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Court Strikes Down New York Opioid Surcharge on Manufacturers and Distributers

On December 19, 2018, the US District Court for the Southern District of New York ruled in favor of McDermott’s client, the Healthcare Distribution Alliance (HDA), the trade association for pharmaceutical distributors. In Healthcare Distribution Alliance v. Zucker, the court granted summary judgment and enjoined enforcement of the New York Opioid Stewardship Act, which imposed a $600 million surcharge on manufacturers and distributors of opioid pharmaceutical products. The first $100 million installment was due on January 1, 2019. McDermott prevailed on its argument that the Tax Injunction Act (TIA) did not bar federal jurisdiction over HDA’s challenge to the surcharge. While the surcharge raised $600 million in revenue, the court held that for the TIA’s purposes, it was a regulatory fee, not a tax, in part because its proceeds were dedicated to specific opioid-related funds and segregated from general state revenues, and in part because the New York...

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BREAKING NEWS: Discussion Draft of Online Sales Simplification Act of 2016 Released

Today, the Chairman of the House Judiciary Committee, Rep. Goodlatte from Virginia, released the long-anticipated discussion draft of the Online Sales Simplification Act of 2016. Highlights of the bill include: The bill implements the Chairman’s much-discussed ‘hybrid-origin’ approach. The bill removes the Quill physical presence requirements for sales tax collection obligations under certain circumstances. States may impose sales tax on remote sales IF the state is the origin state and it participates in a statutory clearinghouse AND the tax uses the origin state base and the destination state rate for participating states (the origin state rate is used if the destination state does not participate in the clearinghouse). A remote seller will only have to remit the tax to its origin state for all remote sales. A destination state may only have one statewide rate for remote sales. Only the origin state may audit a seller for remote sales. States that do not...

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Post-DMA, Federal Court of Appeals Broadly Interprets Jurisdictional Limitations of Anti-Injunction Act

Earlier this month, the United States Court of Appeals for the D.C. Circuit held in Florida Bankers Ass'n v. U.S. Dep't of the Treasury, No. 14-5036 (D.C. Cir. Aug. 14, 2015) that the Anti-Injunction Act (AIA, codified at 26 U.S.C. § 7421(a)) barred two state banking associations from challenging Treasury regulations that: (1) required banks to annually report interest paid to certain foreign account-holders, and (2) imposed a penalty on banks that fail to do so.  Notwithstanding attempts to reconcile the holding with recent precedent, the majority’s decision directly conflicts with the recent unanimous Supreme Court decision in Direct Mktg. Ass'n v. Brohl, 135 S. Ct. 1124 (March 3, 2015) (DMA), which found that the Tax Injunction Act (TIA, codified at 28 U.S.C. § 1341) did not bar a retail association’s challenge to comparable Colorado notice and reporting requirements (and accompanying penalty) imposed on out-of-state retailers.  The TIA is modeled off of,...

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SCOTUS: Colorado Notice and Reporting Challenge Not Barred by the Tax Injunction Act

The United States Supreme Court released a unanimous decision today holding that the Tax Injunction Act (TIA), 28 U.S.C. § 1391, does not bar suit in federal court to enjoin the enforcement of Colorado notice and reporting requirements imposed on noncollecting out-of-state retailers. See Direct Marketing Ass’n v. Brohl, No. 13-1032, 575 U.S. ___ (March 3, 2015), available here. These requirements, enacted in 2010, require retailers to (1) notify Colorado purchasers that tax is due on their purchases; (2) send annual notices to Colorado customers who purchased more than $500 in goods in the preceding year, “reminding” these purchasers of their obligation to pay sales tax to the state; and (3) report information on Colorado purchasers to the state’s tax authorities. See Colo. Rev. Stat. § 39-21-112(3.5). The TIA provides that federal district courts “shall not enjoin, suspend or restrain the assessment, levy or collection of any tax under State law.” The...

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