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Talbots, Inc. v. Schwartzberg, 928 P.2d 822

Facts

Talbots, Inc. is a Delaware corporation with its principal place of business in Massachusetts, operating two retail stores in Denver. It contracted with a printer outside Denver to print and mail catalogs to various addressees, including approximately 30,000 sent to Denver residents. In June 1993, the City of Denver issued a use tax assessment based on these catalogs, which Talbots contested, particularly regarding the 30,000 catalogs sent to addresses other than its stores.

The essential facts are undisputed. Talbots is a Delaware corporation with its principal place of business in Massachusetts. It contracts with a printer outside Denver to print its catalogs and to mail them to addressees all over the world. Talbots has two retail stores in Denver, and it sent approximately 5,000 catalogs to these stores and 30,000 catalogs to other Denver addressees.

Issue

Did the distribution of catalogs to Denver addresses constitute a taxable use within the city, and did the assessment of use tax violate the Commerce Clause?

Talbots first asserts that, because the assessment was on an activity occurring wholly outside the City and County of Denver, it violates Denver Revised Municipal Code § 53–96 which allows the levy of a use tax only on property stored, used, distributed or consumed 'in the city.'

Rule

The Denver Revised Municipal Code § 53–96 allows the levy of a use tax on property stored, used, distributed, or consumed in the city, and 'use' is defined as the exercise of any right, power, or dominion over tangible personal property.

Denver Revised Municipal Code § 53–96 states that: There is levied and there shall be collected and paid a tax in the amount stated in this article, by every person exercising the taxable privilege of storing, using, distributing, or consuming in the city … any article of tangible personal property, purchased at retail, for said exercise of said privilege, as follows: (1) On the purchase price paid or charged upon all sales and purchases of tangible personal property. (emphasis added)

Analysis

The court determined that Talbots retained control over its catalogs by directing their distribution to potential customers in Denver, thus constituting a taxable use under the municipal code. The court also found that the assessment did not violate the Commerce Clause, as there was a sufficient nexus between Talbots' activities and the city, given its retail presence in Denver.

In summary, we hold that the definition of 'use' contained in Denver Revised Municipal Code § 53–96 includes the distribution of promotional and advertising material by the direct mailing of catalogs to Denver addressees. Thus, Talbots retained control over its catalogs and 'used' them within the meaning of the ordinance by distributing them to potential customers in Denver.

Conclusion

The court affirmed the district court's judgment, upholding the use tax assessment on Talbots' catalog distribution.

Accordingly, we reject Talbots' contention that the use tax violates the Commerce Clause.

Who won?

City and County of Denver prevailed because the court found that the distribution of catalogs constituted a taxable use within the city and did not violate the Commerce Clause.

The court disagreed, holding that: (1) the ordinance was intended to include a broad array of 'uses' within the city even though these uses might be directed by a foreign corporation from outside the city.

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