Assume that the analysis applied in ConAgra is applicable in New Mexico. Would Libel likely be deemed
Question:
Assume that the analysis applied in ConAgra is applicable in New Mexico. Would Libel likely be deemed to have a substantial nexus under the Commerce Clause such that it could be subject to a net income tax in New Mexico?
Libel, Inc. (Libel) owns marketing intangibles, including trademarks and trade names, associated with tabloid newspapers that are sold at newsstands and grocery stores across the U.S., including New Mexico. Libel licenses these intangibles to its parent company, All True (True) located outside New Mexico. True prints the newspapers and Libel's intangibles are found on virtually every page.The newspapers are wholesalers located outside New Mexico, who then resell them to newsstands and other retailers in the state.
Libel does not in any way control or direct the manner in which the products are manufactured or sold. Libel's royalties from the use of the intangibles are based on a percentage of the Ture's sales, including sales to customers in New Mexico.
The presence of Libel's intangibles in New Mexico constitutes a substantial nexus under the Due Process Clause such that it could be subject to a net income tax in New Mexico.
Under the ConAgra decision, Libel's activities likely would not constitute a substantial nexus under the Commerce Clause such that it could be subject to a net income tax in New Mexico.
The ConAgra decision is contrary to the U.S. Supreme Court's decision in Quill, and is therefore invalid under the Supremacy Clause.
Libel's activities are protected from the imposition of a net income tax under P.L. 86-272.
Business Law Principles for Today's Commercial Environment
ISBN: 978-1305575158
5th edition
Authors: David P. Twomey, Marianne M. Jennings, Stephanie M Greene