California's Etax Victory

A California court of appeals has ruled that Borders.com is responsible for the collection of use taxes on purchases made by California residents at its Web site. The decision was a victory for the California State Board of Equalization and could make it easier for some other states to collect revenue from online sales.

Under California law, companies that have "agents" in the state are required to collect a use tax. The Board of Equalization claimed that, since consumers who purchased items on-line from Borders.com could return them to Borders' stores, the stores acted as an agent for Borders.com. Therefore, Borders.com was required to collect a use tax.

"The court confirmed we were correctly applying the term agent, and that we are properly collecting this tax," says Anita Gore, a spokeswoman for the Board of Equalization.