Reference no: EM133378810
Case Study: XYZ Corp is a retail seller of grocery store products located in Chicago. These products ranged from food items (both fully cooked to raw food ingredients) to cookware. One-third of its customers are grocery stores, one third are individuals, and one third are government and non-profit hospitals. Its sales are made by web-based orders to customers throughout the US. Most of the orders are shipped to customers via common carrier, although on occasion its own sales force will deliver products. It has no employees or assets in any state other than Illinois, although its sales force occasionally travels to meetings in all states. Each year, XYZ purchases its inventory from an unrelated manufacturer in Korea. It also buys shipping containers from an unrelated supplier which is located in Illinois. Finally, it buys most of its own furniture and equipment from an unrelated supplier in Georgia. XYZ also has some affiliated companies in Iowa and Florida. These affiliates sell microwave ovens which can be used to heat food. Additionally, your client also just received tax bills from a number of states in which it feels it should not be taxed. The bills are as follows:
*$400,000 for income taxes-State of New York. Your client does not have an office there, but has a number of trade shows in New York City.
*$500,000 surcharge tax by Georgia. Georgia charges this fee to any company having sales of over $1 million in the state.
*$300,000 in internet access charges from Connecticut. The client has a server located in this state, and Connecticut recently imposed a tax/fee on anyone who accesses the internet.
*$500,000 for sales taxes on sales made to customers in Nevada and Washington.
*A notice from all states that because the company allows local firms to place their ads on websites (which allow a customer to click through to the company's website to place orders) XYZ should have been collecting sales taxes in those states.
*A number of XYS's sales representatives work from their homes in various states. These reps works as independent contractors.