New Year’s Legal Greetings: Coming Attractions

We thought it important to ring in the New Year by highlighting three legal developments early enough in the year so as to permit enough time to strategically mitigate the risks of failing to comply with these new laws.  (We will go into more detail about these developments during our Webinar at 1 pm on February 13, 2024.)

First up is the Corporate Transparency Act, (CTA) which is a federal anti-money laundering statute that went into effect on January 1, 2024.  The CTA requires certain companies – called reporting companies – and their owners to file reports with a division of the US Department of the Treasury called FinCEN.  The owners (those who own 25% or more of the company and/or are senior management) must file a report disclosing personal information as well as supplying photographic identification.  Failure to do so by the deadlines spelled out in the law gives rise to a fine of $500 per day for non-compliance as well as potential criminal sanctions.

While daunting, there is some good news and certainly an opportunity for strategic planning.

For reporting companies formed prior to January 1, 2024, the required filings are not due until the end of 2024.

In addition, the Corporate Transparency Act does not apply to all companies.  Those US companies that have at least 20 full-time employees and annual sales of more than $5 million are exempt from the filing requirements.  The exemption may also apply to their subsidiaries.  However, what may catch companies by surprise is that the exemption does not apply to the holding companies of the operating companies unless the employees/sales of the holding companies exceed the thresholds.

Determining who is an owner required to submit a disclosure form requires some analysis of the complicated regulations.  The actual ownership of shares of stock of a corporation or of membership interests of a limited liability company are not the only criteria for required filings.  The regulations require certain senior executives to comply. In short, when it comes to CTA compliance, as with other compliance obligations, the devil is in the details and it is well worth an evaluation to determine whether your business is under an obligation to comply.

The second legal development this year is an amendment to the Illinois Consumer Fraud and Deceptive Practices Act.  The amendment requires disclosures or disclaimers in any letter or postcard advertising the sale of products or services to the recipient that requests the recipient contact the seller.  The new law requires the written material to contain a clear and conspicuous disclosure that the mailing is not a bill and is a solicitation for goods or services for sale, as well as a disclaimer of any affiliation by the seller with any other party.  For example, if the mail piece is a solicitation to purchase an Apple iPad, the disclaimer must state that it is a solicitation for the sale of the iPad and the sender is not affiliated with Apple or any other party.

It is not only the sender/seller that is required to comply with the amendment to the Illinois statute.  The amendment places the liability for disclosure on those persons who “knowingly” mail or send the letter or postcard.

A commercial mail producer or printer that causes the promotional direct mail materials to be mailed potentially arguably has liability for the failure to provide adequate disclaimers for solicitation pieces, even though it may not be the sender, because it “knows” that the printed piece is being mailed as a result of its role in the mailing process.  It is important for producers to do some due diligence and adopt suitable contractual terms and conditions to limit potential liability.

A violation of this consumer protection law can give rise to fines of up to $60,000 per violation as well as damages.  Each mail piece to an Illinois recipient is potentially a violation, so as you can imagine the fines add up very quickly for direct mailers.  And while an individual recipient’s damage may be small, a class action lawsuit to enforce the provisions of the amendment are a threatening potential sanction for violation of the new law.

The third is state tax issues.  On this, we have two updates to share. 

The first update relates to the Quad decision we wrote about last year.  To recap for you, this case involved a challenge brought by Quad, the printer of catalogs distributed in North Carolina, to an assessment of sales taxes on the catalogs distributed in North Carolina.  The lowest court ruled in Quad’s favor, holding that because the “sale” of the catalogs to its customers took place outside of North Carolina, assessing a sales tax on the transaction violated the Commerce Clause of the US Constitution. The North Carolina Supreme Court rejected that line of reasoning and instead held that there is no constitutional defense to the sales tax, even though the sale was concluded by an out-of-state printer outside the state of North Carolina.  When we last updated you, Quad had appealed the North Carolina decision, seeking review by the US Supreme Court.  The big update is that the US Supreme Court declined to take the case, effectively upholding the North Carolina Supreme Court decision, which itself effectively reinstated the assessment against Quad.

In the wake of the SCOTUS decision to decline the case, we have seen a noticeable increase in audit activity within the printing industry.  Among the new states that have turned their attention to taxes on the distribution of direct mail we have Wisconsin, Washington, Georgia, and Massachusetts.

To register for the upcoming webinar addressing these changes, go to

Lest you think we always end these missives with doom and gloom, our final state tax update for you is a positive one.  Recently, the states of South Dakota and Minnesota, along with the Streamlined Sales and Use Tax Governing Board, updated their guidance for printers and producers on how to source (in other words, how to assign a tax geographic location) to print jobs. To refresh your memory, the general rule for direct mail is that where the producers know the delivery destination of the mail, the revenue from that mail must be sourced to those destinations.  In other words, the revenue from direct mail print jobs is sourced to the location of every Jane, Jill, and Jasmin that receives the catalogs, postcards, or flyers you print.

South Dakota, Minnesota, and the SSUTA’s updated guidance reflects two points that these states have finally recognized: 1) printers and producers are often working from a mailing list rented or produced by their customers, and 2) the printers/producers are often prohibited from retaining that mailing list.  In light of those two important points, the updated guidance now states that merely having access to and working from a mailing list does not constitute “knowing” the delivery destination.

What this means for practical purposes is that instead of sourcing the catalog revenue to Jane’s or Jill’s or Jasmin’s address, printers and producers can instead turn to the alternate rules that allow you to source the revenue all to one location.  That location depends on what you are producing.  If it is promotional mail (like catalogs or flyers), you can source the revenue to the location of your production facility; if it is transactional mail (like newsletters), you can source the revenue to the billing address of your customers.

Of course, this update only applies in these states, so there is still a risk that some other state will hold you to the delivery destination rule, mailing list notwithstanding. We look forward to seeing you on February 13 to discuss these developments in more detail. 

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