Court Case: Borders Online LLC vs State Board of Equalization

Question 1

What were the three parties involved in this case?

Answer 1

1. Borders Online (online retailer)
2. California Board of Equalization
3. California Court of Appeals

Question 2

What were the facts of this case?

Answer 2

• Borders Online was an online retailer who sold products to people in California, but didn’t charge tax.
• Borders Books and Music Store was a separate, but related company that had physical stores in California.
• Borders Books allowed people in California to make returns in the store of products they purchased from Borders Online.
• California sued Borders Online, saying that the Borders Books Store accepting returns is enough to qualify Borders Online as a retailer who has physical presence in the state and is required to collect tax.

Question 3

In what year did the case take place?

Answer 3

2005

Question 4

What was the Court of Appeal’s decision in the case?

Answer 4

• The Court of Appeals confirmed that Borders Online had substantial nexus and should be required to collect tax due to its business relationship with Borders and the acceptance of returns by Borders Books on its behalf.

Question 5

What type of nexus did this case revolve around?

Answer 5

Affiliate Nexus (having substantial nexus in a state due to being heavily affiliated with another company in that same state)

Question 6

What are two things this case shined light on?

Answer 6

1. Agency relationships between companies.
2. Treatment of online retailers for purposes of nexus determinations.