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Business Taxes Law Guide—Revision 2024

Sales And Use Tax Court Decisions


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Scholastic Book Clubs, Inc. v. State Board of Equalization … (1989)


Out-of-State Retailer's Use of Teachers and Librarians to Solicit Book Sales Constitutes Sufficient Nexus with California for California to Impose the Use Tax Collection Duty on the Retailer

Plaintiff was an out-of-state retailer of books and other items. Plaintiff had no employees or places of business in California, but it distributed catalogs by mail to teachers and librarians at California schools. The teachers who elected to do so distributed offer sheets to their students, consolidated the students' orders, collected payments, and submitted a single order and full payment to plaintiff in the teacher's name. Plaintiff shipped the items ordered from its Missouri warehouse to each teacher placing the order, and each teacher distributed the items to the students who ordered them. The taxpayer rewarded the teachers with bonus points for merchandise.

Taxpayer contended that it was not a retailer engaged in business in California under Revenue and Taxation Code Section 6203 because the teachers had no initial obligation to act to solicit orders, and had no written agency agreement with the taxpayer. Since the teachers had no obligation to act, plaintiff argued, the teachers were not acting under plaintiff's authority in soliciting orders.

The court of appeal decided in favor of the Board, holding that the teachers were not acting under anyone else's authority except that of plaintiff, and that once the teachers undertook to solicit orders, they were acting under plaintiff's authority as its agents. By accepting the orders and shipping the items, the taxpayer ratified the acts of the teachers and confirmed their authority as its agents. Plaintiff depended upon the teachers to act as its conduit to the students. The court held that plaintiff's use of teachers and school librarians to solicit sales from students constituted sufficient nexus to require the taxpayer to collect the use tax due on the students' purchases. Scholastic Book Clubs, Inc. v. State Board of Equalization (1989) 207 Cal.App.3d 734.