Court Rules Borders.com Must Collect Sales Tax
By George Anderson
A ruling by California’s 1st District Court of Appeals says Borders Group must collect sales tax for sales made in that state through the company Web site.
The court ruled that while Borders does not fulfill Internet orders in California, its online operation and physical stores cannot be viewed as separate businesses. For one, the two cross-promote and online customers are given the option of returning merchandise to store locations.
A Supreme Court ruling 1992 said Internet businesses do not have to pay sales taxes to states where they do not have a physical presence.
The appellate court’s ruling would appear to make inevitable that other cross-channel retailers operating in California would now need to collect sales tax also.
Lenny Goldberg, executive director of the California Tax Reform Association, believes the same may apply to online retailers who partner with brick and mortar merchants also. “Any business in California is going to have to collect from their online subsidiary,” he said. “It certainly potentially allows the board to make a case that Amazon has agents and affiliates in California.”
Moderator’s Comment: Is it time for sales made over the Internet to be taxed in the same manner as brick and mortar
operations? What are the pros and cons of taking such an action? –
George Anderson – Moderator