U.S. Supreme Court Denies Request to Decide if Non-Sales Acts by Third-Party Creates Nexus in New Mexico

The U.S. Supreme Court has denied review of a taxpayer’s request to determine if the in-state post-sale service activities of a third-party company allow New Mexico to impose gross receipts tax on an out-of-state computer seller’s sales into the state. Although the computer seller does not own or lease property in New Mexico, has no retail stores, employees, or sales agents within the state, and does not franchise or license its trade name in the state, the New Mexico Supreme Court upheld a hearing officer’s decision that the presence of the service provider satisfied the federal constitutional Commerce Clause requirements and established nexus for the seller. The Court determined that the third-parties activities established nexus for the taxpayer because they helped the taxpayer “establish and maintain a market” in the state, and since over 1,000 service calls were made in New Mexico, these activities could not be considered “isolated” or “sporadic”.

The seller asked the U.S. Supreme Court to determine the scope of Tyler Pipe, 483 U.S. 232 (1987) and Scripto, Inc., 362 U.S. 207 (1960), since the U.S. Supreme Court has not previously held that third-party non-agents engaged in activities other than solicitation creates nexus. The taxpayer asserted that since the hearing officer essentially created a new category for establishing a substantial nexus through a third-party, state taxation authority was unconstitutionally expanded. (Dell Marketing L.P. v. New Mexico Taxation and Revenue Department, U.S. Supreme Court, Dkt. 08-770, petition for certiorari denied March 23, 2009)

Posted on April 2, 2009