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O
n March 19, 2012, the Con-
necticut Supreme Court issued
a significant sales tax decision
that will greatly expand the state's
ability to require out-of-state retailers
to collect and remit sales tax on their
sales to Connecticut customers. In its
decision, Scholastic Book Clubs, Inc.
v. Commissioner of Revenue Services,
SC 18425 (Conn. Mar. 27, 2012), the
Court held that Scholastic Book Clubs,
Inc. ("Scholastic") had sufficient con-
tacts within Connecticut for Connecti-
cut to require it to collect Connecticut
sales tax. By ruling that Scholastic's
relationship with more than 14,000
Connecticut teachers created physical
presence in Connecticut and thereby
obligated Scholastic to collect and re-
mit sales tax on its Connecticut sales,
the Connecticut Supreme Court argu-
ably expanded the ability of Connecti-
cut's Department of Revenue Services
(DRS) to require out-of-state retailers to
pay tax on their sales into Connecticut.
While Scholastic sought out the re-
lationships at issue in this case, the
DRS could rely on the court's expan-
sive definition of "representative" to
attempt to impose a sales tax col-
lection obligation on an out-of-state
retailer whose Connecticut sales or
distribution efforts were aided by the
efforts of a person or entity acting in-
dependently in a way that benefited
the out-of-state retailer.
In light of this decision, any out-of-
state retailer that has been selling to
Connecticut customers and has not
been collecting sales tax (based on
its view that its activities in Connecti-
cut did not create physical presence
in Connecticut) is encouraged to seek
guidance as to whether this decision
might have a material impact on its tax
position.
Find more information about this ruling
at www.ctcpas.org/nexus.
Connecticut Supreme Court
Nexus Decision Expands
Definition of Retailers Required
to Collect Sales and Use Tax
By Alan E. Lieberman, Esq., Partner, Shipman & Goodwin
Connecticut Tax Alert