Internet taxes in the near future:
An appellate court ruling against Borders Group Inc. sets a precedent that could enable California to force some major Internet retailers to start paying state sales tax for books, music and other goods sold online to state residents.
Whether California tax collectors use the precedent to go after not only Borders but Barnes & Noble Inc., Amazon.com and other online retailers remains to be seen. But independent booksellers and other “bricks-and-mortar” retailers have been cheering, saying the ruling should remove their Internet competition’s unfair advantage.
“There are a lot of online retailers who are watching this intently,” said Tom Dressler, a spokesman for the California Attorney General’s office. “Clearly online retailing is growing so one would think the potential revenue problem is fairly substantial.”
Businesses can avoid paying sales taxes to states where they have no physical presence, according to a 1992 U.S. Supreme Court ruling.
Borders Group Inc. says it has never collected sales tax for books and music sold over the Internet to California residents, even though the Ann Arbor, Mich.-based corporate parent operates 129 California stores under the Borders and Waldenbooks brands, as well as a 414,000-square-foot distribution center in the state.
Borders says it doesn’t have to collect California sales taxes because its online division _ since outsourced to Amazon.com _ doesn’t own or lease property in the state. None of the online division’s employees or bank accounts are in California and all Internet orders were received and processed outside the state.
“We’ve done everything within the confines of the tax law. We have always believed that what they did was correct under the Constitution,” said Borders lawyer Scott Brandman.
I am sure there are people who know much more about this issue than I do, so have at it in the comments.