States Can Force Online Shoppers to Pay Sales Tax, Supreme Court Rules

WASHINGTON — The Supreme Court says states can force online shoppers to pay sales tax.

The 5-4 ruling Thursday is a win for states, who said they were losing out on billions of dollars annually under two decades-old Supreme Court decisions that impacted online sales tax collection.

The high court ruled Thursday to overturn those decisions. They had resulted in some companies not collecting sales tax on every online purchase. The cases the court overturned said that if a business was shipping a product to a state where it didn’t have a physical presence such as a warehouse or office, the business didn’t have to collect the state’s sales tax. Customers were generally supposed to pay the tax to the state themselves if they don’t get charged it, but the vast majority didn’t.

Justice Anthony Kennedy wrote that the previous decisions were flawed.

“Each year the physical presence rule becomes further removed from economic reality and results in significant revenue losses to the States. These critiques underscore that the physical presence rule, both as first formulated and as applied today, is an incorrect interpretation of the Commerce Clause,” he wrote.

In addition to being a win for states, the ruling is also a win for large retailers, who argued the physical presence rule was unfair. Retailers including Apple, Macy’s, Target and Walmart, which have brick-and-mortar stores nationwide, generally collect sales tax from their customers who buy online. That’s because they typically have a physical store in whatever state the purchase is being shipped to. Amazon.com, with its network of warehouses, also collects sales tax in every state that charges it, though third party sellers who use the site to sell goods don’t have to.

But sellers that only have a physical presence in a single state or a few states could avoid charging customers sales tax when they’re shipping to addresses outside those states. Online sellers that don’t charge sales tax on goods shipped to every state range from jewelry website Blue Nile to pet products site Chewy.com to clothing retailer L.L. Bean. Sellers who use eBay and Etsy, which provide platforms for smaller sellers, also aren’t required to collect sales tax nationwide.

The case the court ruled in has to do with a law passed by South Dakota in 2016. South Dakota’s governor has said his state loses out on an estimated $50 million a year in sales tax that doesn’t get collected by out-of-state sellers. Lawmakers in the state, which has no income tax, passed a law designed to directly challenge the Supreme Court’s 1992 decision. The law required out-of-state sellers who do more than $100,000 of business in the state or more than 200 transactions annually with state residents to collect sales tax and turn it over to the state.

South Dakota wanted out-of-state retailers to begin collecting the tax and sued several of them: Overstock.com, electronics retailer Newegg and home goods company Wayfair. The state conceded in court, however, that it could only win by persuading the Supreme Court to do away with its physical presence rule.

The Trump administration had urged the justices to side with South Dakota.

The case is South Dakota v. Wayfair, 17-494.

Intel CEO Brian Krzanich Resigns Over Consensual Relationship With Employee

NEW YORK — Intel CEO Brian Krzanich has resigned after the company learned of what it called a consensual relationship with an employee.

Intel said Thursday that the relationship was in violation of the company’s non-fraternization policy, which applies to all managers.

Chief Financial Officer Robert Swan will take over as interim CEO immediately. A search for a new CEO is underway.

In this #MeToo era, corporate America is under intense pressure to enforce workplace policies on gender equality and sexual harassment.

Earlier this month, Guess Inc. co-founder Paul Marciano stepped down following a company investigation into allegations of sexual harassment and assault.

John Lasseter, co-founder of Pixar Animation Studios and Walt Disney’s animation chief, also recently said he was resigning over what he called “missteps” with employees.

Krzanich joined Intel Corp. in 1982 as an engineer.

The abrupt departure of Krzanich, who has been the Intel’s top executive since 2013, overshadowed otherwise positive news for the $246 billion tech company.

Intel said Thursday that it expects to post a per-share profit of 99 cents in the second quarter, 13 cents better than Wall Street was expecting, and revenue of $16.9 billion, which is also better than had been projected by industry analysts.

Shares of Intel Corp., based in Santa Clara, California, slid 2 percent in early trading.

Theranos Founder Elizabeth Holmes Charged With Wire Fraud

Theranos Inc. founder Elizabeth Holmes, who reigned briefly as the world’s youngest female self-made billionaire over her promise to revolutionize blood testing, was criminally charged with defrauding investors along with the company’s former president.

The indictment announced Friday by the U.S. Attorney in San Francisco alleging wire fraud follows claims by the U.S. Securities and Exchange Commission that Theranos, Holmes and the company’s ex-president, Ramesh “Sunny” Balwani, lied about their technology while raising more than $700 million to build the medical-testing startup.

The indictment came out moments after Theranos said Holmes would be stepping down from the blood-testing company that has unraveled amid revelations that her main product was a fraud.

After the testing device that Holmes claimed would be able run hundreds of medical tests on a single drop of blood was shown not to work, Holmes was barred from running a clinical company by U.S. regulators and was sued by investors, and the company let go many of its employees.

Since then, she has been seeking funding for a new venture, a Wall Street Journal reporter who wrote about many of the company’s controversial activities told the magazine Vanity Fair.

Holmes, who dropped out of Stanford University to found the company in 2003, rose to national attention starting in 2013 when she claimed that Theranos had developed a medical technology that could do what seemed impossible: Its secret machines could run thousands of medical tests using the blood from a tiny finger-prick, and do so quickly and cheaply.

As the roll-out with Walgreens neared, Holmes told the company’s engineers to modify standard blood-testing machines to run Theranos’s tests, according to the SEC. She allegedly hid that change from the pharmacy’s executives, conducting demonstrations using Theranos’s machines and leading them on Theranos lab tours without revealing that the startup was using third-party technology.

Regulators claim that at the same time, Holmes was using the company’s glowing profile in the media to raise more money. She and Balwani repeatedly duped investors about the company’s products, its business relationships, and its prospects for long-term growth, according to the SEC complaints. Holmes didn’t admit or deny the SEC’s claims in her settlement, while Balwani is fighting the agency’s suit and has denied wrongdoing.

The company eventually had to retract or correct the results of tens of thousands of medical tests. It was sanctioned by regulators at the Centers for Medicare and Medicaid Services, which banned Holmes from running a lab company for two years. The company let go many of its employees and shut down its consumer-testing operations, and said it would focus on developing its technology.

According to the indictment, Holmes and Balwani used marketing materials, statements to the media and other communications to defraud potential investors even while they knew that their representations about Theranos technology were false.

“Investors large and small from around the world are attracted to Silicon Valley by its track record, its talent, and its promise,” Acting U.S. Attorney Alex Tse said in a statement. “They are also attracted by the fact that behind the innovation and entrepreneurship are rules of law that require honesty, fair play, and transparency.”

Lawyers for Holmes and Balwani didn’t immediately respond to requests for comment.

Campbell Soup’s CEO Will Retire After a Three-Year Slump

Campbell Soup Co., struggling through a three-year sales slump, said Chief Executive Officer Denise Morrison is retiring and will be replaced on an interim basis by board member Keith McLoughlin.

Morrison, 64, who has been at the helm since 2011, is stepping down, effective Friday, Campbell said in a statement. She has been with the company for 15 years. McLoughlin, 61, has been a board member since 2016.

Campbell has been seeking other sources of growth as it grapples with a soup slowdown. In December, the company agreed to buy Snyder’s-Lance in a bid to push deeper into salty snacks — a bright spot in the struggling packaged-food industry. That deal gives Campbell, which makes Goldfish crackers, brands such as Cape Cod potato chips and Snyder’s pretzels.

Last month, the company named industry veteran Luca Mignini, 55, as its chief operating officer. Mignini, who joined Campbell in 2013, had been running the company’s snacks unit, putting him in line for the top job. Mignini is now overseeing Campbell’s soup business in addition to managing the expaned portfolio of snacks.

The soup company also provided a full-year forecast for adjusted earnings per share that fell short of analysts’ estimates.

Shares of Campbell dropped as much as 5 percent in early trading to $37.25. They had already slid 18 percent this year through Friday’s close.

Bumble Bee CEO Charged With Fixing Canned Tuna Prices

SAN FRANCISCO — U.S. prosecutors filed a criminal charge Wednesday against the CEO of Bumble Bee Foods as part of an ongoing investigation into price fixing in the packaged seafood industry.

A grand jury in San Francisco indicted Christopher Lischewski on one count of price fixing, alleging that from November 2010 to December 2013 he conspired with others in the industry to eliminate competition by setting prices for canned tuna.

Three other people, including a former StarKist tuna company executive, have previously been charged. Stephen Hodge, a former senior vice president for sales at StarKist, pleaded guilty last year to price-fixing.

“American consumers deserve free enterprise, not fixed prices, so the department will not tolerate crimes like the one charged in today’s indictment,” Assistant Attorney General Makan Delrahim said in a statement announcing Lischewski’s indictment.

Lischewski’s attorney, John Keker, said his client has lived a hardworking and ethical life and is innocent.

“When the facts are known and the truth emerges, Mr. Lischewski will be found not guilty, and that vindication will rightfully restore his good name,” Keker said in a statement.

The U.S. government began investigating price fixing of canned tuna between StarKist, Bumble Bee Foods and Chicken of the Sea more than two years ago.

Two other executives at Bumble Bee have pleaded guilty in the price-fixing scheme, and Bumble Bee Foods last year agreed to pay a $25 million fine after pleading guilty to price fixing.

Bumble Bee general counsel Jill Irvin has said the company hired a chief compliance officer last fall and recently reformed its guidelines and policies.

Private Equity Firm Lantern Capital to Acquire Bankrupt Weinstein Company

(NEW YORK) — A private equity firm emerged Tuesday as the winning bidder for the Weinstein Co., the studio forced into bankruptcy by the sexual misconduct scandal that brought down Hollywood mogul Harvey Weinstein.

The Weinstein Co. announced in a statement that no other bidder made a better offer than Dallas-based Lantern Capital, which made a “stalking-horse” bid last month to pay $310 million in cash for the Weinstein Co.’s assets. The emergence of another qualified bidder would have triggered an auction leading to higher sale price.

The sale is subject to approval by a Delaware bankruptcy court, which has set a sale hearing for next week. The sale faces numerous objections that must be resolved, some from actors including Jennifer Lawrence, Meryl Streep and Brad Pitt, who claim they are owed profit participation from projects.

The Weinstein Co. filed for bankruptcy in March, succumbing to a fate it had tried to avoid since the scandal that forced Harvey Weinstein’s ouster as CEO in October. Some 80 women, including prominent actresses, have accused Harvey Weinstein of misconduct ranging from rape to harassment.

The New York company’s primary assets are a lucrative 277-film library, a television production business, and an unreleased film portfolio that includes four distribution-ready films and other projects in various stages of development.

Lantern also has agreed to assume about $125 million in project-related debt and to cover obligations related to the assumption of certain contracts and leases.

In a last-minute twist, a company formed by Broadway producer Howard Kagan made an offer Tuesday, asking for an extension to complete due diligence. But the Weinstein Co. declined to consider the bid, saying it lacked “a purchase agreement, a financing commitment, a deposit, or a number of other requirements for a qualified bid.”

Kagan’s offer had the support of five women who have filed a class action lawsuit against Harvey Weinstein. In a statement, the plaintiffs said they opposed the sale to Lantern because it contained no guarantee of a settlement fund for Weinstein’s accusers.

In a letter, Kagan outlined a plan that would have included $25 million, along with 4 percent of the equity of the company, for a fund for Weinstein’s accusers. He also proposed a cash payment of $5 million plus 1 percent of the equity in the new company for employees and former employees with claims against Weinstein.

“What really should happen here is that the company should be sold in a way that the victims are taken care of,” Kagan told The Associated Press.

Kagan, a former hedge fund manager-turned-Broadway-producer, often works alongside his wife, Janet. They won Tony Awards for the 2013 revival of “Pippen” and the 2012 revival of “Porgy and Bess.” Their most recent foray onto Broadway ended disastrously. Having taken “Natasha, Pierre and The Great Comet of 1812” to Broadway with Josh Groban, the Kagans faced criticism over how they handled replacing the pop singer.

Lantern had no immediate comment on the developments.

The private equity firm has been in talks for months about acquiring The Weinstein Co. It had been part a group of investors led by businesswoman Maria Contreras-Sweet that had been poised to buy the studio. A lawsuit filed by New York Attorney General Eric Schneiderman on behalf of the Weinstein Co.’s employees complicated that transaction, and it ultimately fell apart.

Schneiderman’s office released a statement Monday urging any bidders for the Weinstein Co. to include compensation for the victims.

Starbucks Is Closing Thousands of Stores for Racial Bias Training. Here’s How Much Money It Could Lose

Starbucks is closing over 8,000 company-owned stores for racial bias training during an afternoon in May, the company announced Tuesday.

The news comes as the Seattle, Wash.-based firm is being criticized after two black men were arrested in a Philadelphia Starbucks store after asking to use the restroom without making a purchase. The incident has led to protests and boycotts nationwide, while the manager involved in the situation has since left Starbucks’ Philadelphia location where the arrest took place.

“Closing our stores for racial bias training is just one step in a journey that requires dedication from every level of our company and partnerships in our local communities,” said Starbucks CEO Kevin Johnson in a statement Tuesday.

Closing thousands of stores could be costly for the company.

Starbucks-owned stores made about $4.7 billion in revenue over the most recent quarter, according to the company’s latest earnings report. Divide that by three, and you get about $1.6 billion per month. Divide again by 30, and you get about $53.3 million every day. Divide again by 24, and you get about $2.2 million every hour. So if you assume each company-owned Starbucks store will close for about four hours over a single afternoon, that’s roughly $8.8 million in revenue the company will potentially miss out on, by this admittedly back-of-the-envelope math.

It’s worth noting a couple of caveats: Not every company-owned Starbucks store will close, so this estimate may be slightly high. Meanwhile, some customers may simply wait until Starbucks re-opens to get their fix on the day of the closures, but as a self-identifying caffeine addict, I’d argue most people will just get their fix at a rival chain or local coffee shop.

But for Starbucks, the price may be worth paying. The company’s stock price and reputation have both suffered in the wake of the Philadelphia Starbucks arrest incident. Shutting down Starbucks stores is the kind of strong response from Johnson that might help restore the shaken trust and confidence between Starbucks, its customers, its employees, and its investors.

Starbucks Is Closing 8,000 Stores for Racial Bias Training After the Arrest of 2 Black Men

Starbucks will close more than 8,000 stores for one afternoon next month to hold racial bias trainings after two black men were arrested while waiting at a Philadelphia location, an incident that has prompted protests and calls to boycott the coffee giant.

More than 8,000 company-owned stores will close on the afternoon of May 29 to provide the training to nearly 175,000 employees, the company said in a press release on Tuesday. The training will “address implicit bias, promote conscious inclusion, prevent discrimination and ensure everyone inside a Starbucks store feels safe and welcome,” per the company’s statement.

The two men were arrested on Thursday after Starbucks employees called 911 to report them for trespassing when they asked to use the restroom but were denied because they had not yet purchased anything, according to police. Their arrest was filmed by another patron, who said the men were waiting for a friend to arrive. The store manager involved in the situation no longer works at that Starbucks location, a spokesperson said.

“While this is not limited to Starbucks, we’re committed to being a part of the solution,” Starbucks CEO Kevin Johnson said in a statement.

“Closing our stores for racial bias training is just one step in a journey that requires dedication from every level of our company and partnerships in our local communities.”

The training curriculum will be designed by civil-rights leaders and experts on combatting racial bias, including former U.S. Attorney General Eric Holder; Bryan Stevenson, founder and executive director of the Equal Justice Initiative; and Sherrilyn Ifill, president and director-counsel of the NAACP Legal Defense and Education Fund.