Business Fee Fight Heads to High Court

Case could impact future TABOR cases and state elections programs

The Colorado Supreme Court on Tuesday heard oral arguments on a familiar question: Is it a fee or a tax? 

In 2014, the National Federation of Independent Business, a small-business lobbying group, sued then-Colorado Secretary of State Scott Gessler over business and licensing charges imposed by the Department of State, which the foundation said amounted to a tax requiring voter approval under TABOR.

The district court in 2015 granted summary judgment in favor of the Secretary of State’s Office. In 2017, the Colorado Court of Appeals reversed the summary judgment and remanded the case to the district court for further fact finding. The case made its way to the Colorado Supreme Court after both the Secretary of State’s Office and NFIB asked the state’s highest court to review the Court of Appeals’ decision. 

On Tuesday, the court considered whether the charges by Jena Griswold’s office are fees or taxes under TABOR and whether these fees were dictated by a mechanism that pre-dates TABOR and, therefore, are not subject to it. A third issue — whether the Court of Appeals erred in concluding a dispute of material fact precluded summary judgment — was also discussed.

The case could have implications for future TABOR-related cases as well as the state’s elections program, which is funded by the department. In its petition for Supreme Court review, the secretary of state said the Court of Appeals’ decision “places the State’s decades-old election funding scheme in jeopardy.” The NFIB, in its petition, wrote that the case is an opportunity for the court to “expand and clarify its jurisprudence regarding when pre-TABOR statutes are subject to voter approval” and provide clarity on the “tax” versus “fee” distinction.


In 1983, the state legislature enacted a statute instructing the Secretary of State’s Office to charge fees for filing and processing documents. This funding statute also gives the Department of State power to adjust its fees so the revenue generated approximates its direct and indirect costs.

Assistant Solicitor General Grant Sullivan, representing Griswold, argued that by limiting “tax-like features,” the funding statute “very clearly sets forth a fee-based regime.” For example, the statute does not allow the Secretary of State to exercise tax-making or tax policy changes, nor does it allow her to raise revenue exceeding her costs. It also prohibits the secretary from returning surplus revenue to the general fund or using it for non-departmental expenses.

Sullivan noted that the funding statute does not prevent the secretary from aggregating fee revenues to pay for the department’s combined expenses, allowing business and licensing fees to cover the costs of other divisions, which include elections, IT services and administration.

Van Aaron Hughes of counsel at Brownstein Hyatt Farber Schreck, representing NFIB, argued that the question of whether a charge is a fee or a tax was better answered last year in the court’s opinion in Colorado Union of Taxpayers Foundation v. City of Aspen. In that case, the Supreme Court found that a paper bag charge did not amount to a tax because it was imposed as part of a waste management regulatory program, and the “charge for the right to use a paper bag bears a reasonable relationship to Aspen’s cost of permitting that use.”

“What this court said in City of Aspen is that the purpose of gathering these charges must be to defray the costs of regulating an activity ‘under that scheme,’” Hughes said. Hughes argued that without a “reasonable relationship” between business filings and the costs of elections, the charges imposed by the Department of State cannot be considered “fees” according to the City of Aspen decision. 

Justice William Hood asked how Hughes would define a “reasonable relationship.” 

“Your honor, I don’t know that I can do better than the court did in City of Aspen,” Hughes said, “and I hesitate to second-guess the court.”

When asked the same question during rebuttal, Sullivan said, “Here, the reasonable relationship is the fact that, as the district court pointed out, both of these have been housed within a single department, the Department of State, for decades now.”  

Sullivan also argued that the department’s business filing and election duties are related because the Department of State has historically been responsible for maintaining the state’s most important records, which include articles of incorporation and other corporate documents as well as voter registration records and election returns.


Neither the district court nor the Court of Appeals ruled on whether the charges were a tax or a fee. The Court of Appeals sidestepped that issue, instead saying the funding statute predates TABOR, exempting it from TABOR’s requirements. During Tuesday’s oral arguments, Justice Richard Gabriel asked Sullivan whether the court would need to address the issue of whether the charges are a fee or a tax if they agreed with his argument that adjustments to the funding statute didn’t constitute a tax increase or tax policy change.

“I don’t think so,” Sullivan said.

Both Sullivan and Hughes cited Huber v. Colorado Mining and Nicholl v. E–470 Public Highway Authority on the question of whether adjustments to the Secretary’s pre-TABOR funding statute could be considered a tax increase or tax policy change. 

Sullivan argued that NFIB had not shown an increase in individual fee amounts but simply an increase in aggregate department revenue. He said Huber made clear that a pre-TABOR statute could bring in increasing revenues as long as the increase wasn’t caused by a post-TABOR government action.

Hughes argued that the Secretary of State’s case differed from Huber and Nicholl because adjustments to the Department of State’s charges were done at the discretion of the secretary, while in the earlier cases, adjustments were made based on pre-set formulas. 

“You can do math. That doesn’t trigger TABOR,” he said of Huber and Nicholl. “And that’s the distinction here.”

Gabriel made a similar distinction when Sullivan cited the cases. 

Sullivan admitted that the tax increase in Huber was formulaic, but argued that Griswold and Nicholl are similar because in both cases there was some discretion, albeit limited, applied by the two agencies in adjusting fees, but that they couldn’t be considered tax-making or a policy change.


Both parties agreed that the Colorado Court of Appeals erred in finding there was a disputed issue of material fact that precluded summary judgment. 

In 2017, the Court of Appeals found that “the parties provided no facts indicating that any new action since the passage of TABOR on the part of the Secretary has led to the increase in revenue” and remanded the case to the district court for fact-finding.

Sullivan argued the remand is not appropriate because summary judgment law “does not permit a do-over.” He also noted that even the NFIB said in its briefing that “the opportunity for discovery and fact gathering has passed.”

Hughes pointed to fee schedules in the stipulated facts as well as fee holidays under Secretary of State Gessler and a county election-funding scheme implemented in 1996 to show that the NFIB had provided sufficient evidence of adjustments or policy changes since TABOR was implemented, resulting in an increase in revenue. 

— Jessica Folker

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