You and three friends create an online retailer, which is incorporated in California under the name Gifts&Awards.com, Inc. The Web site will sell awards, clocks, desk sets, and other merchandise that businesses want as gifts for their clients and as promotional items for their employees. Physically, Gifts&Awards.com, Inc. will be located exclusively in San Jose, California. All its shareholders, employees, and assets will be in California. As an online retailer, however, Gifts&Awards.com's merchandise will be available to anyone anywhere in the world. Businesses worldwide will place orders through the Web site, which will be filled by the Gifts&Awards.com's staff. Gifts&Awards.com will ship about 20 percent of the merchandise ordered from a warehouse it leases in California. The other 80 percent will be shipped directly from the manufacturers or importers of the items. For that 80 percent, Gifts&Awards.com will take orders from customers and direct the orders to the appropriate manufacturers or importers, some of which will be in California but most of which will be dispersed throughout the United States.
You estimate that Gifts&Awards.com will have $4,000,000 in annual sales, $60,000 of which will be sold to customers residing in Arizona. The goods will be delivered to customers by UPS, a third-party carrier whose fee will be added to the price of the goods. Some of the goods will be shipped from Gifts&Awards.com's warehouse in California, and some from manufacturers in other states, including Arizona. Consider the following questions regarding the State of Arizona's regulation of Gifts&Awards.com, Inc., a California corporation:
May the State of Arizona require Gifts&Awards.com, Inc. to obtain a certificate of authority to do business in Arizona and collect a fee from Gifts&Awards.com for the privilege of doing business in the state?
May the State of Arizona impose its state income tax on a portion of Gifts&Awards.com's worldwide income?
May the State of Arizona require Gifts&Awards.com to collect the Arizona sales tax on sales to Arizona residents?
If Gifts&Awards.com sells defective awards to a customer in Arizona, may the customer sue Gifts&Awards.com in an Arizona trial court? Will your answer affect Gifts&Awards.com policy on customers' returns and refunds?
