The activities of schools and teachers in Tennessee are sufficient to create sales and use tax nexus for a mail-order bookseller that sells books through marketing materials distributed in schools. Reversing the lower court’s awarding of summary judgment to dismiss the case on behalf of Scholastic Books, a Tennessee Court of Appeals found that the bookseller’s contact with Tennessee customers is not merely mail-order. The bookseller is using Tennessee schools and teachers to facilitate sales of books. The bookseller sends marketing materials and order forms to schools. Teachers then distribute the materials to students, collect orders and payment, and submit the orders and payment to the bookseller. The court stated that the issue in this case is not whether Tennessee teachers are considered agents of the bookseller. Rather, the issue is whether substantial business activities have been carried out on the bookseller’s behalf in Tennessee, thus creating nexus. The bookseller’s connections with the state are sufficient to create nexus because the bookseller has created a de facto marketing and distribution mechanism within Tennessee schools in order to sell books. The bookseller asserted that it uses no public services in Tennessee, but the state’s schools and teachers are largely funded by taxpayer dollars.
On June 25, 2012, the Tennessee Supreme Court denied review of the bookseller’s application for discretionary review in this case. On September 20, 2012, the bookseller asked the U.S. Supreme Court to review the decision. (Scholastic Book Clubs, Inc. v. Farr, Tennessee Court of Appeals, No. M2011-01443-COA-R3-CV, January 27, 2012; Scholastic Book Clubs, Inc. v. Commissioner of Revenue Services, U.S. S.Crt. No. 18425 (June 26, 2012); Scholastic Book Clubs, Inc. v. Roberts, U.S. Supreme Court, Dkt. 12-374, petition for certiorari filed September 2012)