Tennessee Court of Appeals Holds That Scholastic Book Clubs Has Nexus in Tennessee

State and Local Tax Alert - Tennessee Edition



The Tennessee Court of Appeals ruled on January 27, 2012 that Scholastic Book Clubs’ ("Scholastic") use of schools and teachers to facilitate book sales and deliveries in Tennessee establishes a sufficient presence in Tennessee requiring Scholastic to collect sales and use tax on its sales. Scholastic Book Clubs, Inc. v. Farr, Dkt. No. M2011-01443-COA-R3-CV, slip op. at 9 (Jan. 27, 2012).

Scholastic markets and sells books and other publications and products to teachers and students at nursery, primary, and secondary schools across the United States. During the period under audit by the Tennessee Department of Revenue, over 8,000 Tennessee schools participated in Scholastic’s program, generating sales in excess of $34 million. Scholastic did not collect or remit Tennessee sales and use tax on the book sales and, following audit, the Department of Revenue issued a $6 million sales tax assessment.

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