Direct Marketing Association, The v. Huber

Filing 16

DECLARATION of Jerry Cerasale regarding MOTION for Preliminary Injunction with Incorporated Memorandum of Law 15 by Plaintiff Direct Marketing Association, The. (Isaacson, George)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Civil Action No. 10–CV–01546–REB–CBS

The Direct Marketing Association,
Plaintiff,
v.
Roxy Huber, in her capacity as Executive
Director, Colorado Department of Revenue,
Defendant.
______________________________________________________________________
DECLARATION OF JERRY CERASALE
______________________________________________________________________
I, Jerry Cerasale, pursuant to 28 U.S.C. § 1746, do depose and state as follows:
1. I am the Senior Vice President, Government Affairs for the Direct Marketing
Association (“DMA”), the plaintiff in this action. In connection with my responsibilities for
the DMA, I have been directly involved in the DMA’s work monitoring and responding to
a new Colorado law, House Bill 10-1193, “An Act Concerning The Collection Of Sales
And Use Taxes On Sales Made By Out-Of-State Retailers, And Making An
Appropriation Therefor,” which imposes new notice and reporting obligations on “each
retailer that does not collect Colorado sales tax” (“H.B. 1193”). I have discussed H.B.
10-1193 with representatives of dozens of DMA member companies and organizations.
I am also the senior officer at the DMA with direct responsibility for managing the DMA’s
efforts as the plaintiff in this litigation challenging the constitutionality of the new
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Colorado law. I make this declaration upon my personal knowledge or, as referenced,
upon information received from third-parties upon which I have a reasonable basis to
rely, and do rely, in the ordinary course of my work for the DMA. I make this declaration
in support of the DMA’s motion for a preliminary injunction.
2. The DMA is a not-for-profit corporation with headquarters in New York, New York
and offices in Washington, D.C. Founded in 1917, the DMA is the leading trade
association of businesses and nonprofit organizations using and supporting
multichannel marketing methods, with more than 3,000 members from all fifty states
and numerous foreign countries, including nearly half of the companies in the Fortune
100. Members of the DMA market their products directly to consumers via catalogs,
magazine and newspaper advertisements, broadcast media, and the Internet.
3. Among the primary missions of the DMA is to provide political representation and
issue advocacy on behalf of the entire direct marketing community. To that end, a
central goal of the DMA is to advance the interests of direct marketers in securing fair
and non-discriminatory treatment under both federal and state laws and regulations.
The DMA represents and promotes its members' interests in each of the 50 states as
well as on Capitol Hill and before federal agencies. Each year the DMA tracks
hundreds of proposed laws and regulations in Washington, DC and across the nation.
The DMA addresses key federal and state policy issues that affect the direct marketing
community including, among other issues, taxes, data security, privacy, and consumer
protection.

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4. H.B. 10-1193’s new notice and reporting requirements apply to retailers that are
not located in Colorado and do not collect Colorado sales tax. This classification
describes hundreds of DMA members, the great majority of which are based outside of
Colorado. DMA members located outside of Colorado enter into remote sales
transactions with thousands of Colorado consumers and businesses each day. Many
such DMA members lack any facilities, employees or other “physical presence” in
Colorado and, as a result, do not collect Colorado sales or use tax on their sales to
residents in the state, consistent with the well-established limitation on state authority to
impose tax collection obligations under the Commerce Clause and Quill Corp v. North
Dakota, 504 U.S. 298 (1992).
5. I am aware that the Colorado Department of Revenue (“Department”) has
adopted regulations implementing the notice and reporting requirements of H.B. 101193. The DMA closely monitored the rulemaking process and submitted certain
comments to the Department on proposed versions of the regulations. One of the
primary activities of the DMA with regard to H.B. 10-1193 has been to explain to
members the requirements imposed upon direct marketers under the Department’s
regulations.
6. The final version of the regulations, as published in the Colorado Register, is
designated “Regulation 39-21-112.3.5” and became effective August 1, 2010. The
regulations, in section 1(a), define the term “retailer that does not collect tax in
Colorado” for purposes of H.B. 10-1193 to mean “a retailer that makes sales to
Colorado purchasers but does not collect Colorado sales or use tax.” The regulation
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also has a “de minimis” exclusion. A retailer is deemed to be de minimis if the retailer
“makes less than $100,000 in total gross sales in Colorado in the prior calendar year
and reasonably expects total gross sales in the current calendar year will be less than
$100,000.” Regulation 39-21-112.3.5(1)(a)(iii). However, it is worth noting that the
regulations define “total gross sales” to include, in any particular company’s “total gross
sales,” all sales of goods by a group of affiliated companies. Regulation 39-21112.3.5(1)(e).
7. There are numerous DMA members with no physical presence in Colorado that
do not collect Colorado sales tax who have annual gross sales of goods in Colorado,
and reasonably expect future annual gross sales of goods in Colorado, that exceed
$100,000. Indeed, there are many such DMA members whose annual gross sales of
goods in Colorado are many millions of dollars.
8. Although the de minimis exception excludes smaller sellers, gross sales of
$100,000 annually is a fairly modest level of sales for a national direct marketer. As a
frame of reference, consider that, according to the United States Census Bureau,
Colorado’s population is approximately 5 million, or 1.6% of the total United States
population of approximately 300 million. Assuming an even distribution of sales by
population, a company with only $6.25 million in annual sales would meet the sales
threshold. Larger catalog and Internet sellers, including many DMA members, have
annual sales that are tens or even hundreds of times that amount.
9. The regulations also include a concept of a “de minimis” purchaser, in connection
with the requirement of H.B. 10-1193 that affected retailers provide an annual statement
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to their Colorado customers listing all of the customer’s purchasers from the retailer
during the prior calendar year. In particular, the regulations provide that out-of-state
retailers may, but are not required to, provide the annual statement to any Colorado
purchaser whose taxable purchases from the retailer are less than $500. Regulation
39-21-112.3.5(3)(c). Affected retailers, however, must provide annual statements to
each Colorado purchaser who purchases more than $500 of goods from the retailer.
Most affected retailers have many such customers, whether as a result of repeat
business or a single large transaction. Indeed, many affected retailers sell multiple
items that alone cost more than $500, such as computers, consumer electronics,
furniture, and other items.
10.

Any retailer that is required to provide at least one Colorado purchaser an

annual statement is required to file an annual report with the Department reporting the
names, billing addresses, shipping addresses, and total purchase amount of all of its
Colorado purchasers. Regulation 39-21-112.3.5(4)(e).
11. In connection with my work related to H.B. 10-1193 and the Department’s
regulations, I have personally spoken to representatives of dozens of DMA members
who have informed me that their company or organization will be affected by the
requirements set forth in the final regulations, notwithstanding the “de minimis” gross
sales amount of $100,000 and the “de minimis” purchaser amount of $500.
I declare under penalty of perjury that the foregoing is true and correct.
Executed on this 13th day of August, 2010.
/s/ Jerry Cerasale
Jerry Cerasale
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