News Briefs

The franchise industry is anticipating a U.S. Supreme Court decision in A&F Trademark, Inc., et al v. North Carolina, a case involving states' ability to tax businesses that are not based in that state. In the case, the Limited, Inc., a chain of clothing stores, which licensed its trademark through A&F Trademark, challenged a ruling by the North Carolina Secretary of Revenue that it owed corporate franchise and income taxes in the state. Ultimately, the North Carolina Court of Appeals upheld a ruling by the Wake County Superior Court that the presence of intangible property in North Carolina is sufficient nexus for the state to impose a state income tax. The appeals court rejected A&F's claim that its lack of offices, employees, tangible property, transactions with residents or customer service in North Carolina left it outside the definition of taxable nexus. The court said that the state's tax statutes defined the term “doing business” as “owning, renting or operating business or income-producing property in North Carolina including … [t]rademarks [and] trade names.”