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Business Taxes Law Guide—Revision 2024
Sales And Use Tax Court Decisions
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Borders Online, LLC v. State Board of Equalization … (2005)
Online Retailer Must Collect and Remit Use Tax
Borders Online (Online), which has no California locations, took orders over the Internet and shipped the purchased items to California consumers from outside the state. Those purchasers could return the items to any Borders Books and Music Store (Borders) for an exchange or credit card refund. Online and Borders were separate but related companies. The court held that, although there was no written agreement between the two, Borders acted as Online's representative in California for purposes of accepting returns from Online's California purchasers. The court further held that the acceptance of returns for Online was a selling activity under Revenue and Taxation Code section 6203. Online was therefore a retailer engaged in business in California, and required to collect the applicable California use tax from its purchasers and remit the tax to the Board. The court held that Online had substantial nexus with California, and that requiring Online to collect and remit the use tax does not violate the commerce clause of the United States Constitution. Borders Online, LLC v. State Board of Equalization (2005) 129 Cal.App.4th 1179.