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through sales representatives. Petitioner’s customers generally
ordered small dollar amounts of merchandise, with the average
order amounting to approximately $100. Many of petitioner’s
customers placed orders on a periodic basis.
During the years in issue, petitioner received approximately
600 orders per day. It was petitioner’s goal and general
practice to ship the ordered product on the same day the order
was received. With each shipment, petitioner enclosed an invoice
containing a description of the product, the sales price, and
applicable shipping and handling charges. In addition,
petitioner mailed monthly statements to those customers who had
outstanding balances payable to petitioner.
Petitioner offered its customers a variety of payment
options, including open credit, cash on delivery, and payment by
credit card. Petitioner’s customers who paid by check sent their
payments directly to a lockbox operated by Marshall and Isley
Thunderbird Bank (the lockbox agent). It was the responsibility
of the lockbox agent to empty the lockbox, process the payments,
and deposit the payments to petitioner’s non-interest-bearing
operating account. Each day, the lockbox agent would send
computer files to petitioner containing the payment data for the
prior day, which petitioner would use to update its accounts
receivable and other records.
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Last modified: May 25, 2011