The New Mexico Court of Appeals upheld the imposition of gross receipts tax on certain trademark-related royalty fees received by an out-of-state corporation pursuant to its franchise agreements with New Mexico businesses. The court examined whether, following statutory amendments in 2007, the royalty fees flowing from a limited trademark license provision contained within the franchise agreements “should be treated as being received from the grant of a franchise” and, thus, subject to the gross receipts tax, “or from the licensing of a trademark” and, therefore, not subject to the gross receipts tax. The court concluded that the trademark licensing provision was “central to the overall franchise and should be treated as part of the franchise,” and not as a standalone trademark licensing agreement, even though the provision was separately stated and itemized in the agreements.

A&W Rests., Inc. v. Taxation & Revenue Dep’t of New Mexico, No. A-1-CA-35999 (N.M. Ct. App. Aug. 22, 2018).