CompUSA 2007 Annual Report Download - page 54

11
• State and local sales tax collection may affect demand for our products.
Our United States subsidiaries collect and remit sales tax in states in which the subsidiaries
have physical presence or in which we believe nexus exists which obligates us to collect sales
tax. Other states may, from time to time, claim that we have state-related activities constituting
a sufficient nexus to require such collection. Additionally, many other states seek to impose
sales tax collection obligations on companies that sell goods to customers in their state, or
directly to the state and its political subdivisions, even without a physical presence. Such
efforts by states have increased recently, as states seek to raise revenues without increasing the
tax burden on residents. We rely on United States Supreme Court decisions which hold that,
without Congressional authority, a state may not enforce a sales tax collection obligation on a
company that has no physical presence in the state and whose only contacts with the state are
through the use of interstate commerce such as the mailing of catalogs into the state and the
delivery of goods by mail or common carrier. We cannot predict whether the nature or level
of contacts we have with a particular state will be deemed enough to require us to collect sales
tax in that state nor can we be assured that Congress or individual states will not approve
legislation authorizing states to impose tax collection obligations on all direct mail and/or e-
commerce transactions. A successful assertion by one or more states that we should collect
sales tax on the sale of merchandise could result in substantial tax liabilities related to past
sales and would result in considerable administrative burdens and costs for us and may reduce
demand for our products from customers in such states when we charge customers for such
taxes.
• Business disruptions could adversely impact our revenue and financial condition.
We insure for certain property and casualty risks consisting primarily of physical loss to
property, business interruptions resulting from property losses, workers' compensation,
comprehensive general liability, and auto liability. Insurance coverage is obtained for
catastrophic property and casualty exposures as well as those risks required to be insured by
law or contract. Although we believe that our insurance coverage is reasonable, significant
events such as acts of war and terrorism, economic conditions, judicial decisions, legislation,
natural disasters and large losses could materially affect our insurance obligations and future
expense.
• Changes in financial accounting standards may affect our results of operations.
A change in accounting standards or practices can have a significant effect on our reported
results of operations. New accounting pronouncements and interpretations of existing
accounting rules and practices have occurred and may occur in the future. Changes to existing
rules may adversely affect our reported financial results.
Risks Related to Our Company
• Increased costs associated with corporate governance compliance may impact our results of
operations.
As a public company, we incur significant legal, accounting and other expenses that we would
not incur as a private company. In addition, the Sarbanes-Oxley Act of 2002, as well as rules
subsequently implemented by the Securities and Exchange Commission and listing
requirements subsequently adopted by the New York Stock Exchange in response to Sarbanes-
Oxley, have required changes in corporate governance practices of public companies. These
developments have substantially increased our legal compliance, auditing and financial
reporting costs and made them more time consuming. These developments may also make it
more difficult and more expensive for us to obtain directors’ and officers’ liability insurance
and we may be required to accept reduced coverage or incur substantially higher costs to