New Mexico ~ Sales and Use Tax: Online Bookseller Did Not Have Nexus

The New Mexico Taxation and Revenue Department has ruled that an online bookseller did not have sufficient contacts with New Mexico to establish substantial nexus for gross receipts and compensating use tax purposes. The online bookseller was an out-of-state limited liability company (LLC) that sold books, music and movies through the Internet to U.S. customers, including customers in New Mexico. The online bookseller was owned by an out-of-state parent corporation. The parent also owned an out-of-state subsidiary company that owned and operated retail bookstores physically located in New Mexico. The activities engaged in between the subsidiary, the online bookseller and the parent, and the economic connections between the three companies, did not result in the subsidiary establishing and maintaining a market in New Mexico for the online bookseller.

The department found that the following activities did not create nexus: (1) close corporate relationship and common ownership; (2) cross marketing, including through use of common trademarks and logos; (3) the subsidiary’s book return policy; (4) participation in a multi-retailer gift card program; (5) participation in a customer loyalty program; (6) sharing of email addresses through a reader’s advantage card program; and (6) a Bookmaster system, through which the subsidiary’s local stores ordered books from the online bookseller for shipment to customers.

Subscribers can view the decision.

In the Matter of the Protest of LLC, New Mexico Taxation and Revenue Department, No. 11-10, April 11, 2011


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