With no fanfare, Barnes & Noble has begun collecting sales tax on online purchases made through its Barnes&Noble.com website in 38 states. The company website currently notes, "In accordance with applicable law, Barnes&Noble.com collects tax in all but the following states: Arizona, Hawaii, Louisiana, Maine, Mississippi, New Mexico, Vermont, and the District of Columbia." States that have no sales tax are Alaska, Delaware, Montana, New Hampshire, and Oregon.
For several years, the American Booksellers Association, along with the regional booksellers associations, has been working with other members of the E-Fairness Coalition to help ensure that online merchants collect applicable state sales taxes, as do in-state bricks-and-mortar stores. The coalition represents over 350,000 retail stores nationwide.
According to Kevin Frain, Barnes&Noble.com CFO, "Barnes&Noble.com has collected sales tax in states where it has a significant presence. In 2004, Barnes&Noble.com began expanding marketing activities in certain states [that] then qualified as a significant presence. The states where Barnes&Noble.com collects sales tax are those where there continues to be a significant presence." Frain also noted that the Streamlined Sales and Use Tax Agreement (SSUTA) influenced the company's decision. "There are a few states that have signed on to the Streamlined Sales Tax Project. Barnes&Noble.com expanded activities in some of these states with the knowledge of the provisions of the Streamlined Sales Tax Project," he said. SSUTA was created as a way to make it easier for retailers that do business in multiple states to calculate, collect, and remit existing use tax.
In addition, a Barnes&Noble.com spokesperson stressed that the company has been collecting sales tax on online orders in New York and New Jersey -- where it has offices and a company warehouse, respectively -- since the website's inception in 1997; and it has been collecting online sales tax in Tennessee and Nevada since 2000, when it opened additional warehouses.
"With the rise of online commerce has come the growing problem of online fairness. We are pleased to see that Barnes & Noble is now collecting sales tax as required by law," said ABA COO Oren Teicher. "From the beginning our fight has been to help ensure a level playing field for all retailers. This is not an issue of new taxes. This is about existing sales taxes that support such essential services as policing and firefighting, and we believe that it's never a good idea for government to favor one retailer over another."
Barnes&Noble.com's decision to collect sales tax online follows a 2005 ruling about what constitutes nexus in the state of California that went against Borders, Inc. In May 2005, the California First District Court of Appeals affirmed a California Board of Equalization (BOE) recommendation that Borders Online LLC had nexus in California and owed back use tax because Borders Books & Music, Inc., accepted returns and had other interconnections with Borders Online purchases. In addition, according to Lenny Goldberg of the California Tax Reform Association, in 2005, Barnes&Noble.com was seeking a settlement with the BOE. In 2003, the BOE had voted to conduct a full-scale audit of Barnes&Noble.com to determine if the online retailer has nexus in the state of California.
In Washington, D.C., as Congress reconvenes, legislators continue to grapple with the issue of online sales tax. In December 2005, Sen. Michael B. Enzi (R-WY) introduced legislation that would help efficiently and fairly collect sales and use tax revenue that is being lost because remote sellers do not have to remit sales and use taxes on catalog and Internet purchases. In late January, a number of businesses and groups, including the E-Fairness Coalition, the National Retail Federation, the National Governors Association, Staples, and AT&T, wrote Sen. Enzi to express their support for his "Sales Tax Fairness and Simplification Act" (S. 2152).
In its letter, the E-Fairness Coalition wrote: "The Sales Tax Fairness and Simplification Act achieves several important objectives. Among them would be congressional endorsement of a simplified sales tax system that could save Main Street retailers millions of dollars by removing the burden to comply with the myriad of disparate laws, rules, and regulations that exist under the nation's patchwork of 7,500 taxing jurisdictions.
"Additionally, the bill would create a level playing field between online and Main Street businesses by allowing states to collect sales taxes from remote sellers, such as the online and catalog retailers without a physical presence in the state. These sales taxes are legally owed, but not collected, due to a loophole created by a 1992 Supreme Court decision, which judged sales tax collection to be too burdensome for remote sellers due to the multiplicity of sales tax jurisdictions across the nation. By enhancing the collection authority of states that simplify state sales taxes under the Streamlined Sales and Use Tax Agreement, the bill cures the problem identified more than a decade ago by the Supreme Court."