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Taxes On Internet|Shipping OK, Judge Says

(CN) - Shipping costs for products ordered from Wal-Mart's Web site are subject to sales tax because the shipping services are a required element of the sale, an Illinois appeals court ruled.

Nancy Kean filed a class action claiming Wal-Mart violated Illinois state law when it taxed her for shipping costs for a trampoline she ordered off the retail giant's Web site.

The trial court dismissed, ruling that Kean failed to state a claim since Wal-Mart was properly applying tax to shipping.

"(C)ourts have ruled that the crucial issue is whether there is an 'inseparable link' between the sale of goods and the associated shipping charges," wrote Justice Joseph Gordon.

When customers buy products off the Wal-Mart Web site, it is impossible to purchase items without paying for shipping services, the court ruled.

Since Wal-Mart has to include shipping charges as part of its "gross receipts" under Illinois' Retailers' Occupation Tax Act, taxing customers for the shipping costs is legal, the appeals court ruled.

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