Dive Brief:

• The Supreme Court unanimously decided Tuesday that federal courts can hear a challenge to Colorado’s e-commerce tax law, which requires out-of-state retailers even without a physical prescence in Colorado to collect the state’s 2.9% sales tax from their Colorado customers.

• A federal court previously agreed with a legal challenge claiming the law violated the Constitutional Commerce Clause, but an appeals court ruled that state laws regarding taxes had to be filed in state court. The Supreme Court ruling reverses this, on the grounds that the challenge is not regarding tax collection per se, but “notice and reporting requirements” about people in other states.

• In reversing the appellate ruling, though, the Court did suggest that there may be other arguments in federal court against challenging the law.

Dive Insight:

This is not necessarily the end of the line for this law, just for this particular argument. While the Supreme Court unanimously agreed that the case needn’t be reserved for state courts, the justices also agreed that there may be other reasons for the federal court to refuse to hear any challenge. The Colorado law was passed in 2010 but has never been put into practice because of the court challenges.

Meanwhile, Justice Anthony Kennedy went so far as to challenge the status quo, where outside state taxes are not collected by retailers that don’t have a physical presence in a given state. He noted that the practice puts local businesses and other retailers that do collect the state taxes at a disadvantage and robs state governments of revenue.