Jessica M. Karmasek Jul. 18, 2013, 6:30pm

SANTA FE, N.M. (Legal Newsline) -- The New Mexico Supreme Court last month sided with a state agency in a tax dispute with a popular online book retailer.

In its eight-page opinion, filed June 3, the state's high court affirmed a Court of Appeals ruling allowing the state Taxation and Revenue Department to collect gross receipts tax on LLC's sales in the state.

The court said doing so would not offend the Commerce Clause of the U.S. Constitution.

In 2006, the department assessed gross receipts tax against on its sales to New Mexico residents during a period from January 1998 through July 2005.

The online retailer protested the assessment, and a hearing officer granted summary judgment to, finding that it lacked a "substantial nexus" with the state. Therefore, it could not constitutionally be required to pay the tax, the officer ruled.

The department appealed, and the Court of Appeals reversed, holding that had a substantial nexus with the state because of its use of Barnes & Noble trademarks and cross-marketing activities with sister corporation Barnes & Noble Booksellers Inc.'s stores.

The online retailer appealed to the Supreme Court, which granted review.

"Although we agree with the holding of the Court of Appeals, we emphasize that our holding does not rest exclusively on's use of Barnes & Noble trademarks; we conclude that there are several additional reasons to hold that had a substantial nexus with the State of New Mexico," Justice Edward L. Chavez wrote for the court.

In particular, Barnes & Noble Booksellers Inc. and presented a "single face" to the public, developing name recognition and loyalty for the online retailer, thus giving it an "advantage" over its competitors, the court explained.

"(Barnes & Noble) Booksellers (Inc.) sold gift cards that encouraged customers to shop at, and advertised its connections to Booksellers by offering a store locator and by promoting its return policy. and Booksellers also shared customer data," Chavez wrote. "None of's online competitors received these benefits."

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