Connecticut Supreme Court Rules that Teachers Create Nexus for Scholastic Book Clubs Inc.

In a recent decision, the Connecticut Supreme Court held that Missouri-based Scholastic Book Clubs, Inc. was subject to sales and use tax because the distributor had a nexus with the state through the activities of local teachers who participated in its program to sell books. The Court decided that teachers who distributed catalogs to students and collected orders were “representatives” of the company, regardless of whether they had a legal or agency relationship with it, for purposes of the sales and use tax statutes. Thus, the company must collect and remit Connecticut sales tax, even though it has no facilities or employees in the state.

According to the Department of Revenue Services, around 14,000 Connecticut teachers voluntarily act as the company’s representatives by soliciting, processing, and delivering book sales to students.