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Technology Stocks : Gateway (GTW)
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To: Terry who wrote (5720)4/6/1998 8:00:00 PM
From: IceShark  Read Replies (1) of 8002
 
Terry, "In addition, I would think that establishing a physical presence in several states would force the company to start collecting sales taxes in those states, which diminishes the mail order advantage."

I initially thought the same thing too and couldn't for the life of me figure out why they would want to establish nexus and incur sales tax liability. Well it turns out GTW has entered into agreements with almost every State to collect and remit sales tax on mail order sales.

While I don't know exactly how this came about, my guess is it went something like: States have a sales and USE tax. So if residents did not pay a sales tax they are liable for the use tax. Of course just about no one bothers to file and pay use tax, so the states have to catch buyers in some fashion. It is not worth it to run after buyers of a shirt from Lands End, but getting a court order to get ahold of GTW's sales register for high value computers is another matter. Apparently GTW decided to collect the tax rather than having pissed off customers getting deliquent use tax notices from their respective states.

I'm sure the other large direct sellers are in the same boat, I am aware that MUEI does the same thing as GTW.

So the country stores may not be the best idea, but you can't hold the tax issue against it.

(BTW, keep this in mind if you ever order furniture from the North Carolina furniture discounters. Illinois gave a bunch of residents heart attacks when they started to send out use tax bills.)

Regards, DWW
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