Cabela's 2005 Annual Report Download - page 32

populated rural area which may make it difficult to attract and retain qualified individuals for key management
positions. The loss of the services of any of these individuals or the inability to attract and retain qualified
individuals for our key management positions could cause our operating results to suffer.
Our business depends on our ability to meet our labor needs and if we are unable to do so, our
destination retail store expansion strategy may be delayed and our revenue growth may suffer.
Our success depends on hiring, training, managing and retaining quality managers, sales associates and
employees in our destination retail stores and customer care centers. Our corporate headquarters, distribution
centers, return center and some of our destination retail stores are located in sparsely populated rural areas. It
may be difficult to attract and retain qualified personnel, especially management and technical personnel, in these
areas. Competition for qualified management and technical employees could require us to pay higher wages or
grant above market levels of stock compensation to attract a sufficient number of employees. If we are unable to
attract and retain qualified personnel as needed, the implementation of our destination retail store expansion
strategy may be delayed and our revenue growth may suffer.
Our use tax collection policy for our direct business may subject us to liabilities for unpaid use taxes
on past sales.
Many states have attempted to require that out-of-state direct marketers, whose only contacts with the state
are solicitations and delivery to their residents of products purchased through the mail or the Internet, collect use
taxes on the sale of these products. In addition, a private litigant, purportedly on behalf of various states, has
initiated litigation against several out-of-state direct marketers alleging that the failure to collect and remit use
tax violates various state false claims laws. The U.S. Supreme Court has held that states, absent congressional
legislation, may not impose tax collection obligations on out-of-state direct marketers unless the out-of-state
direct marketer has nexus with the state. Nexus generally is created by the physical presence of the direct
marketer, its agents or its property within the state. Our use tax collection policy for our direct business is to
collect and remit use tax in states where our direct business has established nexus. Prior to the opening of a
destination retail store, we have historically sought a private letter ruling from the state in which the store will be
located as to whether our direct business will have nexus with that state as a result of the store opening. Some
states have enacted legislation that requires use tax collection by direct marketers with no physical presence in
that state. In some instances, the legislation assumes nexus exists because of the physical presence of an affiliated
entity engaged in the same line of business. We have received a use tax assessment from a state. In addition, a
competitor has commenced an action against us in another state, alleging that our failure to collect and remit use
tax in certain states constitutes unfair competition. We presently intend to vigorously contest the assessment and
the action, and expect that we will challenge any and all future assertions by governmental or private litigants
that we have nexus in states in which our direct business has no physical presence, but we may not prevail. If we
do not prevail, we could be held liable for use taxes on prior direct business sales which could be substantial.
Our destination retail store expansion strategy may result in our direct business establishing nexus
with additional states which may cause our direct business to pay additional income and use taxes and
have an adverse effect on the profitability and cash flows of our direct business.
As we open destination retail stores in additional states, the necessary relationship between the retail stores
and the direct business may be deemed by state tax authorities to create nexus for state income and use taxation
of our direct business in these states. In addition, we may establish nexus in states where our competitors have
not established nexus. The establishment of nexus and imposition of use taxes by states on sales of our direct
business could:
• create administrative burdens for us;
• increase the tax collection and payment obligations of our direct business;
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