No April Fool's: CDW to Charge Sales Tax

CDW historically only collected sales taxes in Illinois, New Jersey, Virginia, Wisconsin and, as of March 1, New York. In other states, customers were required to assess and pay any applicable taxes on their own.

The change will allow CDW to visit customer locations for sales calls and provide more on-site services through third-party companies, according to the company.

The Vernon Hills, Ill.-based solution provider has not experienced an adverse impact on sales in states where it now charges a sales tax, according to the company.

Some solution providers have argued that CDW held a significant advantage over them because it did not include sales tax in purchase orders. John Edwardson, CEO of CDW, told CRN in 2001 that sales tax was not a differentiator and that he wished he could charge the tax.

"We don't try to use sales tax as an advantage. For [Illinois businesses] we have to pay the sales tax here. In the government division, there is no sales tax. [Otherwise] it's incumbent among the purchaser from us to pay the sales tax in their jurisdiction. It's not as if it's free," Edwardson said at that time. "With some of our biggest customers, it's a competitive disadvantage because they do have to file sales tax and keep track of it themselves. They ask us to include sales tax, but we can't. It works for us in some cases, but in more cases it does not."

Edwardson also said he was in favor of a national tax on Internet purchases.

"Before I took this job, I was very much against sales tax. Now I have an entirely different feeling as CEO of this company. Sooner or later, it has to happen. It's not a question of if, but when, it will happen. There's too much sales tax revenue lost," Edwardson said at that time.

CDW needs to be able to offer its services in all states and it is unclear whether the addition of a sales tax charge will affect revenue, said Brian Alexander, vice president of equity research, technology distribution, at Raymond James and Associates.

On one hand, the company needs to broaden its offering to include more services, as customers are increasingly seeking solutions—hardware, software and services—vs. just products. By collecting sales tax from all customers, CDW effectively expands its addressable market with its third-party branded service offerings," Alexander said. "On the other hand, there are likely a number of customers that buy through CDW to avoid paying sales tax. Consequently, the company could naturally lose some of these customers."