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Zones to Dispute Washington State Department of Revenue Ruling.

Business Editors

RENTON, Wash.--(BUSINESS WIRE)--Nov. 27, 2002

Zones, Inc. (the "Company," "Zones"TM) (Nasdaq:ZONS), a single-source direct marketing reseller of name-brand information technology products, announced today that it has received the final determination of the Washington State Department of Revenue (the "Department") in its state tax audit.

The Department has been examining the Company's state tax returns for the years 1996, 1997, 1998 and 1999. The Department remanded certain portions of the disputed amounts back to the audit division, but found against Zones on the most significant issue, whether vendor cooperative reimbursements, for certain catalog advertising, were subject to the Washington business and occupation tax.

"We strongly disagree with the Department's decision regarding the tax treatment of our cooperative advertising reimbursements and intend to vigorously pursue our appeal rights," said Ronald McFadden, chief financial officer. The Company will take a one time charge in the fourth quarter of approximately $2.1 million to reflect the financial impact of the Department's decision.

About Zones, Inc.

Zones, Inc. is a single-source, direct marketing reseller of name-brand information technology products to the growing small to medium sized business market, enterprise and public sector markets. Zones sells these products through outbound and inbound account executives, specialty print and e-catalogs, and the Internet. Zones offers more than 150,000 products from leading manufacturers including Apple, Hewlett-Packard, IBM, Microsoft and Toshiba.

Incorporated in 1988, Zones, Inc. is headquartered in Renton, Washington. Company and buying information is available at http://www.zones.com, or by calling 800-258-2088.

This press release may contain statements that are forward-looking. These statements are made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations that are subject to risks and uncertainties that could cause actual results to differ materially from historical results or those anticipated. These risk factors include, without limitation, future growth, dependence on revenue from products, vendor support, competition, pressure on margin, variability of operating results, changing methods of distributions, potential disruption of business, potential increases in postage, shipping, and paper costs, reliance on vendor relationships, state revenue or use tax uncertainties, dependence on personnel, reliance on outsourced distribution, and rapid technological change and inventory obsolescence, and other risks and uncertainties detailed in the Company's filings with the SEC.
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Publication:Business Wire
Geographic Code:1USA
Date:Nov 27, 2002
Words:385
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