AI Generated Opinion Summaries

This summary was computer-generated without any editorial revision. It is not official, has not been checked for accuracy, and is NOT citable.

Facts

• A 2013 audit by the New Mexico Taxation and Revenue Department assessed unpaid gross receipts tax against A&W Restaurants, Inc. for $29,349.33. This tax was imposed on royalty fees from trademark-related licensing in franchise agreements with New Mexico businesses. A&W protested this tax imposition, arguing that the royalty fees should be exempt from gross receipts tax (paras 2-3).

Procedural History

• Administrative Hearings Office: The hearing officer granted summary judgment in favor of the Department, assessing gross receipts tax on A&W's royalty fees (para 1).

Parties' Submissions

• Petitioner-Appellant (A&W Restaurants, Inc.): Argued that the royalty fees received from trademark licensing are exempt from gross receipts tax, as trademarks are not considered "property" under the Gross Receipts and Compensating Tax Act (para 4).
• Respondent-Appellee (Taxation and Revenue Department of the State of New Mexico): Contended that the royalty fees for the limited trademark license are subject to gross receipts tax as money received from granting a right to use a franchise (para 4).

Legal Issues

• Whether the royalty fees from trademark-related licensing in franchise agreements are subject to gross receipts tax under the Gross Receipts and Compensating Tax Act (paras 4-5).

Disposition

• The Court of Appeals affirmed the decision of the Administrative Hearings Office, holding that the royalty fees are subject to gross receipts tax (para 22).

Reasons

• Per GALLEGOS, J., with KIEHNE, J., and ATTREP, J., concurring: The court conducted a de novo review due to the legal nature of the issue and engaged in statutory construction to determine the Legislature's intent. The court found that the 2007 amendments to the Gross Receipts and Compensating Tax Act, which included money received from granting a right to use a franchise in the definition of gross receipts, intended to subject franchise agreements to gross receipts tax. This includes royalties received from a limited trademark license granted as part of the franchise. The court reasoned that a franchise, including the bundled trademark license agreement, is subject to gross receipts tax, distinguishing it from standalone trademark licensing agreements which are not considered property and thus not taxable under the Act. The court's interpretation aimed to harmonize the statutory provisions and uphold the Legislature's intent to tax franchise agreements employed in New Mexico (paras 5-21).