After months of waiting to hear from the state, Cabela’s has withdrawn its request for a sales tax exemption, though the company still plans to build a large store in Scarborough.

Cabela’s, the Nebraska-based sporting goods giant, had requested a ruling from Maine Revenue Services that would allow the store to exempt its Maine customers from the 5 percent sales tax on catalog and Internet sales.

The company withdrew its request about a half-hour before it was to be reviewed by the planning board at its special meeting last night (Oct. 24). The board did review the entire project, planned for the Haigis Parkway, that includes restaurants, office buildings and a 200-room hotel.

At the meeting, Gene Beaudoin, the developer who is working with Cabela’s, read a letter from Mike Callahan, Cabela’s senior vice president, saying the company is “presently reevaluating its expansion strategy in the Northeast, which may result in (Cabela’s) modification of our approach in Maine.”

The company did reiterate its plans to come to Scarborough. “We look forward to opening a Cabela’s retail store in Scarborough,” Callahan’s letter said.

In an earlier interview, Beaudoin said that the store would not come to Scarborough without a favorable ruling from the state.

Cabela’s has argued that it is actually three separate companies – Internet, catalog and the retail store. Because the catalog and Internet companies would still be located in other states, the company claimed customers should continue to be exempted from the state’s sales tax.

The problem Revenue Services had to solve was the issue of what constituted a nexus – in other words, where Internet, catalog and store sales connect.

It was unclear if there was enough of a connection to establish whether there was a solid relationship between Cabela’s three divisions. If the state ruled there was no connection between the three divisions, then those items ordered from the catalog and Internet would not be subject to tax. However, if the state ruled the three divisions were connected, then Cablea’s would have to charge state sales tax on all items.

Returning items to the retail store that were purchased on the Internet or from the catalog could prove that there is a connection between the three companies. For example, if a customer purchased an item from the Internet without paying sales tax and then returned it to the retail store, there is a question about what to do regarding sales tax.

While the letter from Cabela’s clearly states the withdrawal of the application and its intent to go forward in Scarborough, the company did not say how it is modifying its plans.

“As far as nexus goes, we’re in a period when we’re reviewing that, so we can’t comment,” said James Powell, a Cabela’s spokesman. “The good news for all involved is that we’re still planning on coming to Maine.” He added that with such a large project, many things are still being decided.

According to state Sen. Lynn Bromley, D-South Portland, one potential solution Cabela’s is considering is creating a nexus in Maine. Bromley has been working with the state to ensure that Cabela’s continues to go forward with its plans for Scarborough.

A way to create a nexus, said Bromley, could be as simple as setting up a catalog kiosk in the store or actually building a call center in Maine. With the physical presence of either the catalog or the Internet in the state, Maine customers would then be required to pay the 5 percent sales tax on all purchases.

“This is everything they’ve been fighting,” said Bromley. “When it started looking like the ruling wasn’t going to go the way we all wanted it to go, a bunch of us started talking and said if the state is going to say there’s a nexus, which we still think there isn’t, why not just make a nexus?”

Though Bromley said Cabela’s hasn’t made any decision about this plan, she believes it makes sense. Turning something like the Brunswick Naval Air Station, which is to be closed, into a distribution site, said Bromley, is one of many ideas.

This option gives both the state and Cabela’s a way out, said Bromley. Now the state doesn’t have to come down on one side of a highly politicized issue and Cabela’s does not set a precedent for other states to follow.

“The issue for Cabela’s has never been that it would be a problem to charge the taxes, the disadvantage was that it would have set a precedent for other states,” said Bromley.

The fear, said Bromley, was that if Cabela’s charged Maine customers sales tax on its Internet and catalog sales without a physical presence of either in Maine, the other states that have given Cabela’s a favorable ruling in the past could rule that the company must begin charging sales tax for customers in other states. By creating a nexus in Maine, said Bromley, the Maine store would be different enough that other states wouldn’t be able to reverse their rulings.

According to Bromley, the Scarborough project was in jeopardy of failing a number of times.

“Two or three times I thought, ‘it’s dead,'” said Bromley. “I knew Cabela’s wouldn’t come without a favorable ruling unless there was something substantially different in Maine.” She added that there was concern Cabela’s would head to Portsmouth if they received a no from Maine Revenue Services, said Bromley, thus drawing Maine customers into New Hampshire.

“That would be the worst case scenario,” said Bromley. “There was lots of hinting around about that.”

As for why the state took so long to deliberate, Bromley feels that the agency was caught up the politics and fairness of the issue.

“I think Revenue Services got very interested in doing what they thought was fair and they forgot that their job isn’t to make policy, their job is to make a legal interpretation,” said Bromley. “It’s up to the Legislature to make policy. Good people got caught up in having a discussion of what’s fair, and the only authority they have is to say what’s legal.”

Sen. Phil Bartlett, D-Gorham, has also worked to bring Cabela’s to Maine.

“The whole issue got so politicized,” said Bartlett. “I can understand why they pulled it. It certainly sounds promising that they’ll have a slightly different store in Maine.”

Bartlett said he feels there should be an answer to the nexus question on the national level. “We need to implore Congress to clarify the nexus issue,” said Bartlett. Currently, he added, the federal law allows each state to have its own interpretation. “At the state level, we could direct Maine Revenue Services to take a liberal or conservative interpretation, but ultimately it’s a federal law,” added Bartlett.

In the meantime, said Bartlett, the state needs to come up with a “clear and formal” review process and time line for companies requesting similar rulings. “My big concern all along has been that it makes Maine look like it isn’t eager for business,” said Bartlett.

For a complete story on the Cabela’s decision and the future of the project, see the Nov. 2 issue of The Current.

Gene Beaudoin, the developer from New England Expedition who is working with Cabela’s, presented details of the Haigis Parkway project at the Oct. 25 special planning board meeting.

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