{ "id": 1568731, "name": "BASKIN-ROBBINS ICE CREAM COMPANY, Plaintiff-Appellant, v. REVENUE DIVISION, DEPARTMENT OF TAXATION AND REVENUE of the State of New Mexico, Defendant-Appellee", "name_abbreviation": "Baskin-Robbins Ice Cream Co. v. Revenue Division", "decision_date": "1979-08-09", "docket_number": "No. 3683", "first_page": "301", "last_page": "306", "citations": [ { "type": "official", "cite": "93 N.M. 301" }, { "type": "parallel", "cite": "599 P.2d 1098" } ], "court": { "name_abbreviation": "N.M. Ct. App.", "id": 9025, "name": "Court of Appeals of New Mexico" }, "jurisdiction": { "id": 52, "name_long": "New Mexico", "name": "N.M." }, "cites_to": [ { "cite": "78 N.M. 78", "category": "reporters:state", "reporter": "N.M.", "case_ids": [ 5327620 ], "weight": 2, "year": 1966, "opinion_index": 0, "case_paths": [ "/nm/78/0078-01" ] }, { "cite": "81 N.M. 724", "category": "reporters:state", "reporter": "N.M.", "case_ids": [ 5367243 ], "weight": 2, "opinion_index": 0, "case_paths": [ "/nm/81/0724-01" ] }, { "cite": "82 N.M. 41", "category": "reporters:state", "reporter": "N.M.", "case_ids": [ 5330925 ], "weight": 2, "opinion_index": 0, "case_paths": [ "/nm/82/0041-01" ] }, { "cite": "95 L.Ed. 573", "category": "reporters:federal", "reporter": "L. Ed.", "year": 1951, "opinion_index": 0 }, { "cite": "340 U.S. 602", "category": "reporters:federal", "reporter": "U.S.", "case_ids": [ 6932011 ], "weight": 2, "year": 1951, "opinion_index": 0, "case_paths": [ "/us/340/0602-01" ] }, { "cite": "430 U.S. 274", "category": "reporters:federal", "reporter": "U.S.", "case_ids": [ 12123142 ], "weight": 3, "year": 1977, "opinion_index": 0, "case_paths": [ "/us/430/0274-01" ] }, { "cite": "89 N.M. 133", "category": "reporters:state", "reporter": "N.M.", "case_ids": [ 2864838 ], "weight": 2, "year": 1975, "pin_cites": [ { "page": "137" }, { "page": "99" } ], "opinion_index": 0, "case_paths": [ "/nm/89/0133-01" ] }, { "cite": "89 N.M. 79", "category": "reporters:state", "reporter": "N.M.", "case_ids": [ 2861003 ], "weight": 3, "year": 1976, "pin_cites": [ { "page": "565" } ], "opinion_index": 0, "case_paths": [ "/nm/89/0079-01" ] }, { "cite": "115 A.L.R. 944", "category": "reporters:specialty", "reporter": "A.L.R.", "year": 1938, "opinion_index": 0 }, { "cite": "58 S.Ct. 546", "category": "reporters:federal", "reporter": "S. Ct.", "case_ids": [ 6139505 ], "weight": 2, "year": 1938, "opinion_index": 0, "case_paths": [ "/us/303/0250-01" ] }, { "cite": "303 U.S. 240", "category": "reporters:federal", "reporter": "U.S.", "year": 1938, "opinion_index": 0 }, { "cite": "41 N.M. 141", "category": "reporters:state", "reporter": "N.M.", "case_ids": [ 1571482 ], "weight": 3, "year": 1937, "opinion_index": 0, "case_paths": [ "/nm/41/0141-01" ] }, { "cite": "15 U.S.C. \u00a7 1051", "category": "laws:leg_statute", "reporter": "U.S.C.", "opinion_index": 0 }, { "cite": "208 Kan. 538", "category": "reporters:state", "reporter": "Kan.", "case_ids": [ 61061 ], "weight": 2, "year": 1972, "pin_cites": [ { "page": "211-12" } ], "opinion_index": 0, "case_paths": [ "/kan/208/0538-01" ] }, { "cite": "74 N.M. 377", "category": "reporters:state", "reporter": "N.M.", "case_ids": [ 2806574 ], "weight": 7, "year": 1964, "pin_cites": [ { "page": "381" }, { "page": "145" } ], "opinion_index": 0, "case_paths": [ "/nm/74/0377-01" ] }, { "cite": "77 S.D. 215", "category": "reporters:state", "reporter": "S.D.", "case_ids": [ 4641906 ], "weight": 2, "year": 1958, "pin_cites": [ { "page": "379" } ], "opinion_index": 0, "case_paths": [ "/sd/77/0215-01" ] }, { "cite": "81 S.E.2d 222", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1954, "pin_cites": [ { "page": "224" } ], "opinion_index": 0 }, { "cite": "89 Ga.App. 755", "category": "reporters:state", "reporter": "Ga. App.", "case_ids": [ 1563329 ], "year": 1954, "opinion_index": 0, "case_paths": [ "/ga-app/89/0755-01" ] } ], "analysis": { "cardinality": 702, "char_count": 15034, "ocr_confidence": 0.786, "pagerank": { "raw": 1.1629558391027229e-07, "percentile": 0.5845087879640859 }, "sha256": "07e2e5cc4bcc0701fefa4fb07d5f2b7f49403c96ea9872b890bcd76b5a3df35a", "simhash": "1:cb2c146efaaad872", "word_count": 2407 }, "last_updated": "2023-07-14T15:53:36.909287+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [ "HENDLEY, J., concurs.", "HERNANDEZ, J., concurs in result." ], "parties": [ "BASKIN-ROBBINS ICE CREAM COMPANY, Plaintiff-Appellant, v. REVENUE DIVISION, DEPARTMENT OF TAXATION AND REVENUE of the State of New Mexico, Defendant-Appellee." ], "opinions": [ { "text": "OPINION\nSUTIN, Judge.\nTaxpayer appeals a Decision and Order of the Director, Revenue Division, which imposed payment of gross receipts taxes based upon income derived from an Area Franchise Agreement entered into with Cream-land Dairies, Inc., a New Mexico based corporation engaged in the manufacture and processing of dairy products in New Mexico. We affirm.\nIn his Decision and Order, the Director states that the issue is whether Taxpayer is subject to the New Mexico gross receipts tax on royalties received by Taxpayer based on Creamland\u2019s sales of Taxpayer\u2019s brand of ice cream products in New Mexico.\nThe Decision and Order is lengthy and detailed and is supported by judicial authority. It relates to two subjects: (1) that Taxpayer is engaged in business in New Mexico by leasing its property in New Mexico, and (2) that Taxpayer is not engaged in interstate commerce.\nIn arriving at its Decision, the Director found that Taxpayer is a Delaware Corporation with headquarters in California. It owns distinctive trademarks, trade names, emblems, merchandizing designs and services, recipes and formulas. It has no employees nor any offices located in New Mexico. It does not own or lease any real property nor does it manufacture or sell any products in New Mexico.\nUnder the 1966 franchise agreement executed in California, taxpayer furnished its assorted items to Creamland to use in the manufacture and sale of ice cream products to \u201cBaskin-Robbins 31 Ice Cream\u201d retail stores in New Mexico, stores that are established by Creamland through a \u201cB-R Retailers Franchise Agreement.\u201d This Agreement continued to the time of trial.\nTaxpayer\u2019s trademarks are \u201c31\u201d and \u201cBaskin-Robbins 31 Ice Cream.\u201d (The parties agreed that the secret recipe book and the trademarks were the basis of the agreement; that these were properties used by Creamland to manufacture Baskin-Robbins Ice Cream according to the recipes). Taxpayer\u2019s most valuable assets are its trade name, trademark and related intangibles. These properties are used in New Mexico. The secret formulas and techniques are utilized in New Mexico. Taxpayer\u2019s method of business exploits the New Mexico market for Taxpayer\u2019s benefit.\nCreamland pays Taxpayer a royalty in California based upon the ice cream products sold by Creamland to its New Mexico retail stores.\nThe remainder of the \u201cfindings\u201d will be discussed under the two subjects mentioned above.\nA. Taxpayer is engaged in business by leasing its property to Creamland in New Mexico.\nThe Director further found that Taxpayer had \u201cproperty located in New Mexico; the formula or recipe book and more importantly, a bundle of intangible rights being employed in New Mexico\u201d; that the grant of rights to Creamland of some part of Taxpayer\u2019s property rights in its trademarks and secret formula \u201cis the leasing of property which is employed in New Mexico regularly and systematically for business purposes\u201d; that the legislature intended to impose a tax on receipts from leasing such property employed in New Mexico because of the definition of \u201cproperty\u201d in \u00a7 7 \u2014 9\u20143(1), N.M.S.A. 1978, and Taxpayer is \u201cengaging in business\u201d in New Mexico.\nThe Director held that Creamland was engaged in business because its gross receipts were derived from leasing property in New Mexico.\nTo determine the validity of the Director\u2019s ruling we must seek the answer in the definitional aspects of the Gross Receipts Tax Act.\nSection 7-9-3(E) reads:\n\u201cengaging in business\u201d means carrying on or causing to be carried on any activity with the purpose of direct or indirect benefit;\n\u201cThe definition of \u2018business\u2019 as stated in the statute does not say \u2018any act engaged in for gain,\u2019 but rather \u2018any activity.\u2019 Webster\u2019s New International Dictionary lists, as synonyms of activity, the words occupation and business. Accordingly, no definitive distinction can be drawn between the definition of business as used in the statute, and that of its common and accepted meaning.\u201d [Emphasis theirs.] Novak v. Redwing, 89 Ga.App. 755, 81 S.E.2d 222, 224 (1954). See, State v. Spink Hutterian Brethren, 77 S.D. 215, 90 N.W.2d 365, 379 (1958). (\u201cThe words \u2018occupation\u2019 and \u2018business\u2019 are synonyms of \u2018activity.\u2019 \u201d)\nWe find that Taxpayer was \u201cengaging in business\u201d as defined by Section 7-9-3(E). It was doing what it was organized and authorized to do. Besser Company v. Bureau of Revenue, 74 N.M. 377, 394 P.2d 141 (1964).\nThe remaining issue is whether taxpayer was \u201cleasing property employed in New Mexico\u201d as stated in the definition of \u201cgross receipts.\u201d Section 7-9-3(F).\nSection 7-9-3(J) reads:\n\u201cleasing\u201d means any arrangement whereby, for a consideration, property is employed for or by any person other than the owner of the property. [Emphasis added.]\nSection 7-9-3(I) reads:\n\u201cproperty\u201d means . . licenses, franchises . . . trademarks . . . [Emphasis added.]\nTaxpayer was \u201cengaging in business\u201d and owned \u201cproperty\u201d in New Mexico used by Creamland \u2014 the franchise and trademarks. Is the Area Franchise Agreement \u201cany arrangement\u201d within the definition of \u201cleasing\u201d? The term \u201cany arrangement\u201d is broad and expansive.\nH & R Block, Inc. v. Lovelace, 208 Kan. 538, 493 P.2d 205, 211-12 (1972) defines a franchise as follows:\nIn its simplest terms a franchise is a license from the owner of a trademark or trade name permitting another to sell a product or service under that name or mark. More broadly stated, the franchise has evolved into an elaborate agreement under which the franchisee undertakes to conduct a business or sell a product or service in accordance with methods and procedures prescribed by the franchisor and the franchisor undertakes to assist the franchisee through advertising, promotion and other advisory services. The franchise may encompass an exclusive right to sell the product in a specified territory (see 15 Business Organizations, Glickman, Franchising, \u00a7 2.01).\nBy translating the definition of \u201cleasing\u201d into the facts of this case, \u201cleasing\u201d means an Area Franchise Agreement (any arrangement) whereby for payment of royalties (a consideration) a franchise and trademark (property) are employed by Cream-land (any person) other than Taxpayer (owner) of the franchise and trademarks (property).\nWhen definitions of \u201cengaging in business,\u201d \u201cleasing\u201d and \u201cproperty\u201d are applied to Taxpayer, Taxpayer cannot escape the fact that it is leasing property in New Mexico for which it receives royalties. The royalties are \u201cgross receipts,\u201d the money received by Taxpayer from leasing property employed in New Mexico. Section 7-9-3(F).\nIn so construing the statute, we follow the rule announced by Justice Moise in Besser Company, supra, that a taxpayer \u201cshould be given a fair, unbiased and reasonable construction, without favor either to the taxpayer or the state, to the end that the legislative intent is effectuated and the public interests to be subserved thereby furthered.\u201d [74 N.M. at 381, 394 P.2d at 145.]\nTaxpayer is \u201cengaging in business\u201d by \u201cleasing\u201d property employed in New Mexico. \u201cFor the privilege of engaging in business, an excise tax equal to four percent of gross receipts is imposed on any person engaging in business in New Mexico.\u201d Section 7-9 \u2014 4(A).\nTaxpayer is subject to the Gross Receipts Tax Act.\nB. Taxpayer is not engaged in interstate commerce.\nThe Director determined that \u201cThe fact that the franchise and royalty payments were received in California or that the franchise was executed by the taxpayer in California does not per se, establish that the taxpayer\u2019s receipts were from interstate commerce\u201d; that to the extent that the Taxpayer\u2019s property is used solely in New Mexico, the taxpayer\u2019s activity is localized in New Mexico; that this is not the classic case involving the transportation of property or service from one state to another; that if ever the Taxpayer\u2019s activities involved interstate commerce, that commerce ceased when Creamland started performance in New Mexico pursuant to the franchise agreement.\n\u201cIt is Taxpayer\u2019s position that its activities (vis a vis the Agreement) are clearly interstate commerce. To the extent the activities which the Director relies on to support this Assessment are intrastate, they are activities of Creamland . not those of Taxpayer. It is Taxpayer\u2019s activities which must be examined to sustain the Assessment of Gross Receipts Tax.\u201d [Emphasis added.] [Br. p. 16.] \u201cClearly,\u201d says Taxpayer, \u201cthe agreement and the Lanham Act requires services from Taxpayer, many of which are performed in California.\u201d We disagree.\nWhat are Taxpayer\u2019s \u201cactivities\u201d or \u201cservices\u201d that place it in the stream of commerce? (1) New flavors are developed in California; (2) forms for leases and agreements supplied by Taxpayer are developed in California; (3) trademarks are the symbol of the good will of Taxpayer\u2019s business and its continued value depends upon the continuing use of the trademarks in its business with its continuing effort to regulate the use of the trademarks. When we bundle up these \u201cactivities\u201d or \u201cservices,\u201d we find no relationship to the concept of interstate commerce. The only contact Taxpayer has with New Mexico is its Area Franchise Agreement.\nWhen Taxpayer\u2019s recipes, recipe book and trademarks come to rest in New Mexico, their use becomes localized and have left the stream of interstate commerce. Besser Company, supra. The franchise agreement is not within the protection of the Commerce Clause unless its performance is within its protection. Besser Company, supra. Taxpayer does not perform the agreement. It is completely performed in New Mexico by Creamland, so that the performance of the contract is not within the protection of the Commerce Clause.\nThe Lanham Act (Trademarks) is 15 U.S.C. \u00a7 1051, et seq. In \u00a7 1127, which contains \u201cDefinition of terms; construction; intent,\u201d we find the following:\nFor the purposes of this Act a mark shall be deemed to be used in commerce (a) on goods when it is placed in any manner on the goods or their containers or the displays associated therewith or on the tags or labels affixed thereto and the goods are sold or transported in commerce and (b) on services when it is used or displayed in the sale or advertising of services and the services are rendered in commerce, or the services are rendered in more than one State or in this and a foreign country and the person rendering the services is engaged in commerce in connection therewith. [Emphasis added.]\nTaxpayer neither sells nor transports goods that are marked nor is it engaged in commerce in connection with the use or display of the mark in the sale or advertising of services. The use or display of the trademarks were franchised to Creamland and used by Creamland in New Mexico in the sale and advertising of its products. None of the \u201cactivities\u201d of the franchise agreement are serviced by mail, telephone, correspondence or by any em-' ployees of taxpayer. We find no intercourse or traffic between California and New Mexico. Mere contracts are not commerce at all, neither intrastate nor interstate. Western Live Stock v. Bureau of Revenue, 41 N.M. 141, 65 P.2d 863 (1937), aff\u2019d 303 U.S. 240, 58 S.Ct. 546, 82 L.Ed. 823, 115 A.L.R. 944 (1938).\nTaxpayer does claim that the Director cannot tax services performed outside the State. Advance Schools, Inc. v. Bureau of Revenue, 89 N.M. 79, 547 P.2d 562 (1976). We agree. ASI was an Illinois based correspondence school that sold courses of education to New Mexico students. \u201cAfter the contract was accepted, the whole program was serviced entirely by mail, telephone, and correspondence between ASI instructors in Illinois and the student in New Mexico. The educational kit and materials were all mailed to- the student in New Mexico from the State of Illinois.\u201d Advance Schools, Inc. v. Bureau of Revenue, 89 N.M. 133, 137, 548 P.2d 95, 99, (1975), Sutin, J., dissenting. The Supreme Court said:\n. Virtually all the services accompanying the sale of educational materials by ASI were performed in Illinois. The Commissioner\u2019s decision and order, therefore, are not supported by substantial evidence. [89 N.M. at 82, 547 P.2d at 565.] [Emphasis added.]\nThe relationship between Taxpayer and Creamland does not' approach that which existed between Advanced Schools and its students. In Advanced Schools, the contract was serviced and performed in Illinois. In the instant case, the contract was serviced and performed in New Mexico by Cream-land. In Advanced Schools, New Mexico taxed it for services performed in Illinois. In the instant case, New Mexico does not tax Taxpayer for providing recipes and forms of leases prepared in California.\nTaxpayer has not disclosed any \u201cactivities,\u201d and we have found none that place taxpayer within the perimeter of what we deem interstate commerce to mean\u2014intercourse or traffic of some nature between the states. It is only such transactions as directly affect interstate commerce and impose a direct burden thereon that fall within the interdiction of the Commerce Clause of the Federal Constitution. Western Live Stock, supra.\nTaxpayer relies primarily on a formula that it gleaned from Complete Auto Transit, Inc. v. Brady, 430 U.S. 274, 97 S.Ct. 1076, 51 L.Ed.2d 326 (1977). This case presented the question whether the application of a Mississippi tax on \u201cthe privilege of doing business\u201d within the State of the activity in interstate commerce of a motor carrier in transporting an out-of-state manufacturer\u2019s automobiles between points in the State violated the Commerce Clause. A unanimous court said \u201cno.\u201d\nComplete Auto Transit is not applicable. The Commerce Clause plays no part in the instant case.\nIt is important to note that Complete Auto Transit overruled Spector Motor Service v. O\u2019Connor, 340 U.S. 602, 71 S.Ct. 508, 95 L.Ed. 573 (1951), a case cited in Spillers v. Commissioner of Revenue, 82 N.M. 41, 475 P.2d 41 (Ct.App.1970); Evco v. Jones, 81 N.M. 724, 472 P.2d 987 (Ct.App.1970); Bell Telephone Laboratories v. Bureau of Revenue, 78 N.M. 78, 428 P.2d 617 (1966).\nTaxpayer is not engaged in interstate commerce. The tax here imposed is conditioned on Creamland\u2019s local business of manufacturing and selling ice cream products in New Mexico. It is not a tax imposed on the importation of property or the rendering of services outside the State; neither is it a tax measured by income derived from manufacturing and selling ice cream products in any other state; nor is the tax different from that assessed and paid by local taxpayers in manufacturing and selling ice cream products for others.\nAffirmed.\nIT IS SO ORDERED.\nHENDLEY, J., concurs.\nHERNANDEZ, J., concurs in result.", "type": "majority", "author": "SUTIN, Judge." } ], "attorneys": [ "Sandra Jo Craig, Schlenker, Craig & Le-beck, Albuquerque, for plaintiff-appellant.", "Jeff Bingaman, Atty. Gen., Sarah Bennett, Sp. Asst. Atty. Gen., Santa Fe, for defendant-appellee." ], "corrections": "", "head_matter": "599 P.2d 1098\nBASKIN-ROBBINS ICE CREAM COMPANY, Plaintiff-Appellant, v. REVENUE DIVISION, DEPARTMENT OF TAXATION AND REVENUE of the State of New Mexico, Defendant-Appellee.\nNo. 3683.\nCourt of Appeals of New Mexico.\nAug. 9, 1979.\nSandra Jo Craig, Schlenker, Craig & Le-beck, Albuquerque, for plaintiff-appellant.\nJeff Bingaman, Atty. Gen., Sarah Bennett, Sp. Asst. Atty. Gen., Santa Fe, for defendant-appellee." }, "file_name": "0301-01", "first_page_order": 347, "last_page_order": 352 }