A recent court case may dramatically change how sales tax collection is handled in the United State of America. The case, [Dell Marketing LP v. Taxation and Revenue Dept. of the State of New Mexico, No. 26,843, N.M. Ct. App. 2008] involves a dispute between the state of New Mexico and Dell Computers.

Dell asserts that it does not owe sales tax in New Mexico as it has no physical presence there – all it does is ship computers into the state from its out of state location. These orders are all catalog or Internet based. New Mexico nevertheless pursued the case to force Dell to pay New Mexico state and occupation taxes.

The case linked above is the finding from the New Mexico Supreme Court, which determined that New Mexico could assess sales and occupation tax and that this assessment did not represent a barrier to interstate commerce that would be protected. The case was appealed the United State Supreme Court, which has refused to hear the case. While this doesn’t have the same force as if the Supreme Court had chosen to hear and affirm the case, their decision means that the New Mexico court’s finding will stand, and will become a precedent that other courts can borrow on.

Washington implemented the Destination-Based Sales Tax rules last year, which require remote sellers to charge sales tax based on the delivery location of goods, not the location of the seller. Of greater concern, Washington is part of a coalition of state, the SSUTA which intends to make remote sellers collect sales tax on sales to any state. This New Mexico decision may not directly affect you today, but it paves the way for a dramatic change in sales tax policies.

Categories: Tax News and Tips
No Comments »