The activities of Tennessee schools and teachers are sufficient to create Tennessee sales and use tax nexus for a mail-order bookseller that sells books via marketing materials distributed in schools. The Court of Appeals found that the taxpayer’s contact with the state is not limited to common carrier or mail because the taxpayer utilizes Tennessee schools and teachers to facilitate sales. The taxpayer sends marketing materials and order forms to schools. Teachers distribute the information to students, collect orders and payments from students, and submit orders and payments to the taxpayer. The determinative issue is whether substantial business activities have been carried out in the state on the taxpayer’s behalf. The taxpayer’s connections with the state are sufficient to establish nexus because the taxpayer has created a de facto marketing and distribution mechanism within Tennessee schools, which it uses to sell books. Contrary to the taxpayer’s assertion that it uses no public services in Tennessee, the state’s school facilities and teachers are, in large part, funded by taxpayer dollars.
Scholastic Book Clubs, Inc. v. Farr, Tennessee Court of Appeals, No. M2011-01443-COA-R3-CV, January 27, 2012, ¶401-455
Explanations at ¶60-025