Court Affirms Sales Tax Nexus in Scholastic Book Sales

The U.S. Supreme Court has let stand a decision that broadens the state’s sales tax to more mail-order, and potentially online, transactions. By deciding not to take up the case, the Court affirmed a Connecticut Supreme Court ruling that requires the Scholastic Book Club Inc. to collect sales tax in the state.

School teachers serve as representatives of the Missouri-based book club in selling and processing book orders from their students, said the state’s Supreme Court. Teachers are not paid by the book club for their efforts, but they are the only way the students can access the book club’s offerings.

Department of Revenue Services Commissioner Kevin Sullivan said the court decision confirms that, “the use of schoolteacher representatives … provided sufficient nexus within Connecticut to uphold taxability.”

In Connecticut, businesses that are based elsewhere but operate a store in the state are already required to collect sales tax on mail-order transactions originating in this state.

What’s more, the legislature last year not only increased the sales tax to 6.35%, they also made certain remote sellers, including online retailers, subject to the tax. Out-of-state retailers who pay commissions to people located in Connecticut and who refer customers to them are liable for the sales and use tax.

The court’s latest broadening of the definition of “representative,” however, could open the door to an even wider application of the state sales tax to out-of-state goods. 

For more information, contact CBIA’s Bonnie Stewart at 860.244.1925 or bonnie.stewart@cbia.com.