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"The Gap" in Percentage Rent

Gap_logoOnce upon a time, a certain retailer made the argument that if you had a kiosk in a mall, sales made through that kiosk were different than the normal exchange of money for physical goods. That retailer went on to assert that because of that difference, they should not have to pay percentage rent on goods sold via the kiosk.

Other retailers created separate divisions that operated online exclusively, thinking this would enable them to  avoid paying sales taxes to states where they have no physical presence, pursuant to a 1992 U.S. Supreme Court ruling.

A little-known ruling in California may put a dent in that line of thinking. California's 1st District Court of Appeal in San Francisco ruled against Borders, ruling May 31 that the company's website and retail stores have been too intertwined to call themselves separate companies. The three-judge panel cited in-store advertising for the website, receipts that said, "Visit us online at http://www.borders.com " and the ability of customers to return online goods at retail stores. The judges also noted that the companies had board members in common and shared a similar logo.

Shopping centers have long argued for tax fairness, as opposed to new taxes. As municipalities and others reach their breaking point in budgeting for police, fire, schools, and other critical infrastructure, people need to think harder about what it really takes to fund the places they have chosen to live in.


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