Barnes & Noble Faces State Audit on Internet Sales

The state Board of Equalization is auditing Barnes & Noble Inc. to determine whether the chain’s bookstores in California are offering discounts on Internet sales in an effort to circumvent state sales taxes, officials announced Friday.

The company has argued that the Internet site and stores are separate and that, because the site is not physically located in California, the Internet sales are not subject to the state’s taxes.

In September, however, the board determined that the use of Barnes & Noble stores in California for the distribution of 20% discount coupons for purchases through the company’s Internet site meant the stores were the site’s agents in California.

The board determined that, under state law, the site is therefore required to collect sales taxes on all sales made to California residents.

In announcing the audit earlier this week, board Chairwoman Carole Migden issued a warning to national retailers.

“Do not try to use the Internet as a tax haven for your California stores,” she said.