Opinion ID: 2516407
Heading Depth: 1
Heading Rank: 4

Heading: Kansas Case

Text: In In re Tax Appeal of Scholastic Book Clubs, Inc., 260 Kan. 528, 920 P.2d 947 (1996), this court considered the question of whether Scholastic Book Clubs, Inc. (Scholastic), an out-of-state based business that sold books ordered through Kansas elementary school teachers, had established a sufficient nexus with Kansas to subject it to the Kansas compensating use tax. The Scholastic court found that by soliciting orders, accepting payments and shipping merchandise to teachers for distribution to the student purchasers, Scholastic had made the Kansas teachers its implied agents. 260 Kan. at 541. The Scholastic court applied the test set out in Bellas Hess and Quill and concluded that Scholastic's use of implied agents, the Kansas teachers, to sell its product to Kansas students provided a substantial nexus sufficient for the State to impose the collection and remittance duties of the use tax upon Scholastic. 260 Kan. at 546. In summary, the Commerce Clause requires a taxing state to have substantial nexus with an out-of-state business to impose use tax collection and remittance duties. See Complete Auto, 430 U.S. at 279. Substantial nexus requires a finding of physical presence in the taxing state. Bellas Hess, 386 U.S. at 758. The continuous physical presence of offices and employees in a taxing state is sufficient to impose a use tax collection duty even though the in-state presence is unrelated to the transaction being taxed. National Geographic, 430 U.S. at 560. Mail-order sales without more are a safe harbor for out-of-state vendors. Bellas Hess, 386 U.S. at 758. A slightest presence is not sufficient to establish a substantial nexus, National Geographic, 430 U.S. at 556, but some states have found that more than a slightest presence is sufficient. Orvis, 86 N.Y.2d at 178. The physical presence requirement may turn on the presence in the taxing state of a small sales force, plant, or office. Quill, 504 U.S. at 315. The question is whether Intercard's installation activities in the state of Kansas constitute a physical presence sufficient to establish a substantial nexus with the state. The parties stipulated that Intercard was not incorporated or registered as a foreign corporation doing business in Kansas; all contracts and sales occurred outside of Kansas; and Intercard had no offices or employees in Kansas. BOTA found that Intercard's 11 incursions to install cardreaders in Kansas were isolated, sporadic, and insufficient to establish a substantial nexus to Kansas. We agree and affirm BOTA's order abating the assessed sales and use tax.