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New Mexico Hands Online Bookseller Sales Tax Bill And Wins

  • Apr 20, 2012 | Susan McLain

The New Mexico State Court of Appeals has ruled that Barnes&noble.com, LLC owes back sales taxes for sales from 1998 to 2005. They were handed a bill in 2006 for $534,563 in gross receipts taxes. According to abcnews.com, “[t]he company protested and a state agency hearing officer agreed with the company that it wasn’t required to collect and pay the tax because it had no presence in the state or what is known as a ‘substantial nexus’ with New Mexico.” But other interpretations have taken the argument to a different conclusion.

The New Mexico State Department of Revenue “…contended that activities at the in-state stores, including gift cards that could be redeemed online and a  membership plan that offered online discounts,” created the connection. However, this was not the argument that the Court of Appeals felt truly created nexus. “[I]t concluded the ‘in-state use of the Barnes & Noble’s trademarks was sufficient to meet the constitutional standard’ to permit the New Mexico tax.”

Other states, such as Michigan and Iowa have included trademarks in their sales tax bills to create nexus for out-of-state and Internet-based businesses.

Due to the fact that “…the trademarks were licensed to the online retailer and the company with in=-state stores, Barnes & Noble ‘was in effect telling customers to consider taxpayers (the online retailer) and booksellers to be one and the same,'” according to the court.

Barnes and Noble is currently collecting the New Mexico sales tax on online purchases, but the state “…expects the case to end up before the state’s highest court.”

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Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Avalara Author
Susan McLain
Avalara Author Susan McLain
Susan McLain began her career as a technical writer in technology industries such as satellite networking and medical devices. Her skills encompass technical and marketing writing, usability engineering, verification and validation testing and protocol writing, requirements development, business analysis, technical illustration/graphic design and marketing. She has owned her own business providing service to small to medium sized business and in other positions, she has been in project management, documentation and marketing. She is currently the content specialist for Avalara helping to “make sales tax less taxing.”