Court Sides With Franchise Owners

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SANTA FE - Out-of-state franchise owners have won a court victory worth tens of millions of dollars in New Mexico tax refunds.

However, Thursday’s ruling by the state Supreme Court will apply only to tax disputes before July 2006 because of a change in law that recently took effect.

The court’s unanimous ruling came in a case involving Sonic Industries, a drive-in restaurant franchiser based in Oklahoma.

The high court ruled that New Mexico can’t collect gross receipts taxes on fees paid by local franchisees to out-of-state franchisers, such as fast-food outlets and motels.

Bruce Fort, an attorney for the Taxation and Revenue Department, said the decision will apply to a large number of pending tax refund claims made by other franchisers.

“It will result in refunds of tens of millions of dollars for out-of-state franchisers,” said Fort.