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Monday, October 15, 2012

US Supreme Court Denies Cert in a Nexus Case

As I predicted, the U.S. Supreme Court has denied cert in the request from Scholastic Books to hear its appeal of a finding of sales tax nexus by a Connecticut Court. [Back to School: Sales Tax Nexus Lessons in the AICPA Corporate Taxation Insider (8/23/12).]

I think the Supreme Court really wants Congress to resolve this matter. Or perhaps the Court is saying (I know we are not supposed to read anything into a denial of cert, but ...) clearly our "bright line" test of National Bellas Hess and Quill are not working or we wouldn't even have these cases where states and taxpayers can't agree on when they have sales tax collection obligations in a state.

These are difficult issues.  The teachers who hand out and collect order forms from students are not exactly the same as the contract sales force in Scripto. Yet, they are enabling Scholastic to have sales they would not otherwise have. What if the teachers instead only told the students of Scholastic's URL and the students then ordered on their own?  Would the teacher, who is doing far less than in the situation where they handle the order forms and delivery of the books, cause Scholastic to have a physical presence in the state?  Would it matter if the teachers was compensated in some way?  Is it advertising or solicitation?  When you teacher tells you about books you might enjoy, it that just advertising or is the message - get that book and read it?

What do you think?  Do we really have a bright line nexus test for sales tax? Should the Court take a sales tax nexus case?


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