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Court: Borders Web Ops Must Remit CA Sales Taxes
ScentCone writes "A rather quiet appellate court ruling finds that Borders must start coughing up sales taxes to California. Even though Borders spun off their online business to a separate company (now run by Amazon), has no employees, physical facilities, banking, or other activity in the state, the court found for California. While this is at first alarming (unless you write e-commerce software, in which case this may be the Programmer Permanent Employment Act), the court's reasoning was that despite the separate structures, the Borders brick-and-morter presence in CA, some overlapping board membership, common logos, cross-promotion, etc., meant that the two divisions were too entangled to fend off CA's army of hungry revenuers. Ramifications could include good old print catalog operators, store-less biggies like Amazon that have partnerships with CA companies, and more."
Borders approached the problem of how to avoid to paying sales tax in CA - an area where they have a substantial physical presence. Essentially this ruling will be largely limited to entities that have a physical presence in a state but want to try to dodge paying sales tax. Essentially the Appellate court side this is one entity masquarading as two.
Thalasar
Because a buyer in one state is not under the jurisdiction of another state.
You are "magically exempt" from a foreign state's vehicle registration fees as well.
KFG
I think their case is pretty weak in being able to nail Amazon with "presence in the state" based on the fact that Amazon is providing an outsourced service for a Borders subsidiary.
I would agree that Borders corporate structure looked suspiciously like it was set up to avoid collecting sales tax by the online division.
Sort of a variant of making your HQ in the Caymans if you are multinational. Except the latter is legal.
"I'd rather be a lightning rod than a seismometer." -Ken Kesey
I recall having this conversation with someone in another country about how the US's tax collection works (local/state/federal), and she didn't understand why everything wasn't federal. People abroad (and a lot of people here) don't realize that the decentralized system is what makes America's economy strong. It encourages competition among the states, and keeps them in check. Don't like the tax policy in one state? Move to another state -- and people and businesses do. It also allows experimentation among states. Apply this same argument to the city level as well.
People are also less apt to rip off the local government, because they see it as directly affecting themselves. Ripping off the federal (or even state) government feels a lot more anonymous.
Unfortunately, the US steadily goes in the direction of more central control. -sigh-
Sometimes it's best to just let stupid people be stupid.
Sales taxes in theory should support the government infrastructure a business uses to conduct itself such as the court system, utility infrastructure if it's public, etc.
A business with no physical presence in State A doesn't derive any benefit from the government in State A when one of it's citizens orders something and they ship it from State B. The only company that actually uses resources from State A is the shipping company, which does pay local taxes on it's employees, property, vehicles, and gasoline proportional to the proportion of the transaction that did happen in State A.
That, and there's that whole pesky no tarrifs on interstate commerce by the states clause in the constitution.
This