Reference no: EM131622889

Lord Berkeley Corp., a New Jersey Corporation with its headquarters in this State, has made an executive decision to launch sales online in a slow, progressive fashion. LBC plans on selling a new line of upscale designer women's spring and summer apparel exclusively online. Initially, it will offer only this apparel as a twelve-month pilot project to women in the West and Southwest region of the country and, if the pilot is successful, it may decide to roll its promotions out to the rest of the nation the following year. No affiliates or independent distributors will be employed as sales will be direct-to-consumers. All of the product that is anticipated to be sold online has been designed, manufactured, warehoused in and will be shipped from various locations on the East Coast or shipped from a smaller facility that currently serves the West Coast and the Mid and Southwest regions of the country.

Lord Berkeley Corp. has been advised by its accountant that it may still have to collect sales tax on its online apparel sales made through the pilot program. LBC, however, wants a more definitive answer on the question since LBC executives would like to believe that the online sales would not be subject to sales tax and, frankly, do not want to pay tax on the internet sales because of their belief that the internet is still an unregulated marketplace. The Executives have been careful to distinguish their pilot project from Amazon and Overstock.com. In your considered opinion, will Lord Berkeley Corp. be able to successfully avoid sales tax collection in the event that States such as California, Arizona or Texas seek to impose such obligations on it?

Draft a Memo for your supervisor that responds to the question posed and that details the basic principles of constitutional and state authority to impose taxes, as well as any limits on said authority. Research and include in your response whether the three states mentioned impose sales taxes at all.