, 551 U.S. 1141 (2007).

It may be rare for Supreme Court precedents to suffer as highly a

“distinguished” fate as Bellas Hess — but it isn’t unprecedented. Take baseball. 

Years ago and speaking through Justice Holmes, the Supreme Court held baseball

effectively immune from the federal antitrust laws and did so reasoning that the

“exhibition[] of base ball” by professional teams crossing state lines didn’t

involve “commerce among the States.” Federal Baseball Club of Balt., Inc. v.

Nat’l League of Prof’l Baseball Clubs, 259 U.S. 200, 208-09 (1922). Since then

the Supreme Court has recognized that other organizations offering “exhibitions”

in various states do engage in interstate commerce and are subject to antitrust

scrutiny. E.g., United States v. Shubert, 348 U.S. 222, 230-31 (1955). But

though it has long since rejected the reasoning of Federal Baseball, the Supreme

Court has still chosen to retain the holding itself — continuing to rule baseball

effectively immune from the antitrust laws, if now only out of respect for the

reliance interests the Federal Baseball decision engendered in that particular

industry. Toolson v. N.Y. Yankees, Inc., 346 U.S. 356, 357 (1953) (per curiam). 

And, of course, Congress has since codified baseball’s special exemption. See 15

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U.S.C. § 26b. So it is that the baseball rule now applies only to baseball itself,

having lost every away game it has played. 

Accepting at this point that Quill doesn’t require us to declare Colorado’s

law unconstitutional, the question remains whether some other principle in

dormant commerce clause doctrine might. For their part the plaintiffs identify

(only) one other potential candidate, suggesting that Colorado’s law runs afoul of

the principle that states may not discriminate against out-of-state firms, a

principle often associated with West Lynn Creamery, Inc. v. Healy, 512 U.S. 186

(1994). And to the extent that there’s anything that’s uncontroversial about

dormant commerce clause jurisprudence it may be this anti-discrimination

principle, for even critics of dormant commerce clause doctrine often endorse it

even as they suggest it might find a more textually comfortable home in other

constitutional provisions. E.g., Camps Newfound, 520 U.S. at 610 (Thomas, J.,

dissenting). 

But any claim of discrimination in this case is easily rejected. The

plaintiffs haven’t come close to showing that the notice and reporting burdens

Colorado places on out-of-state mail order and internet retailers compare

unfavorably to the administrative burdens the state imposes on in-state brick-andmortar retailers who must collect sales and use taxes. If anything, by asking us to

strike down Colorado’s law, out-of-state mail order and internet retailers don’t

seek comparable treatment to their in-state brick-and-mortar rivals, they seek

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more favorable treatment, a competitive advantage, a sort of judicially sponsored

arbitrage opportunity or “tax shelter.” Quill, 504 U.S. at 329 (White, J.,

concurring in part and dissenting in part). 

Of course, the mail order and internet retailer plaintiffs might respond that,

whatever its propriety, they are entitled to a competitive advantage over their

brick-and-mortar competitors thanks to Bellas Hess and Quill. And about that

much (again) I cannot disagree. It is a fact — if an analytical oddity — that the

Bellas Hess branch of dormant commerce clause jurisprudence guarantees a

competitive benefit to certain firms simply because of the organizational form

they choose to assume while the mainstream of dormant commerce clause

jurisprudence associated with West Lynn Creamery is all about preventing

discrimination between firms.1

 And the plaintiffs might well complain that the

competitive advantage they enjoy will be diluted by our decision in this case. 

Indeed, if my colleagues and I are correct that states may impose notice and

reporting burdens on mail order and internet retailers comparable to the sales and

1

 An oddity that, if anything, seems to grow by the day, for if it were ever

thought that mail-order retailers were small businesses meriting

(constitutionalized, no less) protection from behemoth brick-and-mortar

enterprises, that thought must have evaporated long ago. Anecdotal evidence to

be sure but consider: today’s e-commerce retail leader, Amazon, recorded nearly

ninety billion dollars in sales in 2014 while the vast majority of small businesses

recorded no online sales at all. See Amazon.com, Inc., Annual Report on SEC

Form 10-K at 17 (2014); Ryan Lunka, Retail Data: 100 Stats About Retail,

eCommerce & Digital Marketing (July 9, 2015),

https://www.nchannel.com/blog/retail-data-ecommerce-statistics/.

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use tax collection obligations they impose on brick-and-mortar firms, many (all?)

states can be expected to follow Colorado’s lead and enact statutes like the one

now before us. 

But this result too seems to me, as it does to my colleagues, entirely

consistent with the demands of precedent. After all, by reinforcing an admittedly

“formalistic” and “artificial” distinction between sales and use tax collection

obligations and other comparable regulatory and tax duties, Quill invited states to

impose comparable duties. In this way, Quill might be said to have attached a

sort of expiration date for mail order and internet vendors’ reliance interests on

Bellas Hess’s rule by perpetuating its rule for the time being while also

encouraging states over time to find ways of achieving comparable results

through different means. In this way too Quill is perhaps unusual but hardly

unprecedented, for while some precedential islands manage to survive indefinitely

even when surrounded by a sea of contrary law (e.g., Federal Baseball), a good

many others disappear when reliance interests never form around them or erode

over time (e.g., Montejo v. Louisiana, 556 U.S. 778, 792-93 (2009)). And Quill’s

very reasoning — its ratio decidendi — seems deliberately designed to ensure

that Bellas Hess’s precedential island would never expand but would, if anything,

wash away with the tides of time. 

I respectfully concur.

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