Tax Analysts Blog

Textbooks with Borders

Posted on Aug 21, 2013

Most of us have heard of doctors without borders, but has anyone heard of textbooks with borders? It’s a reality for those using Amazon’s textbook rental service, Warehouse Deals. According to Amazon's website, textbooks rented through their service may not be moved outside the state in which they were originally rented. “If you wish to move the textbook out of that state, you must first purchase the textbook,” the website continues. And if Amazon determines the textbook has been moved out of the original state, it “may in [its] sole discretion charge you the buyout price of the textbook and transfer title to the textbook to you, retroactive to the date you moved the textbook out of that state.”

The reason for this is very likely related to Amazon's recurring sales tax issues. Amazon has proactively avoided creating sales and use tax nexus in as many states as possible, and this restriction is just one more step to ensure that Amazon limits its potential nexus-creative activities. Given that it is becoming easier and easier for businesses to establish physical presence in a state, Amazon doesn’t want to take a chance on how states will treat the fact that it owns title to rented textbooks that are crossing state lines.

Amazon is a major player in the textbook world, so it owns a lot of books. In a textbook rental transaction, Amazon continues to own the book, while the user borrows it for a certain period of time. The continued ownership of the book means that Amazon possesses a physical product in a state. This possession can create sales tax nexus.

Still, while Amazon can attempt to limit users from taking books across state lines, the reality is that it will happen. Users may not be aware that they are not permitted to do so or will simply ignore the restriction. It will be interesting to see whether (or how) Amazon will be aggressive in figuring out when books cross state lines and retroactively selling the books to users.

Read Comments (1)

Brian Dooley, CPA, MBTAug 24, 2013

Amazon's book rental is a big savings for CPAs and attorneys.

Renting tax books (versus buying a service), allows us to get knowledge on
demand at a very cheap cost.

The Amazon free "look inside" feature allows us to find the book we need.

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