Online Merchants Guild v. Maduros

Under the TIA, "district courts shall not enjoin, suspend or restrain the assessment, levy or collection of any tax under State law where a plain, speedy and efficient remedy may be had in the courts of such State." 28 U.S.C. § 1342.

Appellants appealed a dismissal of their suit to enjoin California’s requirement of a seller’s permit for state sales tax collection. The Appellants are a class of online merchants who facilitate their sales as third–party sellers with the e-commerce company Amazon. On appeal, Appellants sought injunctive and declaratory relief, arguing the “registration demands” and “penalty threats” they received from the Department of Tax and Fee Administration (the Department) were a violation of their Due Process, Equal Protection, and Commerce Clause rights of the United States Constitution, as well as a violation of the Internet Tax Freedom Act. In response, Appellees argued that the Appellant's claims were barred by the Tax Injunction Act (TIA), which bars federal jurisdiction in the prevention of the collection of state taxes. Under the TIA, "district courts shall not enjoin, suspend or restrain the assessment, levy or collection of any tax under State law where a plain, speedy and efficient remedy may be had in the courts of such State." 28 U.S.C. § 1342. The Court reasoned that, because the Appellants sought injunctive and declaratory relief to prevent the Department from requiring that Appellants apply for a seller's permit, this would essentially relieve Appellants of the duty to obtain seller’s permits and would prevent the remittance of sales tax. As such, the Appellant's suit was therefore barred by the TIA. Affirmed.