N.M. Admin. Code tit. 3 | N.M. Admin. Code Title 3 — Taxation

Chapter 1 Tax Administration

Part 1 General Provisions

N.M. Admin. Code § 3.1.1.1 Issuing Agency

Taxation and Revenue Department, Joseph M. Montoya Building, 1100 South St. Francis Drive, P.O. Box 630, Santa Fe NM 87504-0630.

History

10/31/96; 3.1.1.1 NMAC - Rn, 3 NMAC 1.1.1, 12/29/00

N.M. Admin. Code § 3.1.1.2 Scope

This part applies to all taxpayers, their agents and representatives and all persons required to submit a return or information to the taxation and revenue department under any tax, tax act or other law administered and enforced pursuant to the Tax Administration Act.

History

10/31/96; 3.1.1.2 NMAC - Rn, 3 NMAC 1.1.2, 12/29/00

N.M. Admin. Code § 3.1.1.3 Statutory Authority

Section 9-11-6.2 NMSA 1978.

History

10/31/96; 3.1.1.3 NMAC - Rn, 3 NMAC 1.1.3, 12/29/00

N.M. Admin. Code § 3.1.1.4 Duration

Permanent.

History

10/31/96; 3.1.1.4 NMAC - Rn, 3 NMAC 1.1.4, 12/29/00

N.M. Admin. Code § 3.1.1.5 Effective Date

10/31/96, unless a later date is cited at the end of a section, in which case the later date is the effective date.

History

10/31/96; 3.1.1.5 NMAC - Rn & A, 3 NMAC 1.1.5, 12/29/00

N.M. Admin. Code § 3.1.1.6 Objective

The objective of this part is to interpret, exemplify, implement and enforce the provisions of the Tax Administration Act.

10/31/96; 3.1.1.6 NMAC - Rn, 3 NMAC 1.1.6, 12/29/00]

N.M. Admin. Code § 3.1.1.7 Definitions

“SIGN” DEFINED: As used in Section 7-1-71.1 NMSA 1978 and Section 3.1.1.18 NMAC the term “sign” means to affix a name or cause it to be attached using one of the following methods:

A. handwritten;

B. rubber stamp;

C. mechanical device (such as a mechanical pen);

D. computer software program; or

E. any other method of signature acceptable under the Internal Revenue Code.

History

10/31/96; 3.1.1.7 NMAC - Rn, 3 NMAC 1.1.7, 12/29/00; A, 4/28/06

N.M. Admin. Code § 3.1.1.8 Citations of Statutes

All statutory references in Chapter 3.1 NMAC are to the New Mexico Statutes Annotated 1978 (NMSA 1978) unless otherwise specified.

History

10/31/96; 3.1.1.8 NMAC - Rn & A, 3 NMAC 1.1.8, 12/29/00

N.M. Admin. Code § 3.1.1.9 Interpretation, Enforcement and Collection of Certain Municipal and County Taxes

A. The municipal and county tax acts listed below, as they now exist or may hereafter be amended, shall be interpreted, administered and enforced by the secretary under the provisions of the Tax Administration Act.

B. All directives of the secretary shall apply to the administration and enforcement of municipal and county tax acts to the extent that such directives do not conflict with the provisions of the listed municipal and county tax acts:

(1) Supplemental Gross Receipts Tax Act [7-19-10 to 7-19-18 NMSA 1978]

(2) Special Municipal Gross Receipts Tax Act [repealed]

(3) Municipal Local Option Gross Receipts Taxes Act [Chapter 7, Article 19D NMSA 1978]

(4) Local Hospital Gross Receipts Tax Act [Chapter 7, Article 20C NMSA 1978]

(5) County Local Option Gross Receipts Taxes Act [Chapter 7, Article 20E NMSA 1978]

(6) County Correctional Facility Gross Receipts Tax Act [Chapter 7, Article 20F NMSA 1978]

(7) Local Liquor Excise Tax Act [7-24-8 to 7-24-16 NMSA 1978]

C. In addition to the tax acts enumerated in Subsection 3.1.1.9B NMAC, repealed local option gross receipts tax acts whose administration and enforcement were charged to the department are also interpreted, administered and enforced by the department insofar as payments, claims for refunds, assessments, other liabilities, litigation and other actions are received or initiated after, or are outstanding on, the effective date of the repeal of the tax act.

D. Section 3.1.1.9 NMAC applies to interpretation, enforcement or administration on or after July 1, 1993.

History

7/19/67, 11/5/85, 8/15/90, 2/6/91, 10/28/94, 10/31/96; 3.1.1.9 NMAC - Rn & A, 3 NMAC 1.1.9, 12/29/00

N.M. Admin. Code § 3.1.1.10 Delegation of Authority - General

A. The secretary may delegate authority only when specifically authorized to do so in the Tax Administration Act. Where the words “or secretary's delegate” or “or delegate” do not appear in any section, only the secretary may act.

B. Example: As provided in Subsection 7-1-4B NMSA 1978, the secretary alone is invested with the power to issue subpoenas and summonses. The secretary may not delegate the authority to issue subpoenas and summonses.

History

7/19/67, 6/15/85, 11/5/85, 8/15/90, 10/31/96; 3.1.1.10 NMAC - Rn & A, 3 NMAC 1.1.10, 12/29/00

N.M. Admin. Code § 3.1.1.11 Delegation of Authority - Not Required to Be in Writing

A delegation of authority by the secretary to an “employee of the division” or “an employee of the department” as that term is defined in Section 7-1-3 NMSA 1978 is not required to be in writing.

History

11/5/85, 8/15/90, 10/31/96; 3.1.1.11 NMAC - Rn & A, 3 NMAC 1.1.11, 12/29/00

N.M. Admin. Code § 3.1.1.12 Employee of the Department

The following persons shall, for purposes of the Tax Administration Act, be considered to be “employees of the department” when acting as agents or authorized to represent or perform services for the department:

A. the secretary of the department or an employee of the department authorized by the secretary;

B. the New Mexico attorney general, the attorney general's deputies and assistants, district attorneys and the district attorneys' deputies and assistants;

C. persons employed by the multistate tax commission and performing duties under the Multistate Tax Compact, Sections 7-5-1 through 7-5-7 NMSA 1978; and

D. persons acting under professional service contracts with the department.

History

7/19/67, 11/5/85, 8/15/90, 10/31/96; 3.1.1.12 NMAC - Rn & A, 3 NMAC 1.1.12, 12/29/00

N.M. Admin. Code § 3.1.1.13 Unidentified Taxpayer

A person who fits the definition of “taxpayer” under the provisions of Section 7-1-3 NMSA 1978 but who has not registered or been identified under provisions of Section 7-1-12 NMSA 1978 is nonetheless a “taxpayer” subject to the provisions of the Tax Administration Act.

History

11/5/85, 8/15/90, 10/31/96; 3.1.1.13 NMAC - Rn & A, 3 NMAC 1.1.13, 12/29/00

N.M. Admin. Code § 3.1.1.14 Information from Persons Other Than Taxpayer

To establish or determine the liability of any taxpayer, to collect any tax or to enforce any statute administered by the department under the Tax Administration Act, the secretary or delegate is authorized to examine and require the production of any pertinent records, books, information or evidence by persons other than taxpayers. Such persons shall include but not be restricted to accountants, banks and financial corporations, lessors, vendors, buyers, corporate officers, corporate stockholders and general and limited partners.

History

11/5/85, 8/15/90, 10/31/96; 3.1.1.14 NMAC - Rn, 3 NMAC 1.1.14, 12/29/00

N.M. Admin. Code § 3.1.1.15 Taxpayer Registration

A. TAXPAYER IDENTIFICATION:

(1) The secretary shall cause to be developed and maintained multiple systems for the registration and identification of taxpayers who are subject to taxes or tax acts listed in Section 7-1-2 NMSA 1978 and taxpayers shall comply therewith. The systems shall include application forms combining tax programs whenever feasible. The systems shall include an identification number for each individual taxpayer using a state assigned number, federal social security number, federal employer identification number or a combination of these numbers for cross-reference purposes. The systems shall be devised to facilitate the exchange of information with other states and the United States, and to aid in statistical computations. Nothing contained in Section 7-1-12 NMSA 1978 precludes the secretary from utilizing electronic data processing programs to manage registration and identification systems.

(2) The secretary shall include in registration and identification systems a dimension enabling the department to identify purchasers or lessees who, by reason of their status or the nature of their use of property or service purchased or leased, may be entitled to make nontaxable transactions and shall include a procedure for providing nontaxable transaction certificates (NTTCs) to persons not otherwise required to be registered but who, because of the nature of their transactions with New Mexico businesses, must provide NTTCs pursuant to the provisions of the Gross Receipts and Compensating Tax Act.

B. REGISTRATION OF PERSONS FILING INCOME TAX AND ESTATE TAX: Persons who file income or estate tax returns for the purpose of declaring tax payable or refunds or rebates due are not required to preregister with the department by application to secure an identification number. The filing of a tax return containing a federal social security number shall constitute registration for the purposes of Section 7-1-12 NMSA 1978 and Subsection 7-1-8Q NMSA 1978.

C. AMENDMENT OF REGISTRATION BY SECRETARY:

(1) When the secretary determines that a taxpayer registration incorrectly identifies the ownership or the type of ownership of a business by either omission or misinformation, the secretary shall amend the registration to show the correct information.

(2) Notice of such amendment shall be made by mail to the registered taxpayer, and in those cases where the secretary amends the ownership to add new parties, notice shall also be mailed to those new parties which have been registered pursuant to department action.

(3) Notice of such action shall contain information with respect to remedies available under Section 7-1-24 NMSA 1978.

D. TAX IDENTIFICATION NUMBER ISSUED BY INTERNAL REVENUE SERVICE: A tax identification number issued by the internal revenue service to individuals not qualified to be issued a social security number will be accepted by the department in lieu of the social security number in all cases in which reporting a social security number is required under the Tax Administration Act or any tax or tax act administered by the department in accordance with the Tax Administration Act.

History

7/19/67, 11/5/85, 8/15/90, 10/31/96, 3/31/98; 3.1.1.15 NMAC - Rn & A, 3 NMAC 1.1.15, 12/29/00

N.M. Admin. Code § 3.1.1.16 Tax Defined for Purposes of Section 7-1-18 Nmsa 1978

A. The term “tax” as it is used in Section 7-1-18 NMSA 1978 means the amount of any tax imposed and required to be paid or collected and paid over by any tax act made subject to administration and enforcement under the Tax Administration Act pursuant to the provisions of Section 7-1-2 NMSA 1978 and includes the amount of any interest or civil penalty relating thereto.

B. If the return of a taxpayer includes reporting for two or more taxes imposed by separate tax programs, and if any of the separate taxes is understated by more than 25% of the amount of liability for the separate tax for the period to which the return relates, the secretary or secretary's delegate may make assessments for taxes imposed by any of the separate tax programs the liability for which was so understated at any time within six years from the end of the calendar year in which payment of the separate tax was due.

3.1.1.17 “ACTION OR PROCEEDING” DEFINED FOR PURPOSES OF SECTION 7-1-19 NMSA 1978: As used in Section 7-1-19 NMSA 1978, the term “action or proceeding” means any effort initiated by the secretary or secretary's delegate under the provisions of the Tax Administration Act and shall include the filing of a lien, seizure of property through service of a warrant of levy, demand for security to cover the liability, sale of security which has previously been posted, demand for payment, civil action in district court, injunction to enjoin the taxpayer from engaging in business or foreclosure of a lien. “Action or proceeding” does not include processing any payment made by a taxpayer when no other act has been initiated by the secretary or secretary's delegate after ten years from the date.

History

7/19/67, 11/5/85, 1/4/88, 8/15/90, 10/31/96; 3.1.1.16 NMAC - Rn & A, 3 NMAC 1.1.16, 12/29/00
8/22/88, 8/15/90, 10/31/96; 3.1.1.17 NMAC - Rn & A, 3 NMAC 1.1.17, 12/29/00

N.M. Admin. Code § 3.1.1.18 Requirements for Tax Return Preparers

Every tax return preparer, as that term is defined in Section 7-1-3 NMSA 1978, shall furnish that preparer's identification number with, and sign, each income tax return or claim of refund with respect to income tax that the preparer completes. For the purposes of 3.1.1.18 NMAC, a tax return preparer’s identification number is one of the following: the preparer’s department-issued CRS identification number, the preparer’s social security number or the preparer’s internal revenue service-issued practitioner’s tax identification number (PTIN).

HISTORY OF 3.1.1 NMAC:

Pre-NMAC History: The material in this part was derived from that previously filed with the State Records Center:

BOR 67-1, Tax Administration Act, 7/19/67, filed 7/28/67.

R.D./OGAD Rule No. 1985, Regulations Pertaining to the Tax Administration Act, filed 11/5/85.

TRD Rule TA-90, Regulations Pertaining to the Tax Administration Act, Sections 7-1-1 to 7-1-82 NMSA 1978, filed 8/15/90.

History of Repealed Material: [RESERVED]

NMAC History:

3 NMAC 1.1, Tax Administration - General Provisions, filed 10/17/96.

3.1.1 NMAC, Tax Administration - General Provisions, filed 12/15/2000.

History

11/5/85, 8/15/90, 10/31/96; 3.1.1.18 NMAC - Rn & A, 3 NMAC 1.1.18, 12/29/00; A, 5/15/01

Part 2 Promulgation of Regulations

N.M. Admin. Code § 3.1.2.1 Issuing Agency

Taxation and Revenue Department, Joseph M. Montoya Building, 1100 South St. Francis Drive, P.O. Box 630, Santa Fe NM 87504-0630

History

4/15/97; 3.1.2.1 NMAC - Rn, 3 NMAC 1.2.1, 12/29/00

N.M. Admin. Code § 3.1.2.2 Scope

This part applies to the taxation and revenue department and to every person subject to any statute the administration or enforcement of which is charged to the taxation and revenue department.

History

4/15/97; 3.1.2.2 NMAC - Rn, 3 NMAC 1.2.2, 12/29/00

N.M. Admin. Code § 3.1.2.3 Statutory Authority

Section 9-11-6.2 NMSA 1978.

History

4/15/97; 3.1.2.3 NMAC - Rn, 3 NMAC 1.2.3, 12/29/00

N.M. Admin. Code § 3.1.2.4 Duration

Permanent.

History

4/15/97; 3.1.2.4 NMAC - Rn, 3 NMAC 1.2.4, 12/29/00

N.M. Admin. Code § 3.1.2.5 Effective Date

4/15/97, unless a later date is cited at the end of a section, in which case the later date is the effective date.

History

4/15/97; 3.1.2.5 NMAC - Rn & A, 3 NMAC 1.2.5, 12/29/00

N.M. Admin. Code § 3.1.2.6 Objective

The objective of this part is to interpret, exemplify, implement and enforce the provisions of the Taxation and Revenue Department Act.

History

4/15/97; 3.1.2.6 NMAC - Rn, 3 NMAC 1.2.6, 12/29/00

N.M. Admin. Code § 3.1.2.7 Definitions

[Reserved.]

History

4/15/97; 3.1.2.7 NMAC - Rn, 3 NMAC 1.2.7, 12/29/00

N.M. Admin. Code § 3.1.2.8 Rulings - General

A. Persons may request a ruling from the secretary for clarification of the consequences of a specified set of circumstances or interpretation of any statute the administration or enforcement of which is charged to the taxation and revenue department. The request must be in writing. The department may require the requester to state whether the requester is under audit by the department, has an outstanding assessment related to the subject matter of the request or is involved in a protest or litigation with the department over the subject matter of the request. The secretary's ruling will be in writing addressed to the requesting party with an assigned ruling number, signed by the secretary and by counsel to show that it has been reviewed by the attorney general or other legal counsel of the department.

B. In a proceeding pursuant to the Tax Administration Act, the department shall be estopped pursuant to Section 7-1-60 NMSA 1978 from obtaining or withholding the relief requested if it is shown by the party adverse to the department that the party's action or inaction subject to dispute was in accordance with any ruling addressed to the party by the secretary, unless the ruling had been rendered invalid or had been superseded by regulation or by another ruling addressed to the party at the time the asserted liability for tax arose.

C. A person or persons requesting a ruling from the secretary must be subject to the statute for which an interpretation is requested or to which the set of circumstances relate. In particular the requester must be a taxpayer as defined in Section 7-1-3 NMSA 1978 for taxes and tax acts covered by the Tax Administration Act. A representative, such as an accountant or attorney, of the requester may request the ruling on behalf of the requester but must disclose the name of the requester. The secretary will not issue a ruling addressed to the requester's representative, whether or not the name of the requester is disclosed. A copy of a ruling addressed to the requester will be sent to a requester's representative when requested.

D. The secretary may modify or withdraw any previously issued ruling and shall withdraw or modify any ruling when subsequent legislation, regulations, final court decision or other rulings have invalidated a ruling or portions of a ruling.

E. Although the secretary is not required by statute to issue a ruling even if the request is in proper form, every ruling request shall be given careful and diligent consideration.

History

11/17/95, 4/15/97, 3/31/99; 3.1.2.8 NMAC - Rn & A, 3 NMAC 1.2.8, 12/29/00

N.M. Admin. Code § 3.1.2.9 Hearing for Proposed Regulations

A. For the purpose of obtaining comments of interested persons regarding issuance of regulations, the secretary shall schedule a public hearing on a date approximately 45 days from the day of issuing and filing a proposed regulation in the office of the secretary for public inspection. The hearing date shall be publicized in a manner so that individuals, professionals and industry groups who have an interest in the promulgation of proposed regulations will have an opportunity to attend the meeting and express their comments. The secretary or a designated hearing officer shall hear and weigh all comments and suggestions on the proposed regulation. The secretary may incorporate revisions into the proposed regulations including those derived from written or verbal comments of interested persons. The decision of the secretary on the substance and form of the regulation is final.

B. Revisions to a proposed regulation may be incorporated by the secretary at any time during the 60-day waiting period, and the modified regulation need not be reissued as proposed before becoming final.

History

11/17/95, 4/15/97; 3.1.2.9 NMAC - Rn, 3 NMAC 1.2.9, 12/29/00

N.M. Admin. Code § 3.1.2.10 Cooperative Agreement Effective Date

A. A cooperative agreement or an amended cooperative agreement entered into pursuant to Section 9-11-12.1 NMSA 1978 or Section 9-11-12.2 NMSA 1978, shall become effective on July 1 or January 1, whichever date occurs first after the expiration of at least three months from the date the cooperative agreement or amended cooperative agreement is signed by both the pueblo or tribe and the secretary.

B. To be effective as of January 1, cooperative agreements or amendments to cooperative agreements must be executed by both the pueblo or tribe and the secretary on or before September 30 of the previous year. To be effective as of July 1, cooperative agreements or amendments to cooperative agreements must be executed by both the pueblo or tribe and the secretary on or before March 30 of the same year.

History

3.1.2.10 NMAC - N, 6/15/04; A, 1/17/06

N.M. Admin. Code § 3.1.2.11 Secretary May Designate Reporting Requirements of Some Receipts

The secretary may require receipts from sales that occur on the tribal land of a pueblo or tribe that has entered into a gross receipts tax cooperative agreement with the state of New Mexico pursuant to Section 9-11-12.1 NMSA 1978 to be reported as located on tribal land regardless of where the taxpayer’s place of business is maintained.

HISTORY OF 3.1.2 NMAC:

Pre-NMAC History: The material in this part was derived from that previously filed with the State Records Center:

TRD Regulations TRD 6.2:1 & 2, Regulations Pertaining to the Taxation and Revenue Department Act Section 9-11-6.2 NMSA 1978, filed 11/17/95.

History of Repealed Material: [RESERVED]

NMAC History:

3 NMAC 1.2, Tax Administration - Promulgation of Regulations, filed 4/1/97.

3.1.2 NMAC, Tax Administration - Promulgation of Regulations, filed 12/15/2000.

History

3.1.2.11 NMAC - N, 1/17/06

Part 3 Disclosure of Taxpayer Information

N.M. Admin. Code § 3.1.3.1 Issuing Agency

Taxation and Revenue Department, Joseph M. Montoya Building, 1100 South St. Francis Drive, P.O. Box 630, Santa Fe NM 87504-0630.

History

10/31/1996; 3.1.3.1 NMAC - Rn, 3 NMAC 1.3.1, 12/29/2000

N.M. Admin. Code § 3.1.3.2 Scope

History

10/31/1996; 3.1.3.2 NMAC - Rn, 3 NMAC 1.3.2, 12/29/2000

N.M. Admin. Code § 3.1.3.3 Statutory Authority

Section 9-11-6.2 NMSA 1978.

History

10/31/1996; 3.1.3.3 NMAC - Rn, 3 NMAC 1.3.3, 12/29/2000

N.M. Admin. Code § 3.1.3.4 Duration

Permanent.

History

10/31/1996; 3.1.3.4 NMAC - Rn, 3 NMAC 1.3.4, 12/29/2000

N.M. Admin. Code § 3.1.3.5 Effective Date

October 31, 1996, unless a later date is cited at the end of a section, in which case the later date is the effective date.

History

10/31/1996; 3.1.3.5 NMAC - Rn & A, 3 NMAC 1.3.5, 12/29/2000

N.M. Admin. Code § 3.1.3.6 Objective

The objective of this part is to interpret, exemplify, implement and enforce the provisions of the Tax Administration Act.

History

10/31/1996; 3.1.3.6 NMAC - Rn, 3 NMAC 1.3.6, 12/29/2000

N.M. Admin. Code § 3.1.3.7 Definitions

[RESERVED]

History

10/31/1996; 3.1.3.7 NMAC - Rn, 3 NMAC 1.3.7, 12/29/2000

N.M. Admin. Code § 3.1.3.8 State Warrants for Payment of Tax Refunds and Tax Rebates

A. Generally, information contained on a state warrant issued in response to a tax return submitted by a taxpayer, including electronic data processing records relative to the warrant, is confidential information for purposes of Section 7-1-8 NMSA 1978. Warrants issued in response to a claim for a refund, the record of which is required to be available for public inspection under Section 7-1-29 NMSA 1978, are not confidential information.

B. Example: A loan company requests from an employee of the department the mailing address of a taxpayer and the dollar amount of a state warrant which was processed as a refund or rebate from an income tax return. The information requested was derived from information contained in the return of a taxpayer, and it is unlawful for the employee to reveal this information.

History

11/5/1985, 8/15/1990, 10/31/1996; 3.1.3.8 NMAC - Rn & A, 3 NMAC 1.3.8, 12/29/2000

N.M. Admin. Code § 3.1.3.9 Reciprocal Agreements with Other States or Tribes

The secretary shall retain all reciprocal exchange-of-information agreements between the department and the authorized representatives of other states or of Indian nations, tribes or pueblos which permit designated employees of the department to reveal to the receiving state or Indian nation, tribe or pueblo, for tax purposes only, information contained in the return of a taxpayer or other information about a taxpayer.

History

11/5/1985, 8/15/1990, 10/31/1996; 3.1.3.9 NMAC - Rn, 3 NMAC 1.3.9, 12/29/2000

N.M. Admin. Code § 3.1.3.10 Reciprocal Agreement - United States Secretary of the Treasury's Authorized Representative

A. The secretary shall maintain a permanent record of the reciprocal agreement between the department and the representative of the secretary of the treasury for exchange of tax information. The proper representative of the secretary of the treasury shall be identified in the reciprocal agreement with the department. Identification of proper representatives may be made by job title or job description.

B. Example: A representative of the United States treasury department's alcohol, tobacco and firearms bureau (ATFB) requests from a department employee information contained in the return of a taxpayer. The representative explains that the organization is a branch of the treasury department, and the tax information requested will aid the state of New Mexico in collecting more tobacco taxes. Since the ATFB of the treasury department is not the authorized representative of the secretary of the treasury under a reciprocal agreement, it is unlawful for any employee of the department to fulfill the ATFB representative's request.

History

7/19/1967, 11/5/1985, 8/15/1990, 10/31/1996; 3.1.3.10 NMAC - Rn, 3 NMAC 1.3.10, 12/29/2000

N.M. Admin. Code § 3.1.3.11 Taxpayer “waiver” of Confidentiality

A. For the purpose of Section 7-1-8 NMSA 1978, and except as provided in Subsection 7-1-24E NMSA 1978 for a taxpayer request for an administrative hearing to be open to the public, there is no provision in the Tax Administration Act for a taxpayer to “waive” the provisions of Section 7-1-8 NMSA 1978 as applied to an employee or former employee of the department. The provisions of Section 7-1-8 NMSA 1978 and the punitive provisions of Section 7-1-76 NMSA 1978 are imposed on an employee or former employee and cannot be released by a taxpayer. The secretary will not accept or approve a purported “waiver” of confidentiality under Section 7-1-8 NMSA 1978 from taxpayers who attempt to make lawful that which is unlawful for employees and former employees of the department.

B. Example: A taxpayer and the taxpayer's attorney attend an informal conference with the secretary and department attorneys to discuss the tax consequences of the taxpayer's activities as a seller of tangible personal property in New Mexico. The taxpayer's attorney announces that a buyer (who is also a taxpayer) of the client's property has no objections to information from the buyer's tax returns being revealed by the secretary to those present in the conference. The attorney, although not representing the buyer, has a signed letter from the buyer “waiving” confidentiality of information in the buyer's returns which are in the possession of the department. This “waiver” does not make it lawful for the secretary or any other department employee to act upon this request by revealing the buyer's tax records or to give any information about the buyer acquired as a result of employment by the department. The buyer can obtain the information from the department and make any use of it the buyer deems proper. Or, in the alternative, the buyer could appoint the attorney in question the buyer's “authorized representative” to receive this information.

History

11/5/1985, 8/15/1990, 10/31/1996; 3.1.3.11 NMAC - Rn & A, 3 NMAC 1.3.11, 12/29/2000

N.M. Admin. Code § 3.1.3.12 Disclosure of Tax Information to a Court

A. The exception in Subsection 7-1-8D NMSA 1978, permitting disclosure in response to an order of a district court, an appellate court or a federal court, shall be restricted to those actions:

(1) relating to taxes, where the state is a party and where the information sought is material to the inquiry;

(2) where the department is attempting to collect a tax; or

(3) where the taxpayer has put the taxpayer's own tax liability at issue.

B. Unless the order of the court concerns an action that meets all three of the restrictions in Paragraph (1) of Subsection 3.1.3.12A NMAC, or the restrictions in Paragraphs (2) and (3) of Subsection 3.1.3.12A NMAC, it is unlawful for an employee of the department or any former employee of the department to breach taxpayer confidentiality.

C. No provision in Subsection 7-1-8D NMSA 1978 precludes any employee from making tax information available to the taxpayer or the taxpayer's authorized representative when a court orders the taxpayer to obtain such information for purposes of discovery. Nothing in Subsection 7-1-8E NMSA 1978 shall be construed to require any employee to testify in a judicial proceeding except as provided in Subsection 7-1-8D NMSA 1978.

D. Example: A taxpayer in the business of selling construction services files a civil suit in a district court against the owner of a construction project and seeks judgment against the owner for an increase in the contract price as reimbursement for gross receipts taxes. Upon the taxpayer's request the court issues a subpoena duces tecum to an employee of the department to appear as a witness in the court action and bring certain records of the defendant. Although the court action relates to taxes and the information sought is material to the inquiry, the state is not a party to the suit nor does the information sought concern a taxpayer who has put the taxpayer's own tax liability at issue. It is unlawful for the employee to reveal tax information as a witness. Should the employee comply with the court's order, the employee may be guilty of a misdemeanor under Section 7-1-76 NMSA 1978 and upon conviction suffer the penalties prescribed by law. The secretary, through counsel, normally will present a motion to the court asking that the subpoena duces tecum be quashed.

(1) If time does not permit a motion to quash to be prepared and presented before the court, the employee will appear at the appointed time and make the following statement to the court:

“Your honor, I respectfully decline to disclose the information upon the advice of the Secretary of Taxation and Revenue and my legal counsel. The information requested is privileged under Rule 11-502 of the New Mexico Rules of Evidence. Also, the disclosure of this information will subject me to possible criminal prosecution under Section 7-1-8 and Section 7-1-76, New Mexico Statutes Annotated 1978. The disclosure of this information might also subject me to criminal prosecution by the United States pursuant to Section 7213(a)(2) of the United States Internal Revenue Code. Since the disclosure of this information might tend to incriminate me in a later criminal proceeding, I hereby invoke my rights under the Fifth Amendment to the United States constitution and Article II, Section 15 of the constitution of New Mexico.”

(2) The employee may further advise the court that the department may release the information to the taxpayer or the taxpayer's authorized representative and the court may then order the taxpayer to reveal the information as appropriate.

3.1.3.13 AUTHORIZED REPRESENTATIVE

A. The authorization of any person to be a representative of a taxpayer must be in writing, must contain sufficient information for the department to identify the taxpayer and the representative and must be signed by the taxpayer. The authorization must be in a form prescribed by the department, and renewed at an interval set by the department.

B. Upon presentation of a proper authorization from a taxpayer's representative, the secretary or employee may reveal information concerning the taxpayer and the taxpayer's return. If, however, the adversarial position of the representative or some change of circumstance in the relationship between the taxpayer and the taxpayer's authorized representative leads the secretary or employee to question the continued validity of the authorization, the secretary or employee may inquire of the taxpayer whether the authorization remains valid. A taxpayer may revoke an authorization of a person to be the taxpayer's representative by filing a document with the department so stating.

History

7/19/1967, 11/5/1985, 8/15/1990, 10/31/1996; 3.1.3.12 NMAC - Rn & A, 3 NMAC 1.3.12, 12/29/2000
11/5/1985, 8/15/1990, 10/31/1996; 3.1.3.13 NMAC - Rn & A, 3 NMAC 1.3.13, 12/29/2000; A, 9/25/2018

N.M. Admin. Code § 3.1.3.14 Bankruptcy

A. Whenever an order for relief is entered under Title 11 of the United States Code with respect to a taxpayer, the taxpayer shall be deemed to have put his liability for taxes at issue and the department shall be deemed to be a party to the bankruptcy proceeding. The bankruptcy court may enter an order allowing any other party in the bankruptcy case to obtain information from the department regarding the debtor-taxpayer upon the party showing relevance and need for the information. The department may release information pursuant to such an order.

B. The bankruptcy trustee serving in the case in which the taxpayer is the debtor, the United States trustee and any court-appointed examiner or liquidating agent in a Chapter 11 case will be deemed the taxpayer's authorized representative. The department may release information concerning the taxpayer and the taxpayer's tax liabilities to such a representative.

HISTORY OF 3.1.3 NMAC:

Pre-NMAC History: The material in this part was derived from that previously filed with the State Records Center:

BOR 67-1, Tax Administration Act, 7/19/1967, filed 7/28/1967.

R.D./OGAD Rule No. 1985, Regulations Pertaining to the Tax Administration Act, filed 11/5/1985.

TRD Rule TA-90, Regulations Pertaining to the Tax Administration Act, Sections 7-1-1 to 7-1-82 NMSA 1978, filed 8/15/1990.

History of Repealed Material: [RESERVED]

NMAC History:

3 NMAC 1.3, Tax Administration - Disclosure of Taxpayer Information, filed 10/17/1996.

3.1.3 NMAC, Tax Administration - Disclosure of Taxpayer Information, filed 12/15/2000.

History

2/9/1995, 10/31/1996; 3.1.3.14 NMAC - Rn, 3 NMAC 1.3.14, 12/29/2000

Part 4 Filing

N.M. Admin. Code § 3.1.4.1 Issuing Agency

Taxation and Revenue Department, Joseph M. Montoya Building, 1100 South St. Francis Drive, P.O. Box 630, Santa Fe NM 87504-0630.

History

3.1.4.1 NMAC - Rp, 3.1.4.1 NMAC, 7/7/2021

N.M. Admin. Code § 3.1.4.2 Scope

History

3.1.4.2 NMAC - Rp, 3.1.4.2 NMAC, 7/7/2021

N.M. Admin. Code § 3.1.4.3 Statutory Authority

Section 9-11-6.2 NMSA 1978.

History

3.1.4.3 NMAC - Rp, 3.1.4.3 NMAC, 7/7/2021

N.M. Admin. Code § 3.1.4.4 Duration

Permanent.

History

3.1.4.4 NMAC - Rp, 3.1.4.4 NMAC, 7/7/2021

N.M. Admin. Code § 3.1.4.5 Effective Date

July 7, 2021, unless a later date is cited at the end of a section, in which case the later date is the effective date.

History

3.1.4.5 NMAC - Rp, 3.1.4.5 NMAC, 7/7/2021

N.M. Admin. Code § 3.1.4.6 Objective

The objective of this part is to interpret, exemplify, implement and enforce the provisions of the Tax Administration Act.

History

3.1.4.6 NMAC - Rp, 3.1.4.6 NMAC, 7/7/2021

N.M. Admin. Code § 3.1.4.7 Definitions

As used in 3.1.4 NMAC, “CRS liability” means the total of state gross receipts tax due for a period plus the amounts due for the same period for all other taxes collected with the state gross receipts tax, such as local option gross receipts taxes, governmental gross receipts tax, leased vehicle gross receipts tax, leased vehicle surcharge, compensating tax and withholding tax.

History

3.1.4.7 NMAC - Rp, 3.1.4.7 NMAC, 7/7/2021

N.M. Admin. Code § 3.1.4.8 Filing Returns - Forms

A. Information concerning the method of completing and filing a return, the filing date and the due date for paying taxes administered by the department may be found under the specific tax statutes, the secretary's regulations thereunder, on the prescribed forms and on the instructions accompanying the forms. Returns are considered complete and timely filed when the requirements of these documents, including requirements on obtaining extensions of time to file, are complied with by taxpayers.

B. Copies of return forms and instructions will be furnished by the department to taxpayers and to those persons filing returns for the purpose of securing refunds and rebates. The failure to receive a return form, however, does not relieve taxpayers from their duty to report and pay taxes. The forms and instructions may be obtained from the department and from district offices.

History

3.1.4.8 NMAC - Rp, 3.1.4.8 NMAC, 7/7/2021

N.M. Admin. Code § 3.1.4.9 The Requirement of a Correct Mailing Address

A. All notices, returns or applications required to be made by the taxpayer must include the correct mailing address of the taxpayer and the taxpayer must promptly advise the department in writing of any change in mailing address. If the department has prescribed a form or format for reporting a change of address, the form or format must be followed provided that, if the required information is contained in a change of address form or notice of the United States postal service, the United States postal service change of address form or notice may be used in lieu of the department form.

B. If a taxpayer notifies the United States postal service of a change in the taxpayer’s mailing address and this information is given by the United States postal service to the department either voluntarily or upon the department’s request, the taxpayer shall have fulfilled the taxpayer’s obligation to notify the department of a change in mailing address. Unless the taxpayer specifically notifies the department that the change of mailing address does not apply to mailings from the department to the taxpayer, the notice by the taxpayer to the United States postal service of a change in the taxpayer’s mailing address and given by the United States postal service to the department applies to mailings from the department.

History

3.1.4.9 NMAC - Rp, 3.1.4.9 NMAC, 7/7/2021

N.M. Admin. Code § 3.1.4.10 Due Dates and Timeliness

A. Filing returns - due date: A taxpayer becomes liable for tax as soon as the taxable event occurs; payment is not due, however, until on and after the date established by tax acts for the payment of tax. The statutory words “and after” used in the preceding sentence mean that taxes remain due until paid. A taxpayer becomes liable for interest if the tax is not paid when it becomes due. If the tax is not paid when it becomes due or if a report is not filed when due because of negligence of the taxpayer or taxpayer's representative, the taxpayer will also become liable for penalty. The fact that a taxpayer has not registered as a taxpayer is not material to the taxpayer's liability for payment of tax.

B. Timeliness of electronic transmissions:

(1) Notices, returns and applications authorized or required to be made or given by electronic transmission, are timely if the notice, return or application is electronically transmitted to the department and accepted on or before the last date prescribed for filing the notice, return or application. Accordingly, the sender who relies upon the applicability of Section 7-1-13 NMSA 1978 assumes the responsibility to provide the department proof that the electronic transmission to the department was initiated on or before the last date prescribed for filing the notice, return or application.

(2) Returns required by regulation or statute to be filed electronically shall not be considered filed until filed electronically if filed by any means other than as specified in that regulation or statute unless the taxpayer receives an exception or waiver to electronic filing in writing from the department, and taxpayer will be subject to penalties under Section 7-1-69 NMSA 1978 for a late filed return until an electronic return is filed.

C. Determination of timeliness:

(1) Notices, returns, applications and payments, other than payments specified by Section 7-1-13.1 NMSA 1978, authorized or required to be made or given by mail are timely if the postmark on the envelope made by the United States postal service bears the date on or before the last date prescribed for filing the notice, return or application or for making the payment. The date affixed on an envelope by a postage meter stamp will be considered the postmark date if it is not superseded by a postmark made by the United States postal service. If the postmark does not bear a date on or before the last date prescribed for filing the notice, return or application, or for making the payment, the notice, return, application or payment will be presumed to be late. Accordingly, the sender who relies upon the applicability of Section 7-1-9 NMSA 1978 assumes the responsibility that the postmark will bear a date on or before the last date prescribed for filing the notice, return or application, or for making the payment.

(2) If a mailing is not received by the department, the contents of the mailing are not timely. If an envelope is improperly addressed and is returned to the sender by the post office, there has been no timely mailing within the meaning of the statute. The postmark date on the improperly addressed envelope will not be deemed the date of receipt by the department.

(3) A facsimile transmittal of a notice, return or application will be considered a timely filing of the notice, return or application only if:

(a) the facsimile is received by the due date for filing the notice, return or application; and

(b) the original is delivered by the due date or, if mailed, postmarked on or before the due date.

D. Illegible postmark:

(1) If the postmark on the envelope is not legible and the contents are received by the department by the second business day following the due date, filing of the return, payment or other action will be deemed timely. If the contents are received by the department after the second business day following the due date, the person who is required to file notices, returns or applications, or make payments, has the burden of proving the time when the postmark was made.

(2) The provisions of Subsection D of 3.1.4.10 NMAC apply only to actions required or permitted to be performed by mail.

(3) If the notice, return, application or payment other than payments specified by Section 7-1-13.1 NMSA 1978 is sent or delivered to the department by any means other than by mailing with the United States postal service, it must be received by the department on or before the due date for filing the notice, return or application or making the payment.

E. Saturday, Sunday or holiday due date:

(1) If the last date for filing notices, returns or applications or for making payment of taxes falls on Saturday, Sunday or a state of New Mexico or national holiday, the filing of notices, returns and applications or the making of the payment of taxes, other than payments specified by Section 7-1-13.1 NMSA 1978, shall be considered timely if postmarked on the next succeeding day which is not a Saturday, Sunday or state or national holiday.

(2) Example: The due date for taxpayers to file gross receipts tax returns for April receipts is May 25. If May 25th is a Saturday and the following Monday is Memorial Day, a legal holiday designated in Section 12-5-2 NMSA 1978, the due date for filing the gross receipts tax returns is Tuesday, May 28th. The first banking day preceding Tuesday, May 28th is Friday, May 24th.

F. State observance of state holiday on day other than that designated for public observance:

(1) Whenever the New Mexico state government and its employees are directed by competent authority to observe a state legal public holiday on a day other than that specified in Section 12-5-2 NMSA 1978 for that holiday, the day upon which the holiday is observed by the New Mexico state government is deemed to be a “legal state holiday” for the purposes of the Tax Administration Act.

(2) Example: Section 12-5-2 NMSA 1978 designates the third Monday in February as a legal holiday, President's day. Traditionally, state offices are open on the third Monday in February and the holiday is observed by state government on the Friday following Thanksgiving. Accordingly, when state government is closed on the Friday after Thanksgiving in a delayed observance of President's day, the due date for any notices, returns, applications or payments to be made by taxpayers on the Friday after Thanksgiving is the following Monday. For purposes of making payment of tax in accordance with Section 7-1-13.1 NMSA 1978 in this situation, the first banking day preceding the due date is the Friday after Thanksgiving. Because the third Monday in February is observed by the United States postal service and by the national banks, any notices, returns, applications or payments to be made by taxpayers on that date are due the following day, even though state offices are open on President's day.

G. “Received by the department” defined:

(1) Unless the secretary by instruction or other directive permits or requires otherwise, “received by the department” for the purposes of Section 7-1-13.1 NMSA 1978 means received at the Santa Fe headquarters of the department during the department's normal business hours.

(2) The secretary through instruction or other directive may permit or require payment by check of taxes subject to the provisions of Section 7-1-13.1 NMSA 1978 at any other location of the department or at the location of the state fiscal agent or other agent of the department or during times other than normal business hours of the department. When the secretary has so permitted or required payment by check at such locations or times, “received by the department” for the purposes of Section 7-1-13.1 NMSA 1978 includes such locations or times.

H. “Banking day” defined:

(1) A banking day is a day which is not a Saturday, Sunday, national bank holiday or a day deemed by regulation of the secretary to be a state legal holiday for purposes of making payment under Subsection 7-1-13.1B NMSA 1978.

(2) Examples:

(a) When Memorial day falls on Monday, May 27th, the preceding banking day is Friday, May 24th.

(b) The Wednesday immediately prior to Thanksgiving is the first banking day preceding Thanksgiving.

I. Timeliness of electronic payments:

(1) Payments, other than payments specified by Section 7-1-13.1 NMSA 1978, authorized or required to be made or given by electronic payment, are timely if the payment is electronically transmitted to the department and accepted, on or before the last date prescribed for making the payment. Accordingly, the sender who relies upon the applicability of Section 7-1-13.4 NMSA 1978 assumes the responsibility to provide the department proof that the electronic transmission to the department was initiated on or before the last date prescribed for making the payment.

(2) Payments specified by Section 7-1-13.1 NMSA 1978, authorized or required to be made or given by electronic payment, are timely if the result of the electronic payment is that the funds are available to the state of New Mexico on or before the last date prescribed for making the payment. The date that an electronic payment was transmitted to the department is not an indicator of whether the payment was timely. The sender who relies upon the applicability of Section 7-1-13.4 NMSA 1978 assumes the responsibility that the funds were available to the department on or before the last date prescribed for making the payment.

3.1.4.11 SEMIANNUAL OR QUARTERLY FILING

A. Semiannual or quarterly reporting - resources excise and severance taxes:

(1) Persons who are liable for reporting taxes under the Resources Excise Tax Act (Sections 7-25-1 to 7-25-9 NMSA 1978) or the Severance Tax Act (Sections 7-26-1 to 7-26-8 NMSA 1978) and whose anticipated aggregate tax liability for both of these taxes is less than $200 a month may report and pay these taxes at quarterly or semiannual intervals if the taxpayer applies for and obtains the prior approval of the secretary or secretary's delegate. The semiannual reporting and payment intervals shall be only for the periods of January through June and July through December of any calendar year and the quarterly intervals shall be only for the three-month periods ending March 31, June 30, September 30 and December 31 of any calendar year.

(2) The taxpayer may not change from one reporting interval to another without the prior written approval of the secretary or secretary's delegate.

(3) As a condition of approving semiannual or quarterly reporting, the secretary may require the posting of a surety bond or other acceptable security in an appropriate amount payable to the state of New Mexico guaranteeing payment to the state of New Mexico of the taxpayer's tax liability under the Resources Excise Tax Act or Severance Tax Act.

B. Semiannual or quarterly reporting - CRS liability:

(1) Any taxpayer with an anticipated CRS liability of less than $200 per month may report and pay these taxes at quarterly or semiannual intervals if the taxpayer applies for and obtains the prior approval of the secretary or secretary's delegate. Prior approval is also required when a taxpayer, having received permission to file on a quarterly or semiannual basis, wishes to change from quarterly to semiannual or semiannual to quarterly. Quarterly reporting and payment intervals shall be only the three-month periods ending March 31, June 30, September 30 and December 31. Semiannual reporting and payment intervals shall be only for the reporting periods of January through June and July through December. Approval, once granted, applies only so long as the taxpayer’s actual average liability for the reporting periods does not exceed $200 per month.

(2) Any taxpayer who is registered to report and pay on a quarterly or semiannual basis and who subsequently has an average CRS liability over any one-year period of two hundred dollars or more per month must report and pay on a monthly basis, beginning with the first month following the close of the last quarterly or semi-annual reporting period within that year. In addition, when the department, upon examination of its records, discovers a taxpayer who is registered to report and pay on a quarterly or semiannual basis but who has an average monthly CRS liability of two hundred dollars or more over a one-year period may withdraw its approval and require the taxpayer to report and pay on a monthly basis, beginning with a month selected by the department.

(3) The secretary shall furnish the necessary forms to apply for filing tax returns at semiannual or quarterly intervals and to change the reporting interval. A taxpayer may change from quarterly or semiannual intervals to monthly without prior approval of the secretary or the secretary’s delegate if the taxpayer begins monthly reporting with the first month following the end of a quarter or semiannual period.

(4) Except as otherwise provided in Paragraphs (2) and (3) of Subsection B of 3.1.4.11 NMAC, the taxpayer may not change from one reporting interval to another without the prior written approval of the secretary or secretary's delegate.

(5) As a condition of approving semiannual or quarterly reporting, the secretary may require the posting of a surety bond or other acceptable security in an appropriate amount payable to the state of New Mexico guaranteeing payment to the state of New Mexico of the taxpayer's CRS liability.

C. Quarterly or semiannual reporting - Water conservation fee:

(1) Persons who are liable for reporting the water conservation fee under Section 74-1-13 NMSA 1978 and whose anticipated aggregate liability for the fee is less than $200 a month may report and pay this fee at quarterly or semiannual intervals if the taxpayer applies for and obtains the prior approval of the secretary or the secretary's delegate. The semiannual reporting and payment intervals shall be only for the periods of January through June and July through December of any calendar year. The quarterly reporting and payment intervals shall be only for the three-month periods ending March 31, June 30, September 30 and December 31 of any calendar year.

(2) Persons who are liable for reporting the water conservation fee may not change from one reporting interval to another without the prior written approval of the secretary or the secretary's delegate except that the person may change without prior approval from quarterly or semiannual reporting to monthly if the person begins the monthly reporting with either the January or July reporting period.

(3) As a condition of approving quarterly or semiannual reporting, the secretary or the secretary's delegate may require the posting of a security bond or other acceptable security in an appropriate amount payable to the state of New Mexico guaranteeing payment to the state of New Mexico of the person's water conservation fee liability.

D. Filing periods for alternative fuel tax distributors:

(1) In anticipation that distributors who are required to file and pay the alternative fuel excise tax will have a tax liability of less than $200 per month, distributors are authorized to report and pay this tax on a quarterly basis without advance approval of the secretary. The quarterly reporting and payment intervals shall only be for the three-month periods ending March 31, June 30, September 30 and December 31.

(2) After December 31, 1996, any distributor reporting and paying on a quarterly basis whose alternative fuel excise tax liability averages more than $200 per month during a calendar quarter will be required to report and pay alternative fuel excise tax on a monthly basis. After December 31, 1996, any distributor reporting on a monthly basis but whose alternative fuel tax liability is less than $200 per month may report and pay the alternative fuel excise tax on a quarterly basis if the distributor obtains the prior approval of the secretary or the secretary's delegate.

(3) This regulation is retroactively applicable to tax periods beginning on or after January 1, 1996.

E. Quarterly reporting - Withholding by federal agencies: Agencies of the federal government responsible for withholding and paying over state taxes pursuant to federal law, the Withholding Tax Act or any voluntary agreement between the agency and federal employees or retired federal employees may report and pay on a quarterly basis, regardless of the dollar limitation set in Section 7-1-15 NMSA 1978 because of the provisions of the Constitution of the United States.

History

3.1.4.10 NMAC - Rp, 3.1.4.10 NMAC, 7/7/2021
3.1.4.11 NMAC - Rp, 3.1.4.11 NMAC, 7/7/2021

N.M. Admin. Code § 3.1.4.12 Extensions

A. Good cause for extensions:

(1) “Good cause” for which the secretary or secretary's delegate may grant extensions is construed strictly. Such extensions for no more than a total of 12 months will be granted only in situations in which the taxpayer shows a good faith effort to comply with the statute.

(2) Example 1: If the taxpayer operates a multistate business and the filing of returns for New Mexico taxes at the statutory due date would cause the taxpayer unreasonable bookwork and recordkeeping, an extension will be given favorable consideration by the secretary or secretary's delegate.

(3) Example 2: If the taxpayer is temporarily disabled because of injury or prolonged illness and the taxpayer can show that the taxpayer is unable to procure the services of a person to complete the taxpayer's return, an extension will be given favorable consideration.

(4) Example 3: If the conduct of the taxpayer's business has been substantially impaired due to the disability of a principal officer of the taxpayer, physical damage to the taxpayer's business or other similar impairments to the conduct of the taxpayer's business causing the taxpayer an inability to compute taxes before the due date, an extension of time will be given favorable consideration.

(5) Example 4: If the taxpayer's accountant has suddenly died or has become disabled and unable to perform services for the taxpayer and the taxpayer can show that the taxpayer is unable either to complete the return or to procure the services of a person to complete the return before the due date, an extension will be given favorable consideration.

(6) Example 5: If the taxpayer is awaiting the outcome of a court or administrative proceeding or the action of the internal revenue service on a federal tax claim, an extension will be given favorable consideration provided that the extension does not contravene the time limits established by this statute or other New Mexico or federal statute.

B. Procedure for obtaining extensions - Period of extension:

(1) The procedures in Subsection B of 3.1.4.12 NMAC apply only to extensions which the applicant must request; these procedures do not apply to automatic extensions under Subsection E of 3.1.4.12 NMAC.

(2) Any taxpayer may request an extension of time in which to file a tax return. Such a request must be in writing and must be received by the department on or before the date that the tax is due. The application for extension must clearly set forth:

(a) the tax or tax return to which the extension, if granted, will apply;

(b) a clear statement of the reasons for the requested extension; and

(3) The extension will not be granted unless a reason satisfactory to the secretary or secretary's delegate appears in the request.

(4) An approved extension will ordinarily be granted for a period of 30 days. A request for longer extensions must state the reason why the 30 days is insufficient. Additional 30-day extensions or a longer extension may be granted by the secretary or secretary's delegate for up to a maximum aggregate extension of 12 months.

(5) Example 1: P is in the business of preparing tax returns. P realizes that, because of the great volume of business, P will be unable to complete all of P's customers' tax returns before the due date. P submits to the secretary a request for an extension of time on behalf of each customer whose return P is unable to complete. The request will be denied. It is irrelevant to consider whether or not P's request states a good cause because an extension will not be granted unless the taxpayer's personal necessity is the basis of the request. In this case, each of the taxpayers must request an extension and give “good cause” for this privilege.

(6) Example 2: On April 20, 20XX, T is granted a 30-day extension for payment of March, 20XX, taxes due April 25, 20XX. On May 20, 20XX, T, showing good cause, requests a further extension of the March taxes for 12 months. A 12-month extension will not be granted because the payment or filing date for any tax liability may not be extended for more than 12 months after the date on which the taxes were due and no series of extensions exceeding 12 months when aggregated will be granted to any taxpayer. The maximum extension that could be granted to T is until April 25 of the year following 20XX.

C. Extensions granted when no liability has arisen:

(1) An extension may be granted even though the tax liability has not yet arisen. The following examples illustrate the application of Subsection E of Section 7-1-13 NMSA 1978.

(2) Example 1: B's business is destroyed by flood on June 1, 20XX. B, a cash-basis taxpayer, is expecting to receive payment in July for items sold in May. In June B requests a six-month extension for those taxes for which B will be liable in July and which will become due August 25, 20XX. Upon a showing of good cause, the request may be granted notwithstanding that the liability for the tax has not yet arisen.

(3) Example 2: Under the same facts as in Example 1, in January of the following year, B, showing good cause, requests a further extension of the July, 20XX taxes for a period of nine months to September 25 of the year following 20XX. The nine-month extension will not be granted because the reporting period for any tax liability may not be extended for an aggregate period of more than 12 months after the date the taxes were due. The maximum extension which could have been granted was until August 25 of the year following 20XX.

D. Automatic extension for report of Federal Form 990-T Income: A taxpayer who is required to file a New Mexico corporate income and franchise tax return to report taxable income from unrelated activities included in a federal Form 990-T is hereby granted an automatic extension to the 15th day of the fifth month following the close of the taxable year to file a return reporting that income. Interest will accrue during the period of the automatic extension.

E. Automatic Federal income tax extensions - General:

(1) An automatic extension of time to file a federal income tax return as provided in the Internal Revenue Code shall be considered to be an approved federal extension of time and shall be sufficient to extend the time for filing the New Mexico income tax return. If it is necessary to submit a form to the internal revenue service to claim an automatic extension for filing the federal income tax return, then a copy of the federal form claiming the automatic extension for federal tax purposes shall be attached to the taxpayer's New Mexico income tax return and shall serve as the basis for extending the time for filing the New Mexico return to the date of filing the federal return under the automatic extension provided by the Internal Revenue Code. If it is not necessary to submit a form to the internal revenue service to claim an automatic extension for filing the federal income tax return, then the due date for filing the New Mexico income tax return shall be extended automatically to the same date as the extension for the federal return unless the federal extended date is more than six months from the original due date, in which case the extended due date for the New Mexico return shall be six months after the original due date.

(2) If the taxpayer desires additional time beyond the automatic extension for filing the New Mexico income tax return, a written request for the additional time must be made by the taxpayer prior to the expiration of the extended federal date. If it is necessary to submit a form to the internal revenue service to claim an automatic extension for filing the federal return, then a copy of the federal form requesting the automatic extension for filing the federal return must accompany the taxpayer's request for additional time to file the New Mexico income tax return beyond the extended federal date. The total combined extension for filing the New Mexico return shall not exceed 12 months beyond the actual due date for that return.

F. Invalidation of Federal extension: If an extension of time to file a federal income tax return is invalidated for any reason for federal income tax purposes, it is also invalidated for New Mexico income tax purposes.

G. Failure to file, pay or protest by extended due date:

(1) The term “extended due date” means:

(a) for income tax returns, the latest date to which the due date for filing the New Mexico income tax return has been extended by either an extension granted by the internal revenue service with respect to the taxpayer's federal income tax return or by an extension granted by the department; and

(b) for all other tax returns, the latest date to which the due date for filing the tax return has been extended by the department.

(2) A taxpayer becomes a delinquent taxpayer if the taxpayer fails by the extended due date either to file the required return and, if a tax is due, to pay the tax due or to protest in accordance with Section 7-1-24 NMSA 1978 the payment or filing requirement.

H. Automatic extension for certain information returns: The due date for Form 1099-MISC or pro forma 1099-MISC information returns that are required to be electronically filed pursuant to 3.3.5.19 NMAC is automatically extended to the first day of April of the year following the year for which the statement is made. This extended due date conforms to the federal due date for electronic filings of Form 1099-MISC.

3.1.4.13 REPORTING ACCORDING TO BUSINESS LOCATION (Applicable to periods beginning July 1, 2021):

A. Definitions: As used in 3.1.4.13 NMAC, these terms have the following definitions:

(1) "Gross receipts." Under Section 7-1-14 NMSA 1978, “gross receipts” is defined as that term is used in the Gross Receipts and Compensating Tax Act, the Leased Vehicle Gross Receipts Tax Act, or the Interstate Telecommunications Gross Receipts Tax Act, as applicable. As used in 3.1.4.13 NMAC, the term “gross receipts from” or similar terms indicates that under the applicable tax acts, the gross receipts would be treated as derived from a particular source or characterized as relating to a particular activity such as the lease or property or the sale of services.

(2) "In-person service." Under Section 7-1-14 NMSA 1978 “professional service,” as defined, “does not include an in-person service.” The term “in-person service” means a service physically provided in person by the service provider, where the customer or the customer's real or tangible personal property upon which the service is performed is in the same location as the service provider at the time the service is performed. If the service is not generally provided, or does not generally need to be provided, physically in the presence of or upon the customer or upon the customer’s property, it is not an “in-person service” simply because it may be or sometimes is performed in the presence of the customer or at the location of the customer’s property.

(a) Examples of services that will generally be treated as in-person services include, but are not limited to:

(i) Services provided by healthcare workers that are generally performed or required to be performed on or in the presence of the patient.

(ii) Mental health services, unless the provider generally provides the particular service either only in-person, or with limited exceptions.

(iii) Services provided by athletic trainers or physical therapists for clients.

(iv) Services provided by barbers and cosmetologists.

(v) Home healthcare services.

(b) Examples of services that will generally not be treated as in-person services include, but are not limited to:

(i) Architectural and engineering services. Note, however, that when performed as part of or billed to a construction project, these services are considered “construction-related services” rather than professional services pursuant to Subsection C of Section 7-9-3.4 NMSA 1978, and the reporting location for gross receipts from these services is the construction site per Paragraph (2) of Subsection F of Section 7-1-14 NMSA 1978.

(ii) Legal services.

(iii) Accounting, auditing, and tax preparation services.

(iv) Real estate appraisal services.

(3) "Professional service." The term “professional service” as defined in Section 7-1-14 NMSA 1978 means a service, other than an in-person service or construction-related service, that requires either an advanced degree from an accredited post-secondary educational institution or a license from the state to perform. As provided in Paragraph (2) of Subsection A of 3.1.4.13 NMAC, just because a service is provided in person by the service provider does not make it an “in-person” service if the service is not generally provided, or does not generally need to be provided, physically in the presence of or upon the customer or upon the customer’s property.

(4) “Reporting location.” 3.1.4.13 NMAC uses the term “reporting location” in place of the term “business location,” the term that is used in Sections 7-1-3 and 7-1-14 NMSA 1978 as well as local option taxes to refer to the location code designated by the department and required to be used to report the gross receipts and related deductions subject to gross receipts tax or the value of items whose taxable use is subject to the compensating tax. Like the term “business location,” the term “reporting location” refers to the location code and applicable tax rate for reporting gross receipts tax and compensating tax, as designated by the department.

(5) “Seller’s location” or “place of performance.” This regulation may use the terms “seller’s location” or “place of performance” or similar terms to refer to the general facts that may be essential for determining the reporting location. In general, a seller’s location may include a particular building, including a store or office, or other physical location maintained or operated by or for the seller, or used by the seller, where some designated activity giving rise to gross receipts takes place. If the seller uses no such physical location in New Mexico, and if the seller’s domicile is not in New Mexico, then the “seller’s location” as used in this regulation is deemed to be outside the state.

B. Reporting according to reporting location - General:

(1) Reporting location and rate of tax for gross receipts and taxable use. Section 7-1-14 NMSA 1978, amended effective July 1, 2021, determines the proper reporting jurisdiction and rate of tax that apply under the Gross Receipts and Compensating Tax Act, Interstate Telecommunications Gross Receipts Tax Act, Leased Vehicle Gross Receipts Tax Act and any act authorizing the imposition of a local option gross receipts or compensating tax.

(2) Effect of the substantive tax provisions on the rules for reporting location. Unless otherwise indicated, the provisions of 3.1.4.13 NMAC should be read consistently with the provisions of the Gross receipts and Compensating Tax Act, Interstate Telecommunications Gross Receipts Tax Act, Leased Vehicle Gross Receipts Tax Act, as appropriate, and any acts authorizing imposition of local option gross receipts or compensating tax, and any regulations issued under these acts. No provisions of 3.1.4.13 NMAC should be read as subjecting to tax items that are not subject to tax, or excluding from tax items that are subject to tax, under these substantive tax provisions.

(3) State reporting location and application of the state rate. In some cases, taxable gross receipts or the value of items whose taxable use is subject to the compensating tax may not be required to be reported to a particular reporting location in this state. In those cases, the reporting location is the state reporting location and only the state tax rate will apply.

(a) Example: Gross receipts from a professional service performed outside New Mexico, the product of which is delivered to a New Mexico customer for initial use in the state, are taxable in the state. Because Paragraph (9) of Subsection C of 3.1.4.13 NMAC provides that the reporting location of gross receipts from professional services is the location where the services are performed or sold, the gross receipts would be reported to the reporting location for the state and taxed at the state rate.

(b) Example: A nonresident individual with no regular place of business in the state is hired by an out-of-state seller to represent the seller. In order to perform this service, the individual obtains tangible personal property in a tax-free transaction outside the state, which would have been subject to the gross receipts tax had it been acquired inside the state. After acquiring the property, the individual brings that property into New Mexico, using the property in the service performed at various locations throughout the state. The compensating tax on the value of this property would be reported to the reporting location for the state and taxed at the state rate. See Item (ii) of Subparagraph (e) of Paragraph (5) of Subsection C, and Subsection E of 3.1.4.13 NMAC.

(c) Example: Under Subparagraph (e) of Paragraph (5) of Subsection C of 3.1.4.13 NMAC, a seller that does not have access to sufficient information for reporting sales of tangible personal property to the location where the customer receives that property may report to the gross receipts from those sales to the seller’s location. So an out-of-state seller may have certain sales that would be reported to the reporting location for the state and taxed at the state rate. As explained under Subparagraph (e) of Paragraph (5) of Subsection C of 3.1.4.13 NMAC, however, sellers who have access to reliable information from which they can determine an estimate of receipts by reporting location must use that information.

(4) Gross receipts tax not required to be charged or collected. Nothing in Section 7-1-14 NMSA 1978 or 3.1.4.13 NMAC requires the person that engages in activity or transactions resulting in taxable gross receipts to charge or collect the tax from purchasers. The gross receipts tax is a tax on the seller and under Section 7-9-6 NMSA 1978, the taxpayer need only affirmatively state on the billing to its purchaser whether gross receipts tax is included in the amount billed. Furthermore, 3.2.6.8 NMAC provides that the amount of gross receipts tax owed may be “backed out” of the total charged to the customer.

(5) Gross receipts of commissioned sales agents versus consignors/consignees and marketplace sellers/providers.

(a) Commissioned sales agents. Under Subparagraph (a) of Paragraph (2) of Subsection A of Section 7-9-3.5 NMSA 1978 and applicable regulations, commissioned sales agents report only their commission or fee when the property or services which they promote for sale are those of a third party. Under Section 7-1-14 NMSA 1978, the commission is gross receipts from the performance of a service by the sales agent and the reporting location of those receipts is determined in accordance with Paragraph (9) of Subsection C of 3.1.4.13 NMAC.

(b) Gross receipts of consignors/consignees and marketplace sellers/providers. Under Subparagraphs (b) and (g) of Paragraph (2) of Subsection A of Section 7-9-3.5 NMSA 1978 and applicable regulations, the gross receipts and related deductions for sales on consignment and for sales facilitated by marketplace providers are generally defined as all amounts paid or collected from the sale, lease, or licensing of property or services even where a third party consignor or marketplace seller also has gross receipts from selling the related property or service provided. The reporting location of gross receipts and related deductions of the consignor/consignee or the marketplace seller/provider is determined under 3.1.4.13 NMAC as follows:

(i) By looking to the nature of the transaction or activity from which the gross receipts are derived, as though the consignor and consignee, or the marketplace seller and marketplace provider, is each the seller or provider of that transaction or activity to the customer; and, except as provided in Items (ii) and (iii) of this Subparagraph (b), imputing to both parties information known by either party that may be relevant in properly determining the reporting location of the gross receipts.

(ii) In a case where the consignor or marketplace seller may properly claim a deduction under the Gross Receipts and Compensating Tax Act and applicable regulations on account of the transaction with the consignee or marketplace provider, respectively, the consignor or marketplace seller may report these deductions and related gross receipts to the reporting location based on information available to them, without imputing of information known by the consignee or marketplace provider.

(iii) In a case where the marketplace provider, in determining the reporting location of gross receipts reasonably relies on erroneous information provided by the marketplace seller as provided in Subsection C of Section 7-9-5 NMSA 1978, the correct information that may be known to the marketplace seller will not be imputed to the marketplace provider.

(i) Commissioned sales agent X works for business y to sell tangible personal property owned by y to customers in New Mexico. Agent X receives a commission based on the amount of the sale made on behalf of business Y to a customer. Business Y will have gross receipts from selling tangible personal property. The reporting location of Y’s gross receipts from the sale of the property is the location of Y’s customer, determined under the provisions of Paragraph (5) of Subsection C of 3.1.4.13 NMAC. Agent X is performing a service sourced under Subparagraph (e) of Paragraph (9) of Subsection C of 3.1.4.13 NMAC. The product of the service performed by agent X is the completion of the order and sale to a customer of Y’s products. Therefore, the reporting location of agent X’s gross receipts from commissions paid by Y for services performed is also the location of Y’s customer and this location should be determined consistent with the provisions of Paragraph (5) of Subsection C of 3.1.4.13 NMAC.

(ii) Same facts as Item (i) of Subparagraph (c) of Paragraph (5) of Subsection B of 3.1.4.13 NMAC, except that, rather than a commissioned sales agent, X is a consignee and Y is a consignor. Under the consignment arrangement, X receives receipts from customers for Y’s tangible personal property and agrees to pay Y a portion of those receipts. Under the Gross Receipts and Compensating Tax Act and applicable regulations, both X and Y have gross receipts from selling tangible personal property. The reporting location for the gross receipts and any related deductions of both X and Y is the location of the customer determined under the provisions of Paragraph (5) of Subsection C of 3.1.4.13 NMAC.

(iii) Same facts as Item (ii) of Subparagraph (c) of Paragraph (5) of Subsection B of 3.1.4.13 NMAC,except that rather than the consignee/consignor relationship described, X is a marketplace provider and y is a marketplace seller. Under the Gross Receipts and Compensating Tax Act and applicable regulations, both X and Y have gross receipts from selling or facilitating the sale of tangible personal property. The reporting location for the gross receipts and any related deductions of both X and Y is the location of the customer determined under the provisions of Paragraph (5) of Subsection C of 3.1.4.13 NMAC.

(iv) Same facts generally as Items (ii) and (iii) of Subparagraph (c) of Paragraph (5) of Subsection B of 3.1.4.13 NMAC. In addition, while the consignee or marketplace provider offers the tangible personal property for sale to the customer and collects the payment, it is the consignor or marketplace seller that ships the tangible personal property to the customer. Information as to the customer’s location is imputed to the consignee or marketplace provider when determining reporting location of its gross receipts, but the marketplace provider is also allowed to reasonably rely on information provided by the marketplace seller, even if erroneous, in determining the reporting location.

(v) Same facts generally as Items (ii) and (iii) of Subparagraph (c) of Paragraph (5) of Subsection B of 3.1.4.13 NMAC. In addition, the consignee or marketplace provider offers the tangible personal property for sale to the customer, collects the payment, and also ships the tangible personal property to the customer. The consignor or marketplace seller may report gross receipts for which a proper deduction can be taken on account of the sale by the consignee or marketplace seller based on information known by the consignor or marketplace seller, without imputing information known by the consignee or marketplace provider.

C. General rules for determining reporting location:

(1) Meaning of certain terms. Unless otherwise defined in Subsection A of 3.1.4.13 NMAC, Section A or otherwise indicated by the context, the terms used in these rules have the same meaning as under the Gross Receipts and Compensating Tax Act.

(2) Effect of the reporting location. A person that has gross receipts and a person making taxable use of property or services in New Mexico subject to the compensating tax shall report the gross receipts or compensating tax to the proper reporting location as provided in this section. The gross receipts and compensating taxes imposed by the Gross Receipts and Compensating Tax Act may include both a state rate of tax as well as applicable local option rates authorized by state law and imposed by county and municipal governments. The reporting location, as that term is used in 3.1.4.13 NMAC, determines the local jurisdiction to which the tax will be reported as well as the gross receipts or compensating tax rate that applies.

(3) Reporting to multiple locations. Any person that must report gross receipts or taxable use of items to more than one reporting location under one identification number is required to report gross receipts, deductions, and the value of items used for each location on the tax return and in accordance with the reporting location codes as designated by the Secretary under Section 7-1-14 NMSA 1978 and 3.1.4.13 NMAC.

(4) Gross receipts from transactions involving real property. If the gross receipts are from the sale, lease or granting of a license to use real property located in New Mexico, then the reporting location for those gross receipts and any related deductions is the location of the real property.

(5) Gross receipts from sale or license of tangible personal property and from certain licenses and other services. If the gross receipts are from the sale or license of tangible personal property, or if the receipts are from activity described in Subparagraph (e) of Paragraph (9) or Paragraph (6) of Subsection C, of 3.1.4.13 NMAC the reporting location for the gross receipts and related deductions is determined as follows:

(a) If the gross receipts are from the property or the product of a service that is delivered by the seller and received by the purchaser from the seller at the seller’s location, then the reporting location of the gross receipts and any related deductions, is the seller’s location.

(b) If the gross receipts are from property or the product of a service that is not delivered by the seller and received by the purchaser at the seller’s location as described in Subparagraph (a) of Paragraph (5) of Section C of 3.1.4.13 NMAC, the reporting location is the location indicated by instructions for delivery to the purchaser, or the purchaser’s donee, when known to the seller.

(c) If Subparagraphs (a) and (b) do not apply, the reporting location is the location indicated by an address for the purchaser available from the business records of the seller that are maintained in the ordinary course of business; provided that use of the address does not constitute bad faith.

(d) If Subparagraphs (a) through (c) do not apply, the reporting location is the location for the purchaser obtained during consummation of the sale, including the address of a purchaser's payment instrument, if no other address is available; provided that use of this address does not constitute bad faith.

(e) If Subparagraphs (a) through (d) do not apply, including a circumstance in which the seller is without sufficient information to apply those provisions, then the reporting location for the gross receipts and related deductions is the location from which the property or product of the service was shipped or transmitted to the purchaser.

(i) Except as provided in provision in Item (ii) of Subparagraph (e) of Paragraph (5) of Subsection C of 3.1.4.13 NMAC below, the seller is not considered to be without sufficient information to apply provisions of Subparagraphs (a) through (d) if it obtains or has access to sufficient information at the time of the sale, or subsequently, but simply fails to maintain that information in its records; or it has access to sufficient information from other reliable sources to make a reasonable estimate of the reporting location under Subsection F of this regulation at the time the gross receipts are required to be reported. Examples of information from other reliable sources includes population or market-penetration information that may be used to develop a reasonable estimate of the location of consumers of certain products.

(ii) If gross receipts are derived from a single sale or transaction where the property or the product of a service provided is determined to be delivered simultaneously at multiple locations throughout the state, the seller is deemed not to have sufficient information to determine the reporting location under Subparagraph (e) of Paragraph (5) of Subsection C of 3.1.4.13 NMAC.

(iii) Example: Company X provides an advertising service to Customer Y that will be distributed or displayed to persons in New Mexico through general access to particular media. The product of the advertising service is delivered to the location of the person accessing or viewing the advertising. Under Subparagraph (e) of Paragraph (5) of Subsection C of 3.1.4.13 NMAC, the reporting location of the gross receipts and related deductions from this service is the location of Company X as determined by the location from which the advertising service was primarily provided.

(iv) Example: Company x provides customer Y with a license to use digital goods by customer Y at various locations throughout the state. The license is delivered to customer Y throughout the state. Under Subparagraph (e) of Paragraph (5) of Subsection C of 3.1.4.13 NMAC, the reporting location of the gross receipts and related deductions of company X from providing the license to use digital goods is the location of company X as determined by the location from which the digital goods were primarily provided. A person may report different gross receipts and deductions to different reporting locations under the rules of this Paragraph (5) of Subsection C of 3.1.4.13 NMAC, as applicable.

(v) Example: Company X provides a digital advertising service to customer Y that can be viewed in New Mexico, and is intended to be viewed only in New Mexico, through access to company X’s digital platform, as that term is defined in Subsection D of 3.2.213.13 NMAC. The product of the digital advertising service is delivered to the locations of all persons in New Mexico viewing or accessing the advertising. Under Subparagraph (e) of Paragraph (5) of Subsection C of 3.1.4.13 NMAC, the reporting location of the gross receipts and related deductions from this service is the location of company X as being the location from which the product of the digital advertising service was transmitted to the purchaser.

(6) If the gross receipts are from the sale of a license of digital goods, or any other sale of a license not otherwise specifically addressed in these regulations, the reporting location of the gross receipts and related deductions is determined consistent with Paragraph (5) of Subsection C of 3.1.4.13 NMAC.

(7) If the gross receipts are from the lease of tangible personal property, including vehicles, other transportation equipment, and other mobile tangible personal property, then the reporting location for the gross receipts any related deductions is the location of primary use of the property, as indicated by the address for the property provided by the lessee that is available to the lessor from the lessor's records maintained in the ordinary course of business; provided that use of this address does not constitute bad faith. The primary reporting location shall not be altered by intermittent use at different locations, such as use of business property that accompanies employees on business trips and service calls.

(8) If the gross receipts are from the sale, lease or license of franchises, then the reporting location for the gross receipts and any related deductions is where the franchise is used. The location where the franchise is used may be determined from the franchise agreement or from other facts and circumstances related to the exercise of the franchise.

(9) The reporting location of gross receipts and related deductions from the sale of services is determined as follows:

(a) If the gross receipts are from professional services, whether performed in New Mexico or performed outside the state where the product of the service is initially used in New Mexico, the reporting location of the gross receipts and related deductions is the location of the performance of the service. Gross receipts from a service performed outside the state that are taxable in New Mexico because the buyer makes initial use of the product of the service in this state are reported to the state reporting location and taxed at the state rate.

(b) If the gross receipts are from construction services and construction-related services, as those terms are defined under the Gross Receipts and Compensating Tax Act and applicable regulations, performed for a construction project in New Mexico, the reporting location of the gross receipts and related deductions is the location of the construction site.

(c) If the gross receipts are from the service of selling of real estate located in New Mexico, the reporting location of the gross receipts and related deductions is the location of the real estate.

(d) If the gross receipts are from transportation of persons or property in, into or from New Mexico, the reporting location of the gross receipts and related deductions is the location of where the person or property enters the vehicle.

(e) If the gross receipts are from services other than those described in Subparagraphs (a) through (d) of Paragraph (9) of Section C of 3.1.4.13 NMAC, including in-person services, the reporting location of those gross receipts and related deductions is the location where the product of the service is delivered. In general, the location of delivery of the product of the service is determined under rules consistent with Paragraph (5) of Subsection C of 3.1.4.13 NMAC. The “product of the service” is determined under applicable provisions of the Gross Receipts and Compensating Tax Act and related regulations.

(i) Advertising services. An advertising service involves an agreement with a client to communicate or to place advertisements before an intended audience, on behalf of the client. The product of an advertising service is the ad which is capable of being heard or viewed by the intended audience. The reporting location for gross receipts from an advertising service is determined under Paragraph (5) of Subsection C of 3.1.4.13 NMAC based on delivery of the product of the service, which is the location where the ad may be heard or seen by the intended audience.

(ii) Services ancillary to advertising. Services ancillary to advertising include design of the advertisement, creation of data processing or information technology to capture of customer related information, etc., which the seller may treat as a separate service under Section D of 3.1.4.13 NMAC and which are provided to a client. The reporting location of gross receipts from a service ancillary to advertising under Paragraph (5) of Subsection C of 3.1.4.13 NMAC depends on the product of the service and where it is delivered, but will generally be the location of delivery of that product of the service to the client.

(f) The reporting location of gross receipts from in-person services is the location of the performance of the service, which is also the location of the customer or the customer’s property on which the service is performed.

D. Mixed transactions: Where a single transaction gives rise to gross receipts that would have different reporting locations under Paragraphs (4) through (9) of Subsection C of 3.1.4.13 NMAC if they were provided to the customer in the form of separate transactions, the reporting location for those gross receipts shall be determined as follows:

(1) If the billing to the customer does not break out the charges for the separate items, then the reporting location will be determined based on how the gross receipts for the transaction would be treated under the Gross Receipts and Compensating Tax Act and applicable regulations and applying Paragraphs (4) through (9) of Subsection C of 3.1.4.13 NMAC.

(2) If the billing to the customer breaks out the separate charges for the items and one or more items would be treated as incidental charge or an element of the sales price of other items under the Gross Receipts and Compensating Tax Act and applicable regulations, then the reporting location of those incidental receipts will be the reporting location as determined for the gross receipts from the remaining related item or items.

(3) If the billing to the customer breaks out the separate charges for the items and one or more items would not be treated as an incidental charge or an element of the sales price of other items under the Gross Receipts and Compensating Tax Act, and if the reporting location for the gross receipts from two or more such items would be different under Paragraphs (4) through (9) of Subsection C of 3.1.4.13 NMAC, then the gross receipts and related deductions reported to each reporting location will be determined as follows:

(a) the separate gross receipts for each item will be reported to the separate reporting locations, based on the separate charges in the bill to the customer; or

(b) all of the gross receipts may be reported to the single reporting location properly determined for the item or items from which the majority of the gross receipts result as properly determined under Subsection C of 3.1.4.13 NMAC.

(4) Example: Taxpayer sells a professional service along with tangible personal property delivered to the buyer. The billing to the buyer includes a separate charge of $100 for the service, $100 for the tangible personal property, and $5 for shipping. Assume that under the Gross Receipts and Compensating Tax Act and applicable regulations, the taxpayer would be treated as having $100 of gross receipts from the sale of a service and $105 (the charge for the property and the incidental charge for shipping) from the sale of tangible personal property. Assume also that the reporting location of the gross receipts from the sale of the service under 3.1.4.13 NMAC is the location where the service is performed but the reporting location for the gross receipts from the sale of the tangible personal property is the location of the delivery to the customer. The taxpayer may report the gross receipts from the service to the reporting location as properly determined under Subparagraph (a) of Paragraph (9) of Subsection C of 3.1.4.13 NMAC and the gross receipts from the sale of property to the reporting location as properly determined under Subparagraphs (b) through (d) of Paragraph (5) of Subsection C of 3.1.4.13 NMAC. Alternatively, the taxpayer may report all of the gross receipts to the reporting location as determined for the sale of the property.

E. Reporting location for compensating tax:

(1) Except as provided in Paragraphs (2) and (3) of Subsection E of 3.1.4.13 NMAC, the value of an item that is subject to compensating tax under Section 7-9-7 NMSA 1978 is generally reported to the same reporting location to which gross receipts from the transaction in which the item was acquired would have been reported under Subsections C or D of 3.1.4.13 NMAC, had the transaction been subject to gross receipts tax. In applying Subsections C or D to determine the reporting location to report the value of items for compensating tax, the taxpayer should assume that the person providing those items would have had information on the taxpayer’s location at the time of the transaction.

(2) In the case of an individual who owes compensating tax for non-business use of items acquired in a transaction with a person that did not have nexus in New Mexico, the reporting location for reporting that compensating tax is the individual’s residence or primary place of abode in the state at the time of the transaction.

(3) In the following cases, the reporting location for reporting compensating tax on purchases, other than professional services, is the location of first use in the state:

(a) purchases made by a business that were not subject to the gross receipts tax solely because they were made outside the state, where the later use inside New Mexico is subject to the compensating tax; or

(b) where the taxpayer has information that can show that first use upon which compensating tax is imposed occurred at a different time and place than would be determined under Paragraphs (1) or (2) of Subsection G of 3.1.4.13 NMAC.

(4) Examples:

(a) A business acquires tangible personal property in a transaction with a person that lacks nexus in New Mexico. The business uses the property in a manner that would have rendered the transaction subject to the gross receipts tax, had the person had nexus. The reporting location for purposes of reporting the compensating tax is the reporting location to which the gross receipts would have been reported by the person if the person had had nexus and assuming, for this purpose, that the person would have had information on the location of the business that acquired the property.

(b) A business with offices both inside and outside New Mexico purchases tangible personal property at its office outside the state and later ships that property to its New Mexico office for use. The use of the property in New Mexico was such that the property would have been subject to the gross receipts tax had it been acquired in New Mexico. The reporting location for purposes of reporting the compensating tax is the office in New Mexico at which the property is first used.

(c) A business purchases tangible personal property for resale from a New Mexico seller and takes delivery of that property at the seller’s place of business in Location X, using a nontaxable transaction certificate to purchase the property tax-free. Subsequent to the purchase, the business uses the property, rather than reselling it, at its own place of business in location Y. The reporting location for purposes of reporting the compensating tax is location Y.

(d) A business with offices both inside and outside New Mexico obtains a license to use digital goods which will be used at its offices inside and outside the state. In the transaction with the provider of the license, the provider knows only the purchaser’s out-of-state office and conducts the transaction with that office. The reporting location for the portion of the value of the license used in New Mexico is the location of the office in New Mexico.

(e) A business purchases a service from an out-of-state person who lacks nexus in New Mexico. The product of the service is initially used in New Mexico. The reporting location of the value of the service for purpose of compensating tax is the location of the initial use by the business in New Mexico.

(f) A nonresident individual with a place of abode in New Mexico purchases tangible personal property for use in New Mexico from a seller who lacks nexus in New Mexico. The transaction would not otherwise be exempt or deductible from gross receipts tax had it occurred in New Mexico. The reporting location of the compensating tax owed by the individual is that individual’s place of abode.

F. Use of reasonable estimates:

(1) Use of reasonable estimates allowed. Where a person subject to the gross receipts or compensating tax maintains records or has access to other reliable information that would allow that person to determine or estimate the reporting location for those gross receipts or the compensating tax under the rules of Subsections C and D of 3.1.4.13 NMAC, those records or other information may be used to establish reasonable estimates of the amounts reported to be reported by reporting location. Provided that the taxpayer’s reporting of gross receipts or compensating tax otherwise complies with provisions of the Gross Receipts and Compensating Tax Act and applicable regulations, the department will not assess the taxpayer for additional tax if the taxpayer uses reasonable estimates, applied consistently and in good faith to determine the reporting location, so long as there is no obvious distortion. Obvious distortion shall be presumed whenever the method used to estimate the reporting location treats similar transactions inconsistently. Any method which intentionally credits sales to a location with a lower combined tax rate primarily for the purpose of reducing the taxpayer's total tax liability shall be presumed to contain obvious distortion.

(2) Use of reasonable estimates required. Where a person has gross receipts that would generally be sourced under the rules of Paragraph (5) of Subsection C of 3.1.4.13 NMAC, and where the person has records or information that would allow a reasonable estimate of the reporting location of those receipts applying Subparagraphs (a) through (d) of Paragraph (5) of Section C of 3.1.4.13 NMAC, the taxpayer shall use a reasonable estimate before applying Subparagraph (e) of Paragraph (5) of Section C of 3.1.4.13 NMAC.

G. Reporting location - Receipts subject to the interstate telecommunications gross receipts tax:

Notwithstanding anything in Section 7-1-14 NMSA 1978, or provisions of 3.1.4.13 NMAC, the reporting location for gross receipts subject to the interstate telecommunications gross receipts tax is the state location and rate. The following telecommunications services are subject to the tax:

(1) interstate telecommunications services (other than mobile telecommunications services) that originate or terminate in New Mexico and are charged to a telephone number or account in New Mexico; and

(2) mobile telecommunications services that originate in one state and terminate in any location outside it, to a customer with a place of primary use in New Mexico as defined under Subsection E of Section 7-9C-2 NMSA 1978.

H. Transactions on tribal territory: A person selling or delivering goods or performing services on the tribal land of a tribe or pueblo that has entered into a gross receipts tax cooperative agreement with the state of New Mexico pursuant to Section 9-11-12.1 NMSA 1978 is required to report those receipts based on the tribal location of the sale or delivery of the goods or performance of the service.

History

3.1.4.12 NMAC - Rp, 3.1.4.12 NMAC, 7/7/2021
3.1.4.13 NMAC - Rp, 3.1.4.13 NMAC, 7/7/2021; A, 12/19/2023

N.M. Admin. Code § 3.1.4.14 Prescribed Format of Non-Paper Returns Must Be Followed

Whenever the secretary permits or requires returns to be filed electronically or in electromagnetic media, such as tapes or disks, the return information must be in the format prescribed by the department. Failure to follow the prescribed format may result in non-acceptance of an attempted filing. If a return is not accepted because of formatting errors and re-submission of the return occurs after the due date, the return has not been timely filed.

History

3.1.4.14 NMAC - Rp, 3.1.4.14 NMAC, 7/7/2021

N.M. Admin. Code § 3.1.4.15 Reporting Period - Permission Required for Use of Non-Standard “month”

For purposes of reporting taxes due on a monthly basis, the reporting period is a calendar month unless the taxpayer has obtained the secretary's permission to use another period, such as reporting based on standardized calendar quarters of 4 weeks, 4 weeks and 5 weeks or thirteen months of 4 weeks. Because of complications introduced by deviations from the calendar month reporting, the secretary may require substantial justification before approving any significant departure from the calendar month reporting cycle.

History

3.1.4.15 NMAC - Rp, 3.1.4.15 NMAC, 7/7/2021

N.M. Admin. Code § 3.1.4.16 Private Delivery Service Postmarks

Delivery to a private delivery service designated by the secretary of the treasury under 26 USCA 7502 during the time the designation is in effect will be considered a timely mailing for purposes of the Tax Administration Act if the date recorded or marked by the private delivery service is on or before the date by which mailing is required. Section 3.1.4.16 NMAC applies to deliveries to a designated private delivery service after June 30, 1999.

History

3.1.4.16 NMAC - Rp, 3.1.4.16 NMAC, 7/7/2021

N.M. Admin. Code § 3.1.4.17 Approved Electronic Media

Department approved electronic media includes an electronic transmission of the personal income tax return data submitted in an approved format using a computer language designated by the department.

History

3.1.4.17 NMAC - Rp, 3.1.4.17 NMAC, 7/7/2021

N.M. Admin. Code § 3.1.4.18 Electronic Filing

A. This regulation is adopted pursuant to the secretary’s authority in Section 9-11-6.4 NMSA 1978.

B. The secretary or secretary delegate will publish on the department’s public website a full list of all tax programs that have an electronic filing or payment mandate. This website will also include information on how to obtain an electronic filing or payment exception or waiver.

C. Once a taxpayer is required to file returns or make payments electronically pursuant to this regulation, the taxpayer may not file future returns or make future payments by mail or any method other than electronically unless they receive an exception or waiver. An exception or a waiver may be granted if the taxpayer has shown a good faith attempt to comply with the electronic filing and payment requirements but is unable to do so due to a reason listed in Subsections D or E below. If a taxpayer is granted an exception or, the taxpayer must file a paper return and make a payment by the due date unless an extension pursuant to 3.1.4.12 NMAC has been granted. If a return is not filed and a payment is not made timely, interest will be due, and penalty may be due.

D. A taxpayer may request in writing an exception to the requirement of electronic filing or making electronic payments for a year at a time. The request must be on the form prescribed by the department and must be received by the department at least 30 days before the taxpayer’s electronic return or payment is due. An exception may be granted for the following reasons.

(1) if the taxpayer shows a hardship including but not limited to no reasonable access to internet in the taxpayer’s community;

(2) if the taxpayer does not have reasonable access to a computer or technology required to electronically file;

(3) if the taxpayer does not have the knowledge or expertise to file a return electronically; or

(4) if the taxpayer is unable to utilize technology or the internet for religious reasons.

E. A taxpayer may request in writing a waiver to the requirement of electronic filing for a single tax return or for a single payment. The request for a waiver must be on a form prescribed by the department and received by the department on or before the date that the tax return is due. A waiver may be granted for the following reasons:

(1) if the taxpayer is temporarily disabled because of injury or prolonged illness and the taxpayer can show that the taxpayer is unable to procure the services of a person to complete and file the taxpayer's return electronically or make the necessary payment electronically.

(2) if the conduct of the taxpayer's business has been substantially impaired due to the disability of a principal officer of the taxpayer, physical damage to the taxpayer's business or other similar impairments to the conduct of the taxpayer's business causing the taxpayer an inability to electronically file or pay;

(3) if the taxpayer's accountant, agent, or employee who routinely electronically files for taxpayer has suddenly died, has become disabled, or sick and is unable to perform services for the taxpayer and the taxpayer can show that the taxpayer is unable either to electronically file the return, electronically pay the tax due or to procure the services of a person to electronically file the return or make the electronic payment before the due date; or

(4) if the taxpayer’s accountant, agent, or employee who routinely electronically files for taxpayer is no longer employed with the taxpayer and the taxpayer has been unable to gain access to their method of electronically filing and making payment of tax due in time to file electronically before the due date.

3.1.4.19 [RESERVED]

HISTORY OF 3.1.4 NMAC:

Pre-NMAC History: The material in this part was derived from that previously filed with the State Records Center:

BOR 67-1, Tax Administration Act, 7/19/1967, filed 7/28/1967.

R.D./OGAD Rule No. 1985, Regulations Pertaining to the Tax Administration Act, filed 11/5/1985.

TRD Rule TA-90, Regulations Pertaining to the Tax Administration Act, Sections 7-1-1 to 7-1-82 NMSA 1978, filed 8/15/1990.

History of Repealed Material: 3.1.4 NMAC, Tax Administration - Filing, filed 12/15/2000, Repealed effective 7/7/2021.

Other History:

3 NMAC 1.4, Tax Administration - Filing, filed 6/3/1996.

3.1.4 NMAC, Tax Administration - Filing, filed 12/15/2000.

3.1.4 NMAC, Tax Administration - Filing, filed 12/15/2000 was replaced by 3.1.4 NMAC, Tax Administration - Filing, effective 7/7/2021.

History

3.1.4.18 NMAC - Rp, 3.1.4.18 NMAC, 7/7/2021, A, 05/24/2022
3.1.4.19 NMAC - Rp, 3.1.4.19 NMAC, 7/7/2021; Repealed, 05/24/2022

Part 5 Records

N.M. Admin. Code § 3.1.5.1 Issuing Agency

Taxation and Revenue Department, Joseph M. Montoya Building, 1100 South St. Francis Drive, P.O. Box 630, Santa Fe NM 87504-0630

History

10/31/96; 3.1.5.1 NMAC - Rn, 3 NMAC 1.5.1, 12/29/00

N.M. Admin. Code § 3.1.5.2 Scope

History

10/31/96; 3.1.5.2 NMAC - Rn, 3 NMAC 1.5.2, 12/29/00

N.M. Admin. Code § 3.1.5.3 Statutory Authority

Section 9-11-6.2 NMSA 1978.

History

10/31/96; 3.1.5.3 NMAC - Rn, 3 NMAC 1.5.3, 12/29/00

N.M. Admin. Code § 3.1.5.4 Duration

Permanent.

History

10/31/96; 3.1.5.4 NMAC - Rn, 3 NMAC 1.5.4, 12/29/00

N.M. Admin. Code § 3.1.5.5 Effective Date

10/31/96, unless a later date is cited at the end of a section, in which case the later date is the effective date.

History

10/31/96; 3.1.5.5 NMAC - Rn & A, 3 NMAC 1.5.5, 12/29/00

N.M. Admin. Code § 3.1.5.6 Objective

The objective of this part is to interpret, exemplify, implement and enforce the provisions of the Tax Administration Act.

History

10/31/96; 3.1.5.6 NMAC - Rn, 3 NMAC 1.5.6, 12/29/00

N.M. Admin. Code § 3.1.5.7 Definitions

Reserved.

History

10/31/96; 3.1.5.7 NMAC - Rn, 3 NMAC 1.5.7, 12/29/00

N.M. Admin. Code § 3.1.5.8 Sufficiency of Records

A. Books of account, documents and other records shall be kept and maintained by a taxpayer in a manner that will permit the accurate computation of state taxes and provide information required by the statutes under which the taxpayer is required to keep records. The Tax Administration Act sets no time requirement for taxpayer retention of books of account or other records but Section 7-1-18 NMSA 1978 sets the statute of limitations for the assessing of tax asserted to be due. If state taxes cannot be accurately or readily computed by the secretary or secretary's delegate from the records, the records are not sufficient or adequate for the purpose of Section 7-1-10 NMSA 1978. The adequacy or inadequacy of taxpayer records is a matter of fact to be determined by the secretary or secretary's delegate. Taxpayers have a duty to provide the secretary or secretary's delegate, upon request, with books of account and other records upon which to establish a basis for taxation.

B. Failure of a taxpayer to keep adequate books of account or other records will cause the department to use alternative methods to determine or estimate taxes due.

C. Alternative methods which may be used by the department include, but are not limited to:

(1) bank deposit method;

(2) documents and records of persons other than the taxpayer;

(3) federal returns and other government reports;

(4) cost of sales markup -- weighted percentage;

(5) net worth analysis;

(6) industry comparison; and

(7) provisional assessment of taxes based on best available information and allowing for any increase which may have occurred due to inflation, increased economic activity or other reasons.

D. Any one, or a combination, of the methods listed above or other methods may be used for taxpayer records reconstruction or verification.

History

7/19/67, 11/5/85, 8/15/90, 10/31/96; 3.1.5.8 NMAC - Rn & A, 3 NMAC 1.5.8, 12/29/00

N.M. Admin. Code § 3.1.5.9 Records Reconstruction

A. The secretary or secretary's delegate is authorized to reconstruct records of a person to establish or determine the extent of tax liability. The nonexistence or inadequacy of the records, for whatever reason, is the pertinent fact permitting reconstruction.

B. Example: A taxpayer's records for one audit year were destroyed accidentally. The department auditor is permitted to use the bank deposit method to reconstruct sales and income for that year.

History

11/5/85, 8/15/90, 10/31/96; 3.1.5.9 NMAC - Rn, 3 NMAC 1.5.9, 12/29/00

N.M. Admin. Code § 3.1.5.10 Consistency in Method of Accounting

The method of accounting used by taxpayers for state tax computation or for accumulating information required by state tax statutes shall be consistent for the same business. There is no requirement that the method of accounting for one type of state tax be the same method of accounting for another type of state tax. For example, a taxpayer may account for and report the taxpayer's gross receipts tax on the cash basis, while accounting for and reporting the taxpayer's income tax on an accrual basis. But a taxpayer may not account for and report January's gross receipts on the cash accounting method, and then account for and report February's gross receipts on the accrual accounting method without first securing the consent of the secretary or secretary's delegate.

History

7/19/67, 11/5/85, 8/15/90, 10/31/96; 3.1.5.10 NMAC - Rn, 3 NMAC 1.5.10, 12/29/00

N.M. Admin. Code § 3.1.5.11 Accounting for Governmental Gross Receipts Tax

Agencies, institutions, instrumentalities and political subdivisions of the state of New Mexico which are subject to the governmental gross receipts tax may treat different taxable activities as different lines of business. Accordingly, one or more activities may be accounted for and reported on a cash basis and one or more other activities may be accounted for and reported on an accrual or modified accrual basis. Once the cash basis, accrual or modified accrual basis has been selected as the method of accounting for and reporting receipts from a particular activity, the activity must continue to be accounted for and reported on the same basis in subsequent periods unless prior permission is received from the department to change the method of accounting or reporting.

History

9/17/91, 10/31/96; 3.1.5.11 NMAC - Rn, 3 NMAC 1.5.11, 12/29/00

N.M. Admin. Code § 3.1.5.12 Records Include Governmental Returns, Documents, Reports and Other Attachments

For the purpose of inspection or audit of taxpayers' records and books of account by the secretary or secretary's delegate, “records” shall include, but not be restricted to, all copies of returns or reports filed by taxpayers with agencies of the federal government, agencies of the state of New Mexico and agencies of any sovereign state or Indian nation, tribe or pueblo located nationally or worldwide. Records shall include all returns, documents and reports, as well as any attachments thereto, to any political subdivision of any state.

History

11/5/85, 8/15/90, 10/31/96; 3.1.5.12 NMAC - Rn, 3 NMAC 1.5.12, 12/29/00

N.M. Admin. Code § 3.1.5.13 Enforcement by Subpoena

The secretary may serve or cause to be served a subpoena duces tecum upon a taxpayer or other person having custody of the taxpayer's records and books of account.

History

11/5/85, 8/15/90, 10/31/96; 3.1.5.13 NMAC - Rn, 3 NMAC 1.5.13, 12/29/00

N.M. Admin. Code § 3.1.5.14 Reasonable Hours

Reasonable hours for taxpayers to make their records and books of account available for inspection means any time during taxpayer's business hours but not less than between the hours of 8:00 a.m. and 5:00 p.m. of any day except Saturday, Sunday and state and federal holidays.

3.1.5.15 RECORDKEEPING AND RETENTION REQUIREMENTS

A. RECORDKEEPING REQUIREMENTS - DEFINITIONS: For purposes of Section 3.1.5.15 NMAC, these terms shall be defined as follows:

(1) “Database management system” means a software system that controls, relates, retrieves and provides accessibility to data stored in a database.

(2) “Electronic data interchange” or “EDI technology” means the computer to computer exchange of business transactions in a standardized structured electronic format.

(3) “Hardcopy” means any documents, records, reports or other data printed on paper.

(4) “Machine-sensible record” means a collection of related information in an electronic format. Machine-sensible records do not include hardcopy records that are created or recorded on paper or stored in or by an imaging system such as microfilm, microfiche or storage-only imaging systems.

(5) “Storage-only imaging system” means a system of computer hardware and software that provides for the storage, retention and retrieval of documents originally created on paper. It does not include any system, or part of a system, that manipulates or processes any information or data contained on the document in any manner other than to reproduce the document in hardcopy or as an optical image.

B. RECORDKEEPING REQUIREMENTS - GENERAL:

(1) A taxpayer shall maintain all records that are necessary to a determination of the correct tax liability under the taxes and tax acts the administration and enforcement of which is governed by the Tax Administration Act. All required records must be made available on request by the department or its authorized representatives as provided for in Section 7-1-11 NMSA 1978. Such records shall include, but not be necessarily limited to the records required under Section 7-1-10 NMSA 1978.

(2) If a taxpayer retains records required to be retained under Section 3.1.5.15 NMAC in both machine-sensible and hardcopy formats, the taxpayer shall make the records available to the department in machine-sensible format upon request of the department.

(3) Nothing in Section 3.1.5.15 NMAC shall be construed to prohibit a taxpayer from demonstrating tax compliance with traditional hardcopy documents or reproductions thereof, in whole or in part, whether or not such taxpayer also has retained or has the capability to retain records on electronic or other storage media in accordance with Section 3.1.5.15 NMAC. However, this paragraph shall not relieve the taxpayer of the obligation to comply with Paragraph 3.1.5.15B(2) NMAC.

C. RECORDKEEPING REQUIREMENTS - MACHINE SENSIBLE RECORDS:

(1) General Requirements.

(a) Machine-sensible records used to establish tax compliance shall contain sufficient transaction-level detail information so that the details underlying the machine-sensible records can be identified and made available to the department upon request. A taxpayer has discretion to discard duplicated records and redundant information provided its responsibilities under Section 3.1.5.15 NMAC are met.

(b) At the time of an examination, the retained records must be capable of being retrieved and converted to a standard record format.

(c) Taxpayers are not required to construct machine-sensible records other than those created in the ordinary course of business. A taxpayer who does not create the electronic equivalent of a traditional paper document or store the information in machine-sensible records in the ordinary course of business is not required to construct a machine-sensible record for tax purposes.

(2) Electronic Data Interchange Requirements.

(a) Where a taxpayer uses electronic data interchange processes and technology, the level of record detail, in combination with other records related to the transactions, must be equivalent to that contained in an acceptable paper record. For example, the retained records should contain such information as vendor name, invoice date, product description, quantity purchased, price, amount of tax, indication of tax status, shipping detail, etc. Codes may be used to identify some or all of the data elements, provided that the taxpayer provides a method which allows the department to interpret the coded information.

(b) The taxpayer may capture the information necessary to satisfy Paragraph 3.1.5.15C(1) NMAC at any level within the accounting system and need not retain the original EDI transaction records provided the audit trail, authenticity and integrity of the retained records can be established. For example, a taxpayer using electronic data interchange technology receives electronic invoices from its suppliers. The taxpayer decides to retain the invoice data from completed and verified EDI transactions in its accounts payable system rather than to retain the EDI transactions themselves. Since neither the EDI transaction nor the accounts payable system capture information from the invoice pertaining to product description and vendor name (i.e., they contain only codes for that information), the taxpayer also retains other records, such as its vendor master file and product code description lists and makes them available to the department. In this example, the taxpayer need not retain its EDI transaction for tax purposes.

(3) Electronic Data Processing Systems Requirements. The requirements for an electronic data processing accounting system are similar to that of a manual accounting system, in that an adequately designed accounting system should incorporate methods and records that will satisfy the requirements of Section 3.1.5.15 NMAC.

(4) Business Process Information.

(a) Upon the request of the department, the taxpayer shall provide a description of the business process that created the retained records. Such description shall include the relationship between the records and the tax documents prepared by the taxpayer and the measures employed to ensure the integrity of the records.

(b) The taxpayer shall be capable of demonstrating:

(i) the functions being performed as they relate to the flow of data through the system;

(ii) the internal controls used to ensure accurate and reliable processing, and;

(iii) the internal controls used to prevent unauthorized addition, alteration or deletion of retained records.

(c) The following specific documentation is required for machine sensible records retained pursuant to Section 3.1.5.15 NMAC:

(i) record formats or layouts;

(ii) field definitions (including the meaning of all codes used to represent information);

(iii) file descriptions (e.g., data set name); and

(iv) detailed charts of accounts and account descriptions.

D. RECORDKEEPING REQUIREMENTS - RECORDS MAINTENANCE REQUIREMENTS:

(1) The department recommends but does not require that taxpayers refer to the national archives and record administration's (NARA) standards for guidance on the maintenance and storage of electronic records, such as the labeling of records, the location and security of the storage environment, the creation of back-up copies, and the use of periodic testing to confirm the continued integrity of the records. The NARA standards may be found at 36 Code of Federal Regulations, Part 1234.

(2) The taxpayer's computer hardware or software shall accommodate the extraction and conversion of retained machine-sensible records.

E. RECORDKEEPING REQUIREMENTS - ACCESS TO MACHINE-SENSIBLE RECORDS:

(1) The manner in which the department is provided access to machine-sensible records as required in Paragraph 3.1.5.15C(2) NMAC may be satisfied through a variety of means that shall take into account a taxpayer’s facts and circumstances through consultation with the taxpayer.

(2) Such access will be provided in one or more of the following manners:

(a) the taxpayer may arrange to provide the department with the hardware, software and personnel resources to access the machine sensible records;

(b) the taxpayer may arrange for a third party to provide the hardware, software and personnel resources necessary to access the machine sensible records;

(c) the taxpayer may convert the machine sensible records to a standard record format specified by the department, including copies of files, on a magnetic medium that is agreed to by the department;

(d) the taxpayer and the department may agree on other means of providing access to the machine sensible records.

F. RECORDKEEPING REQUIREMENTS - TAXPAYER RESPONSIBILITY AND DISCRETIONARY AUTHORITY:

(1) In conjunction with meeting the requirements of Subsection 3.1.5.15C NMAC, a taxpayer may create files solely for the use of the department. For example, if a database management system is used, it is consistent with Section 3.1.5.15 NMAC for the taxpayer to create and retain a file that contains the transaction-level detail from the database management system and that meets the requirements of Subsection 3.1.5.15C NMAC. The taxpayer should document the process that created the separate file to show the relationship between that file and the original records.

(2) A taxpayer may contract with a third party to provide custodial or management services of the records. Such a contract shall not relieve the taxpayer of its responsibilities under Section 3.1.5.15 NMAC.

G. RECORDKEEPING REQUIREMENTS - ALTERNATIVE STORAGE MEDIA:

(1) For purposes of storage and retention, taxpayers may convert hardcopy documents received or produced in the normal course of business and required to be retained under Section 3.1.5.15 NMAC to microfilm, microfiche or other storage-only imaging systems and may discard the original hardcopy documents, provided the conditions of Section 3.1.5.15 NMAC are met. Documents which may be stored on these media include, but are not limited to general books of account, journals, voucher registers, general and subsidiary ledgers and supporting records of details, such as sales invoices, purchase invoices, exemption certificates and credit memoranda.

(2) Microfilm, microfiche and other storage-only imaging systems shall meet the following requirements.

(a) Documentation establishing the procedures for converting the hardcopy documents to microfilm, microfiche or other storage only imaging system must be maintained and made available on request. Such documentation shall, at a minimum, contain a sufficient description to allow an original document to be followed through the conversion system as well as internal procedures established for inspection and quality assurance.

(b) Procedures must be established for the effective identification, processing, storage and preservation of the stored documents and for making them available for the period they are required to be retained under Subsection 3.1.5.15I NMAC.

(c) Upon request by the department, a taxpayer must provide facilities and equipment for reading, locating, and reproducing any documents maintained on microfilm, microfiche or other storage-only imaging system.

(d) When displayed on such equipment or reproduced on paper, the documents must exhibit a high degree of legibility and readability. For this purpose, legibility is defined as the quality of a letter or numeral that enables the observer to identify it positively and quickly to the exclusion of all other letters or numerals. Readability is defined as the quality of a group of letters or numerals being recognizable as words or complete numbers.

(e) All data stored on microfilm, microfiche or other storage-only imaging systems must be maintained and arranged in a manner that permits the location of any particular record.

(f) There is no substantial evidence that the microfilm, microfiche or other storage-only imaging system lacks authenticity or integrity.

H. RECORDKEEPING REQUIREMENTS - EFFECT ON HARDCOPY RECORDKEEPING REQUIREMENTS:

(1) Except as otherwise provided in Subsection 3.1.5.15H NMAC, the provisions of Section 3.1.5.15 NMAC do not relieve taxpayers of the responsibility to retain hardcopy records that are created or received in the ordinary course of business as required by existing law and regulations. Hardcopy records may be retained on a recordkeeping medium as provided in Subsection 3.1.5.15G NMAC.

(2) If hardcopy records are not produced or received in the ordinary course of transacting business (e.g., when the taxpayer uses electronic data interchange technology), such hardcopy records need not be created.

(3) Hardcopy records generated at the time of a transaction using a credit or debit card must be retained unless all the details necessary to determine correct tax liability relating to the transaction are subsequently received and retained by the taxpayer in accordance with Section 3.1.5.15 NMAC. Such details include those listed in Subparagraph 3.1.5.15C(2)(a) NMAC.

(4) Computer printouts that are created for validation, control, or other temporary purposes need not be retained.

(5) Nothing in Section 3.1.5.15 NMAC shall prevent the department from requesting hardcopy printouts in lieu of retained machine-sensible records at the time of examination.

I. RECORDKEEPING REQUIREMENTS - RECORDS RETENTION PERIOD: All records required to be retained under Section 3.1.5.15 NMAC shall be preserved pursuant to Section 7-1-10 NMSA 1978 unless the department has provided in writing that the records are no longer required.

History

11/5/85, 8/15/90, 10/31/96; 3.1.5.14 NMAC - Rn, 3 NMAC 1.5.14, 12/29/00
4/30/97; 3.1.5.15 NMAC - Rn & A, 3 NMAC 1.5.15, 12/29/00

N.M. Admin. Code § 3.1.5.16 Taxpayer’s Records in Possession of Another

Section 7-1-11 NMSA 1978 applies to records of a taxpayer in the possession, whether permanent or temporary, of another person. Except for possessors who are banks, savings and loan associations, credit unions or similar financial institutions, the possessor is required to allow the inspection or audit by the department of the records upon written request of the department just as if the records were in the possession of the taxpayer. Failure of the possessor to allow inspection or audit of the records by the department upon a reasonable request of the department is a violation of Section 7-1-74 NMSA 1978. Requests by the department to inspect or audit records of a taxpayer in the possession of a bank, savings and loan association, credit union or similar financial institution will be made in accordance with Sections 14-7-1 and 14-7-2 NMSA 1978.

HISTORY OF 3.1.5 NMAC:

Pre-NMAC History: The material in this part was derived from that previously filed with the State Records Center:

BOR 67-1, Tax Administration Act, 7/19/67, filed 7/28/67.

R.D./OGAD Rule No. 1985, Regulations Pertaining to the Tax Administration Act, filed 11/5/85.

TRD Rule TA-90, Regulations Pertaining to the Tax Administration Act, Sections 7-1-1 to 7-1-82 NMSA 1978, filed 8/15/90.

History of Repealed Material: [RESERVED]

NMAC History:

3 NMAC 1.5, Tax Administration - Records, filed 10/17/96.

3.1.5 NMAC, Tax Administration - Records, filed 12/15/2000.

History

3.1.5.16 NMAC - N, 12/29/00

Part 6 Assessment

N.M. Admin. Code § 3.1.6.1 Issuing Agency

Taxation and Revenue Department, Joseph M. Montoya Building, 1100 South St. Francis Drive, P.O. Box 630, Santa Fe NM 87504-0630

History

10/31/96; 3.1.6.1 NMAC - Rn, 3 NMAC 1.6.1, 1/15/01

N.M. Admin. Code § 3.1.6.2 Scope

History

10/31/96; 3.1.6.2 NMAC - Rn, 3 NMAC 1.6.2, 1/15/01

N.M. Admin. Code § 3.1.6.3 Statutory Authority

Section 9-11-6.2 NMSA 1978.

History

10/31/96; 3.1.6.3 NMAC - Rn, 3 NMAC 1.6.3, 1/15/01

N.M. Admin. Code § 3.1.6.4 Duration

Permanent.

History

10/31/96; 3.1.6.4 NMAC - Rn, 3 NMAC 1.6.4, 1/15/01

N.M. Admin. Code § 3.1.6.5 Effective Date

10/31/96, unless a later date is cited at the end of a section, in which case the later date is the effective date.

History

10/31/96; 3.1.6.5 NMAC - Rn & A, 3 NMAC 1.6.5, 1/15/01

N.M. Admin. Code § 3.1.6.6 Objective

The objective of this part is to interpret, exemplify, implement and enforce the provisions of the Tax Administration Act.

History

10/31/96; 3.1.6.6 NMAC - Rn, 3 NMAC 1.6.6, 1/15/01

N.M. Admin. Code § 3.1.6.7 Definitions

[Reserved.]

History

10/31/96; 3.1.6.7 NMAC - Rn, 3 NMAC 1.6.7, 1/15/01

N.M. Admin. Code § 3.1.6.8 Payment of Unprotested Amounts

Any taxpayer who protests under the provisions of Section 7-1-24 NMSA 1978 only a portion of an assessment and either does not pay the portion of the assessment not protested within 30 days after the date of assessment or does not post security covering the unprotested amount pursuant to Section 7-1-54 NMSA 1978 shall be a delinquent taxpayer until the unprotested amount has been paid or security covering the unprotested amount has been posted.

3.1.6.9 [Reserved]

History

7/19/67, 11/5/85, 8/22/88, 8/15/90, 10/31/96; 3.1.6.8 NMAC - Rn & A, 3 NMAC 1.6.8, 1/15/01
11/5/85, 8/15/90, 10/31/96; 3.1.6.1 NMAC - Rn & A, 3 NMAC 1.6.1, 1/15/01; Repealed, 12/30/10

N.M. Admin. Code § 3.1.6.10 Self-Assessment

When a tax return has been submitted by a taxpayer and received by the department, this self-assessment constitutes an effective assessment under Section 7-1-17 NMSA 1978. Self-assessments by taxpayers are not, however, presumed to be correct under Subsection 7-1-17C NMSA 1978.

History

7/19/67, 11/5/85, 8/15/90, 10/31/96; 3.1.6.10 NMAC - Rn & A, 3 NMAC 1.6.10, 1/15/01

N.M. Admin. Code § 3.1.6.11 Taxpayer's Remedies

The remedies available to taxpayers upon the delivery of notice of assessment of taxes shall be included with the document entitled “Notice of Assessment of Taxes”.

History

11/5/85, 8/15/90, 10/31/96; 3.1.6.11 NMAC - Rn, 3 NMAC 1.6.11, 1/15/01

N.M. Admin. Code § 3.1.6.12 Presumption of Correctness of Assessment

A. Once a “Notice of Assessment of Taxes” has been mailed or personally delivered to a taxpayer, the statutory presumption of the correctness of the assessment will apply. The effect of the presumption of correctness is that the taxpayer has the burden of coming forward with some countervailing evidence tending to dispute the factual correctness of the assessment made by the secretary. Unsubstantiated statements that the assessment is incorrect cannot overcome the presumption of correctness.

B. The presumption exists even if the secretary has issued assessments using alternative methods of reconstruction of a tax or has estimated the tax.

History

7/19/67, 11/5/85, 8/15/90, 10/31/96; 3.1.6.12 NMAC - Rn, 3 NMAC 1.6.12, 1/15/01

N.M. Admin. Code § 3.1.6.13 Presumption of Correctness of Interest and Penalty

The presumption of correctness also applies to any interest imposed under Section 7-1-67 NMSA 1978 and any penalty imposed under Section 7-1-69 NMSA 1978.

History

11/5/85, 8/15/90, 10/31/96; 3.1.6.13 NMAC - Rn & A, 3 NMAC 1.6.13, 1/15/01

N.M. Admin. Code § 3.1.6.14 Secretary's Good Faith Doubt of Liability

A. The secretary may compromise the assessed liability of a taxpayer by entering into a written closing agreement only if and when there is a good faith doubt as to the liability. The written agreement must adequately protect the interests of the state and be approved by the attorney general. The secretary may not compromise a taxpayer's liability because of the taxpayer's inability to pay. The secretary may not compromise a taxpayer's liability solely because of the threat of litigation or as an expedient means of disposing of a controversy unless the secretary has a good faith doubt as to the liability.

B. Each written closing agreement entered into by the secretary must address the factual aspects of the liability that has created a good faith doubt in the mind of the secretary. The specific periods of assessed liabilities must be detailed in the written agreement.

C. The burden is upon the taxpayer to convince the secretary that a good faith doubt exists by presenting evidence sufficient to overcome the presumption of correctness of an assessed liability. A written closing agreement is conclusive only as to liability covered by the agreement.

History

7/19/67, 11/5/85, 8/15/90, 10/31/96; 3.1.6.14 NMAC - Rn, 3 NMAC 1.6.14, 1/15/01

N.M. Admin. Code § 3.1.6.15 Cancellation of Assessment

Pursuant to Section 7-1-17 NMSA 1978, a document denominated “Notice of Assessment of Taxes” is not effective until mailed or delivered to the taxpayer. At any time before this action occurs, an assessment document can be cancelled by the secretary or secretary's delegate. A cancellation is an accounting process and is not an abatement of an assessment as defined by Section 7-1-28 NMSA 1978.

3.1.6.16 [Reserved]

HISTORY OF 3.1.6 NMAC:

Pre-NMAC History: The material in this part was derived from that previously filed with the State Records Center:

BOR 67-1, Tax Administration Act, 7/19/67, filed 7/28/67.

R.D./OGAD Rule No. 1985, Regulations Pertaining to the Tax Administration Act, filed 11/5/85.

TRD Rule TA-90, Regulations Pertaining to the Tax Administration Act, Sections 7-1-1 to 7-1-82 NMSA 1978, filed 8/15/90.

History of Repealed Material: [RESERVED]

NMAC History:

3 NMAC 1.6, Tax Administration - Assessment, filed 10/17/96.

3.1.6 NMAC, Tax Administration - Assessment, filed 1/4/2001.

History

7/19/67, 11/5/85, 8/15/90, 10/31/96; 3.1.6.15 NMAC - Rn & A, 3 NMAC 1.6.15, 1/15/01
10/31/96; 3.1.6.16 NMAC - Rn and Repealed, 3 NMAC 1.6.16, 1/15/01

Part 7 Protest

N.M. Admin. Code § 3.1.7.1 Issuing Agency

Taxation and Revenue Department, Joseph M. Montoya Building, 1100 South St. Francis Drive, P.O. Box 630, Santa Fe, NM 87504-0630

History

10/31/96; 3.1.7.1 NMAC - Rn, 3 NMAC 1.7.1, 1/15/01

N.M. Admin. Code § 3.1.7.2 Scope

History

10/31/96; 3.1.7.2 NMAC - Rn, 3 NMAC 1.7.2, 1/15/01

N.M. Admin. Code § 3.1.7.3 Statutory Authority

Section 9-11-6.2 NMSA 1978.

History

10/31/96; 3.1.7.3 NMAC - Rn, 3 NMAC 1.7.3, 1/15/01

N.M. Admin. Code § 3.1.7.4 Duration

Permanent.

History

10/31/96; 3.1.7.4 NMAC - Rn, 3 NMAC 1.7.4, 1/15/01

N.M. Admin. Code § 3.1.7.5 Effective Date

10/31/96, unless a later date is cited at the end of a section in which case the later date is the effective date.

History

10/31/96; 3.1.7.5 NMAC - Rn & A, 3 NMAC 1.7.5, 1/15/01

N.M. Admin. Code § 3.1.7.6 Objective

The objective of this part is to interpret, exemplify, implement and enforce the provisions of the Tax Administration Act.

History

10/31/96; 3.1.7.6 NMAC - Rn, 3 NMAC 1.7.6, 1/15/01

N.M. Admin. Code § 3.1.7.7 Definitions

[Reserved]

History

10/31/96; 3.1.7.7 NMAC - Rn, 3 NMAC 1.7.7, 1/15/01

N.M. Admin. Code § 3.1.7.8 Taxpayer Election of Remedies

A. The election provided for in Section 7-1-23 NMSA 1978 is made when a taxpayer files a timely protest to an assessment or makes a timely claim for refund with the department. The taxpayer may not withdraw a protest, pay the assessment and then claim a refund without permission from the secretary or delegate.

B. There is no provision in the Tax Administration Act for a taxpayer to “Pay Under Protest”.

C. Example 1: A taxpayer files a timely protest to a notice of assessment of taxes. Prior to the time for the administrative hearing under Section 7-1-24 NMSA 1978, the taxpayer realizes that, if the taxpayer had paid the assessment and claimed a refund, under Section 7-1-26 NMSA 1978 after the denial by the secretary of the claim for refund the taxpayer would be able to commence a civil action in the district court instead of having an administrative hearing on the protest. The taxpayer therefore commences the civil action and asks that the administrative proceedings be discontinued. The secretary will move to dismiss the action brought in district court on the grounds that the taxpayer has made an election to pursue the administrative remedy by filing the protest and is, therefore, precluded by Section 7-1-23 NMSA 1978 from pursuing a district court action.

D. Example 2: A taxpayer writes a letter to the department objecting to paying an assessment. The taxpayer does not state in the letter the nature of the complaint or the affirmative relief requested, nor is the complaint received within 30 days of the date of the assessment by the secretary. The taxpayer has not filed a protest as provided by Section 7-1-24 NMSA 1978. The taxpayer still has the right, however, to pay the assessment and claim a refund. Any one of the three defects noted above in the taxpayer's written objection would disqualify the document from being a valid protest.

History

7/19/67, 11/5/85, 8/15/90, 10/31/96; 3.1.7.8 NMAC - Rn & A, 3 NMAC 1.7.8, 1/15/01

N.M. Admin. Code § 3.1.7.9 Acceptance of Payment of Assessment After Protest

Tender by a taxpayer and acceptance by the secretary or secretary's delegate of payment of a protested assessment prior to resolution of the protest constitutes an agreement:

A. by the secretary to waive the taxpayer's election of remedies under Section 7-1-23 NMSA 1978 upon a resolution of the protest favorably to the taxpayer so as to permit the taxpayer to file a claim for refund for the portion of the protested assessment resolved in favor of the taxpayer; and

B. by the taxpayer to waive the accrual of interest on any refund arising from the portion of the protested assessment resolved in favor of the taxpayer.

History

11/5/85, 8/15/90, 11/17/95, 10/31/96; 3.1.7.9 NMAC - Rn & A, 3 NMAC 1.7.9, 1/15/01

N.M. Admin. Code § 3.1.7.10 Definition of “protest” - Payment of Unprotested Amounts Required

A. To be effective, a protest must be in writing, must be filed with the secretary within the time required and must the taxpayer, identify the tax or taxes involved, state the grounds for the taxpayer's protest and state the affirmative relief requested.

B. If a notice of assessment of taxes includes taxes due under more than one tax program, taxes assessed in that portion of the assessment not being disputed by a taxpayer are due and payable. The secretary may proceed to enforce collection of any tax which the taxpayer has not protested and which is otherwise delinquent within the meaning of Section 7-1-16 NMSA 1978.

C. Any purported protest which does not comply with the requirements of Section 7-1-24 NMSA 1978 will not be accepted as a “protest” within the meaning of Section 7-1-24 NMSA 1978. The secretary may require the taxpayer to state with greater particularity the nature and basis of a protest and the relief sought.

History

7/19/67, 11/5/85, 8/15/90, 10/28/94, 10/31/96; 3.1.7.10 NMAC - Rn & A, 3 NMAC 1.7.10, 1/15/01

N.M. Admin. Code § 3.1.7.11 Time for Protest

Ordinarily, a protest must be made by a taxpayer within 30 days of the date of mailing by the department of the notice of assessment, or mailing or service upon the taxpayer of other notice or demand, or the date of filing or mailing of a tax return. As provided in Section 7-1-24 NMSA 1978, the secretary may, in the secretary's discretion, grant an extension of up to 60 days additional time to file a protest. Failure by a taxpayer to file a protest within a maximum of 90 days is jurisdictional, and the secretary is without authority to consider any protest filed after that period.

History

7/19/67, 11/5/85, 8/15/90, 10/28/94, 10/31/96; 3.1.7.11 NMAC - Rn & A, 3 NMAC 1.7.11, 1/15/01

N.M. Admin. Code § 3.1.7.12 Statement of Grounds of a Protest

A. A statement of the grounds for a protest must include an explanation of the law and facts supporting the protest. It should include for each ground asserted the legal basis under the constitution, statute, regulation, or case law for the challenge to the assessment or other action of the department and a summary of the evidence expected to be produced. A summary of the evidence to be produced means the facts expected to be proven by testimony and documentary evidence surrounding the taxpayer's transactions that support relief under the cited legal standards. It is the facts alleged, not the evidence to prove them, that must be stated. If the taxpayer changes the legal theory or facts supporting the protest, the taxpayer must file a supplemental statement of grounds for the protest prior to the date of the hearing or, if a scheduling order has been issued, by the date set in the scheduling order. For protests filed on or after July 1, 2000, the statement of grounds for the protest must be supplemented no later than ten (10) days prior to the date of the hearing or, if a scheduling order has been issued, by the date set in the scheduling order. A prehearing statement filed in conformance with a scheduling order issued by the hearing officer will qualify as a supplemental statement of grounds for the protest.

B To accelerate the processing and review of the protest, copies of the evidence may be included with the statement of the grounds for protest. Evidence included with a protest still must be introduced and admitted at the formal hearing on the protest before it will be considered by the hearing officer.

C. Example: A taxpayer's protest of penalty and interest for late payment of gross receipts tax would be valid if it stated “Taxpayer, I.D. No. 00-123456-00-0, protests Assessment No. 1234567 issued December 14, 1993, imposing interest and penalty pursuant to Sections 7-1-67 and 7-1-69 NMSA 1978 (allegedly for late payment) on the grounds that taxpayer's payment of gross receipts tax for August, 1993, was timely delivered to the department on September 24, 1993”. It would be helpful, but not necessary, to specify with submission of the statement of grounds what documentary or testimonial evidence will prove the facts alleged by the taxpayer, such as, “The date of delivery of the payment will be shown by the date of deposit on the canceled check.” It would be even more helpful to attach a copy of the canceled check, which, in this circumstance, would probably permit the department to resolve the matter in the taxpayer's favor without even a hearing. The taxpayer may choose to submit the evidence at a later time, but not later than the hearing.

History

3/11/94, 10/31/96; 3.1.7.12 NMAC - Rn, 3 NMAC 1.7.12, 1/15/01; A, 8/30/01

N.M. Admin. Code § 3.1.7.13 Informal Conferences

A. Upon the taxpayer’s written request or the department’s own initiative, the department will provide for an informal conference before setting a hearing on the protest. When requested, an informal conference will be scheduled at a time and place agreed to by both parties.

The secretary may attend or designate a delegate to attend. Both parties may bring representatives of their own choosing to the conference, and both parties may bring any records or documents that are pertinent to the issues to be discussed. An informal conference will be vacated if the parties resolve the protest prior to the scheduled date.

B. The purpose of the informal conference is to discuss the facts and the legal issues. The result of an informal conference will usually be one of the following:

(1) an agreement that the taxpayer will withdraw all or part of the protest;

(2) an agreement that the department will abate all or part of the assessment protested, or will refund all or part of the amount of refund claimed;

(3) an agreement to enter into a closing agreement;

(4) an agreement that one or more issues will be litigated upon stipulated facts or a statement of the case;

(5) an agreement to schedule a formal hearing; or

(6) any combination of the above agreements.

C. The taxpayer or the department may be given the opportunity to provide more facts if the situation warrants. There is no statutory restriction on the number of informal conferences that may be scheduled with a taxpayer but, after the initial informal conference, additional informal conferences will be scheduled only if the secretary believes that the additional informal conferences will be useful in resolving the issues. In the event that the taxpayer fails to appear at the informal conference without reasonable notice to the secretary, the protest may be scheduled for a formal hearing without further opportunity for an informal conference.

HISTORY OF 3.1.7 NMAC:

Pre-NMAC History: The material in this part was derived from that previously filed with the State Records Center:

BOR 67-1, Tax Administration Act, 7/19/67, filed 7/28/67.

R.D./OGAD Rule No. 1985, Regulations Pertaining to the Tax Administration Act, filed 11/5/85.

TRD Rule TA-90, Regulations Pertaining to the Tax Administration Act, Sections 7-1-1 to 7-1-82 NMSA 1978, filed 8/15/90.

History of Repealed Material: [RESERVED]

NMAC History:

3 NMAC 1.7, Tax Administration - Protest, filed 10/17/96.

3.1.7 NMAC, Tax Administration - Protest, filed 1/4/2001.

History

11/5/85, 8/15/90, 10/31/96; 3.1.7.13 NMAC - Rn & A, 3 NMAC 1.7.13, 1/15/01, A, 8/30/01; A, 4/30/07

Part 8 Hearings

N.M. Admin. Code § 3.1.8.1 Issuing Agency

Taxation and Revenue Department, Joseph M. Montoya Building, 1100 South St. Francis Drive, P.O. Box 630, Santa Fe, NM 87504-0630

History

10/31/1996; 3.1.8.1 NMAC - Rn, 3 NMAC 1.8.1, .

N.M. Admin. Code § 3.1.8.2 Scope

History

10/31/1996; 3.1.8.2 NMAC - Rn, 3 NMAC 1.8.2, 1/15/2001

N.M. Admin. Code § 3.1.8.3 Statutory Authority

Section 9-11-6.2 NMSA 1978.

History

10/31/1996; 3.1.8.3 NMAC - Rn, 3 NMAC 1.8.3, 1/15/2001

N.M. Admin. Code § 3.1.8.4 Duration

Permanent.

History

10/31/1996; 3.1.8.4 NMAC - Rn, 3 NMAC 1.8.4, 1/15/2001

N.M. Admin. Code § 3.1.8.5 Effective Date

October 31, 1996, unless a later date is cited at the end of a section, in which case the later date is the effective date.

History

10/31/1996; 3.1.8.5 NMAC - Rn &A, 3 NMAC 1.8.5, 1/15/2001

N.M. Admin. Code § 3.1.8.6 Objective

The objective of this part is to interpret, exemplify, implement and enforce the provisions of the Tax Administration Act.

History

10/31/1996; 3.1.8.6 NMAC - Rn, 3 NMAC 1.8.6, 1/15/2001

N.M. Admin. Code § 3.1.8.7 Definitions

[RESERVED]

3.1.8.8 [RESERVED]

3.1.8.9 [RESERVED]

3.1.8.10 [RESERVED]

3.1.8.11 [RESERVED]

3.1.8.12 [RESERVED]

3.1.8.13 [RESERVED]

3.1.8.14 [RESERVED]

3.1.8.15 [RESERVED]

3.1.8.16 [RESERVED]

History

10/31/1996; 3.1.8.7 NMAC - Rn, 3 NMAC 1.8.7, 1/15/2001
7/19/1967, 11/5/1985, 8/15/1990, 10/31/1996; 3.1.8.8 NMAC - Rn, 3 NMAC 1.8.8, 1/15/2001, A, 8/30/2001; A, 4/30/07; Repealed, 05/24/2022
11/5/1985, 1/4/1988, 5/24/1990, 8/15/1990, 10/31/1996; 3.1.8.9 NMAC - Rn, 3 NMAC 1.8.9, 1/15/2001; A, 8/30/2001; Repealed, 05/24/2022
7/19/1967, 11/5/1985, 8/15/1990, 10/31/1996; 3.1.8.10 NMAC - Rn, 3 NMAC 1.8.10, 1/15/2001; A, 8/30/200; Repealed, 05/24/2022
11/5/1985, 5/24/1990, 8/15/1990, 10/31/1996, 1/15/98; 3.1.8.11 NMAC - Rn, 3 NMAC 1.8.11, 1/15/2001; A, 8/30/200; Repealed, 05/24/2022
11/5/1985, 8/15/1990, 10/31/1996; 3.1.8.12 NMAC - Rn, 3 NMAC 1.8.12, 1/15/2001; Repealed, 05/24/2022
11/5/1985, 1/4/1988, 5/24/1990, 8/15/1990, 10/31/1996, 1/15/98; 3.1.8.13 NMAC - Rn, 3 NMAC 1.8.13, 1/15/2001; Repealed, 05/24/2022
11/5/1985, 8/15/1990, 10/31/1996; 3.1.8.14 NMAC - Rn & A, 3 NMAC 1.8.14, 1/15/2001; A, 8/30/2001; Repealed, 05/24/2022
7/19/1967, 11/5/1985, 8/15/1990, 10/31/1996; 3.1.8.15 NMAC - Rn, 3 NMAC 1.8.15, 1/15/2001; A, 8/30/2001; Repealed, 05/24/2022
11/5/1985, 8/15/1990, 10/31/1996; 3.1.8.16 NMAC - Rn, 3 NMAC 1.8.16, 1/15/2001; A, 8/30/2001; Repealed, 05/24/2022

N.M. Admin. Code § 3.1.8.17 Date of Mailing or Delivery

Use of the phrase “date of mailing or delivery” in Subsection 7-1-25A NMSA 1978 authorizes the department to choose between mailing and hand-delivering the written decision and order of the hearing officer. “Date of mailing” means the time that the hearing officer's decision and order enclosed in properly addressed envelope or wrapper was postmarked by the U.S. postal service. “Delivery” means time of hand delivery of the written decision and order to the taxpayer's business or residence.

History

11/5/1985, 8/15/1990, 10/31/1996; 3.1.8.17 NMAC - Rn & A, 3 NMAC 1.8.17, 1/15/2001

N.M. Admin. Code § 3.1.8.18 Timely Filing

The filing of an appeal from the hearing officer's decision and order is governed by the Supreme Court Rules of Appellate Procedure.

History

11/5/1985, 8/15/1990, 10/31/1996; 3.1.8.18 NMAC - Rn, 3 NMAC 1.8.18, 1/15/2001

N.M. Admin. Code § 3.1.8.19 Issues on Appeal

Only issues raised before the hearing officer may be heard on appeal. A party may appeal from a decision only on the same theory as presented to the hearing officer.

HISTORY OF 3.1.8 NMAC:

Pre-NMAC History: The material in this part was derived from that previously filed with the State Records Center:

BOR 67-1, Tax Administration Act, 7/19/1967, filed 7/28/1967.

R.D./OGAD Rule No. 1985, Regulations Pertaining to the Tax Administration Act, filed 11/5/1985.

TRD Rule TA-90, Regulations Pertaining to the Tax Administration Act, Sections 7-1-1 to 7-1-82 NMSA 1978, filed 8/15/1990.

History of Repealed Material: [RESERVED]

NMAC History:

3 NMAC 1.8, Tax Administration - Hearings, filed 10/17/1996.

3.1.8 NMAC, Tax Administration - Hearings, filed 1/4/2001.

History

7/19/1967, 11/5/1985, 8/15/1990, 10/31/1996; 3.1.8.19 NMAC - Rn, 3 NMAC 1.8.19, 1/15/2001

Part 9 Refund

N.M. Admin. Code § 3.1.9.1 Issuing Agency

Taxation and Revenue Department, Joseph M. Montoya Building, 1100 South St. Francis Drive, P.O. Box 630, Santa Fe NM 87504-0630

History

10/31/96; 3.1.9.1 NMAC - Rn, 3 NMAC 1.9.1, 1/15/01

N.M. Admin. Code § 3.1.9.2 Scope

History

10/31/96; 3.1.9.2 NMAC - Rn, 3 NMAC 1.9.2, 1/15/01

N.M. Admin. Code § 3.1.9.3 Statutory Authority

Section 9-11-6.2 NMSA 1978.

History

10/31/96; 3.1.9.3 NMAC - Rn, 3 NMAC 1.9.3, 1/15/01

N.M. Admin. Code § 3.1.9.4 Duration

Permanent.

History

10/31/96; 3.1.9.4 NMAC - Rn, 3 NMAC 1.9.4, 1/15/01

N.M. Admin. Code § 3.1.9.5 Effective Date

10/31/96, unless a later date is cited at the end of a section, in which case the later date is the effective date.

History

10/31/96; 3.1.9.5 NMAC - Rn & A, 3 NMAC 1.9.5, 1/15/01

N.M. Admin. Code § 3.1.9.6 Objective

The objective of this part is to interpret, exemplify, implement and enforce the provisions of the Tax Administration Act.

History

10/31/96; 3.1.9.6 NMAC - Rn, 3 NMAC 1.9.6, 1/15/01

N.M. Admin. Code § 3.1.9.7 Definitions

[Reserved.]

History

10/31/96; 3.1.9.7 NMAC - Rn, 3 NMAC 1.9.7, 1/15/01

N.M. Admin. Code § 3.1.9.8 Claim for Refund - General

A. Any person may submit a written claim for refund to the department when the person believes the person: 1) has made payment of or had withheld from that person any tax in excess of that for which the person was liable; 2) has been denied any credit or rebate claimed; or 3) has a claim of prior right to property possessed by the department pursuant to a levy. The secretary has not been given statutory authority to initiate action in the circumstances specified in numbers 1), 2) and 3) above. The person affected must initiate the claim for refund. The filing of a fully completed income, corporate income and franchise, estate or special fuel excise tax return or a fully completed amended income, corporate income and franchise, estate or special fuel excise tax return showing an overpayment of tax, a credit or rebate claimed will constitute the filing of a claim for refund and no separate claim for refund is required.

B. “Fully completed” means a return which complies with all the instructions for the return and contains all attachments required by those instructions.

C. A written claim for refund is timely if it meets the requirements for validity of 3.1.9.8 NMAC and is transmitted, delivered or mailed to the department prior to the expiration of the statutory time limits in Section 7-1-26 NMSA 1978.

D. A claim for refund is valid if it states the nature of the complaint and affirmative relief requested and if it contains information sufficient to allow the processing of the claim.

E. Information sufficient to allow processing of a claim includes:

(1) taxpayer's name, address and identification number;

(2) the type or types of tax for which the refund is being claimed;

(3) the sum of money being claimed;

(4) the period for which the overpayment was made;

(5) the basis for the refund; and

(6) a copy of the appropriate, fully completed amended return for each period for which a refund is claimed.

F. A claim that does not include the information required by Subsections D and E of 3.1.9.8 NMAC is invalid. The department may return any invalid claim to the taxpayer. Alternatively the department may advise the taxpayer of the missing information and that the claim is invalid without submission of the missing information. If the taxpayer re-submits the claim with the required information or, when the return is not returned, submits all required information, the claim becomes valid only at the time the claim is re-submitted or the required information is supplied.

G. Example: A taxpayer submits an income tax return showing an amount due the taxpayer. The taxpayer either omits entering a social security account number or enters an obviously incorrect number. In either case, the income tax return is not fully completed and the taxpayer has failed to provide a proper identification number. The return is not a valid claim for refund.

H. Effective January 1, 2012, an information return is not a claim for refund.

History

7/19/67, 11/5/85, 8/15/90, 10/28/94, 10/31/96, 1/15/99; 3.1.9.8 NMAC - Rn & A, 3 NMAC 1.9.8, 1/15/01; A, 12/15/10

N.M. Admin. Code § 3.1.9.9 Remedies of Claimant

A. A person who has been denied a claim for refund or who has submitted a valid claim for refund upon which the department has taken no action within 120 days may submit to the secretary a written protest against the denial of, or failure to either allow or deny, the claim pursuant to Section 7-1-26 NMSA 1978. The protest must be received by the department either:

(1) on or before 90 days after the date that the department has mailed to the claimant a written denial of the claim for refund; or

(2) within 90 days after the expiration of 120 days after the mailing of a claim to the department on which no action has been taken by the department.

B. A person who has been denied a claim for refund or who has submitted a valid claim for refund upon which the department has taken no action within 120 days may commence a civil action against the secretary pursuant to Paragraph 7-1-26C(2) NMSA 1978. The civil action must be commenced within 90 days of the denial by the department or within 90 days after the expiration of 120 days after the mailing of the claim to the department upon which no action has been taken by the department.

C. A claimant may not refile a claim which has been denied in whole or in part. If the claimant wishes to challenge the department's denial, the claimant must pursue one of the two remedies specified above. A claimant may, however, refile a claim within the statutory period if the department has not denied the claim in whole or in part and has taken no action on that claim within 120 days from the filing of the claim.

D. For the purposes of Section 3.1.9.9 NMAC, a request for additional information by the department does not constitute “action”.

E. This version of Section 3.1.9.9 NMAC is retroactively applicable to protests on refund claims denied by the department or upon which the department has taken no action within 120 days on or after July 1, 1993.

History

7/19/67, 11/5/85, 8/15/90, 10/28/94, 10/31/96; 3.1.9.9 NMAC - Rn & A, 3 NMAC 1.9.9, 1/15/01

N.M. Admin. Code § 3.1.9.10 Claim for Refund of Corporate Income Tax Based on Adjustment to Federal Income Tax

A. The department may require that a claim for refund of state corporate income tax resulting from an adjustment to or claim for refund of federal income tax include proof of the approval and/or payment of such claim by the United States treasury department as a prerequisite to approval and payment of such claim by the state of New Mexico.

B. The supporting documentation requested may include copies of the internal revenue service revenue agent report (RAR); IRS form 1139, corporation application for tentative refund; and IRS form 1120X, amended u.s. corporation income tax return.

History

5/8/87, 8/15/90, 10/31/96; 3.1.9.10 NMAC - Rn, 3 NMAC 1.9.10, 1/15/01

N.M. Admin. Code § 3.1.9.11 Claim for Refund of Income Taxes or Banking and Financial Corporations Taxes Based on a Net Operating Loss Carryback or Carryforward - 1990 and Prior Income Tax Years

A. For the 1990 and prior income tax years, New Mexico tax law had no provision for net operating loss carrybacks or carryforwards. The only way the federal Internal Revenue Code provisions concerning net operating loss carrybacks and carryforwards can affect New Mexico taxes for the 1990 and prior income tax years is through the fact that New Mexico taxes are based on federal tax computations and federal net operating loss carryback or carryforward provisions change those federal tax computations.

B. The New Mexico individual income tax, corporate income tax and banking and financial corporations taxes are based on either adjusted gross income of individuals or federal taxable income of corporations, subject to various modifications. Application of federal law concerning net operating loss carrybacks may thus result in a reduction of adjusted gross income or federal taxable income for a past tax year. This reduction in federal adjusted gross income or taxable income for that past year will then result in a reduction of the New Mexico tax owed under one of those tax acts. In such case, a taxpayer may claim a refund on those taxes within one year of the date on which the adjustment of federal tax became fixed or within the period limited by Subsection 7-1-26D NMSA 1978, whichever expires later. No other provision for a net operating loss carryback exists under New Mexico tax law for the 1990 and prior income tax years.

C. Example: X Bank is permitted under federal law to carryback a net operating loss for ten years. In 1986 X has a net operating loss of $10,000. In 1976 X had federal taxable income reflecting a net loss. Under federal law, the net operating loss cannot be carried back to a previous loss year. Thus, even though the add-back provision under Subsection 7-6-2F NMSA 1978 of the New Mexico Banking and Financial Corporation Tax Act produced net income resulting in state tax liability in 1976, no modification is permitted to the state tax in the 1976 tax year. If X had federal taxable income of $10,000 in 1977, federal tax law does allow X to carry back the 1986 net operating loss to 1977, thereby reducing the 1977 federal taxable income to $0. X could then recompute its 1977 state tax under the Banking and Financial Corporations Tax Act by starting with a federal taxable income of $0 instead of $10,000 and completing its computation using the appropriate add backs for that year. The result would be a lessened state tax liability for 1977. X would then have one year from the adjustment in the federal tax to file a claim for refund of the excess New Mexico bank tax paid in 1977.

History

5/8/87, 8/15/90, 10/31/96; 3.1.9.11 NMAC - Rn & A, 3 NMAC 1.9.11, 1/15/01

N.M. Admin. Code § 3.1.9.12 Periods for Which Certain Refunds May Be Claimed

A. When the department has assessed tax for any part of a period covered by a waiver signed on or after July 1, 1993, by the taxpayer pursuant to Subsection 7-1-18F NMSA 1978, the taxpayer may submit a claim for refund for any part of the waiver period with respect to the taxes covered by the waiver, regardless of whether tax is assessed for that part of the waiver period. Any such claim for refund must be submitted within one year of the date of the assessment.

B. When the department has assessed tax for periods specified in Subsections 7-1-18 B, C or D NMSA 1978 and the assessment applies to a period ending at least three years prior to the beginning of the year in which the assessment is made, the taxpayer may submit a claim for refund with respect to those periods for which an assessment is made. Any such claim for refund must be submitted within one year of the date of the assessment.

C. Example: Taxpayer, a monthly filer, underreported by more than 25% gross receipts taxes due in the period November 1988 through December 1991. The department audits Taxpayer in 1993. On May 1, 1993, the department assessed Taxpayer with respect to underreported taxes for the entire period. In May 1993, the November 1988 through December 1989 portion of the period is beyond the time described in Subsection 7-1-18A NMSA 1978. The taxpayer may claim a refund at any time until April 30, 1994 with respect to gross receipts taxes paid in the period November 1988 through December 1989.

History

6/3/94, 10/31/96; 3.1.9.12 NMAC - Rn & A, 3 NMAC 1.9.12, 1/15/01

N.M. Admin. Code § 3.1.9.13 Conditions for Refund or Credit

A. A refund or credit of tax may be granted to a taxpayer by the secretary or secretary's delegate only if all the following conditions are satisfied:

(1) the tax has been erroneously paid and payment has been verified from the department's or taxpayer's records;

(2) the taxpayer has submitted a proper claim for refund pursuant to Section 7‑1‑26 NMSA 1978 and the regulations thereunder; and

(3) the secretary has secured the prior approval of the attorney general for any refund of tax and interest erroneously paid when such approval is required in Subsection A of Section 7-1-29 NMSA 1978.

B. The secretary or secretary's delegate, in response to a claim for refund for one type of tax, may credit the amount to be refunded against the amount of any other tax due from the taxpayer. The secretary or secretary's delegate shall give a full accounting of the crediting transaction to the claimant.

C. A taxpayer may not create a credit for a discovered overpayment of tax by understating the amount due on current tax returns to offset amounts paid on prior returns.

History

7/19/67, 11/5/85, 8/15/90, 10/31/96; 3.1.9.13 NMAC - Rn, 3 NMAC 1.9.13, 1/15/01; A, 12/15/11

N.M. Admin. Code § 3.1.9.14 Interest on Refunds of Taxes Self-Assessed by the Taxpayer

A. When an overpayment results from a self-assessment of taxes based on a return filed by the taxpayer, interest on a refund of that overpayment of taxes shall be computed from the date of filing of the claim for refund when the refund is not paid within the appropriate 60, 75 or 120 day limit specified in Subsection 7-1-68D NMSA 1978 and when the overpayment results from a self-assessment of taxes based on a return filed by the taxpayer. The fact that a subsequent notice of assessment is issued by the department due to failure of the taxpayer to accompany the return with full payment does not change the date from which interest is computed.

B. The determinative factor in deciding whether an overpayment is an “overpayment arising from an assessment by the department” - requiring interest on a refund to be computed from the date of overpayment rather than the date of a claim for refund - is whether the action establishing the amount of liability for taxes was initiated by the taxpayer or by the department. Actions initiated by the taxpayer include, but are not limited to, the filing of a tax return reporting a tax liability, whether or not payment accompanies the return. Actions initiated by the department include, but are not limited to, an audit of the taxpayers books and records or the issuance of a provisional assessment as a result of a taxpayer's failure to file any return or returns.

History

7/19/67, 11/5/85, 1/14/86, 8/15/90, 10/28/94, 10/31/96; 3.1.9.14 NMAC - Rn & A, 3 NMAC 1.9.14, 1/15/01

N.M. Admin. Code § 3.1.9.15 Interest on Refunds Based on Adjustment to Federal Income Tax

Interest on refunds based on an adjustment to federal tax pursuant to Subsection 7-1-26F NMSA 1978 shall be allowed from the date 120 days after the claim is filed until the date the final authorizing signature approves the claim.

History

5/20/94, 10/31/96; 3.1.9.15 NMAC - Rn & A, 3 NMAC 1.9.15, 1/15/01

N.M. Admin. Code § 3.1.9.16 Refund of Certain Interest or Penalty Paid

A. When a taxpayer has paid interest with respect to an amount of tax that is paid after the time it is due to be paid and the taxpayer subsequently becomes entitled to a refund of part or all of the tax, the taxpayer is also entitled to a refund of a proportionate amount of the interest paid by the taxpayer whether or not the taxpayer specifically requests refund of the interest.

B. When a taxpayer has paid penalty pursuant to Section 7-1-69 NMSA 1978 with respect to an amount of tax that is paid after the time it is due to be paid and the taxpayer subsequently becomes entitled to a refund of part or all of the tax, the taxpayer is also entitled to a proportionate refund of the penalty paid by the taxpayer whether or not the taxpayer specifically requests refund of the penalty.

HISTORY OF 3.1.9 NMAC:

Pre-NMAC History: The material in this part was derived from that previously filed with the State Records Center:

BOR 67-1, Tax Administration Act, 7/19/67, filed 7/28/67.

R.D./OGAD Rule No. 1985, Regulations Pertaining to the Tax Administration Act, filed 11/5/85.

TRD Rule TA-90, Regulations Pertaining to the Tax Administration Act, Sections 7-1-1 to 7-1-82 NMSA 1978, filed 8/15/90.

History of Repealed Material: [RESERVED]

NMAC History:

3 NMAC 1.9, Tax Administration - Refund, filed 10/17/96.

3.1.9 NMAC, Tax Administration - Refund, filed 1/4/2001.

History

3.1.9.16 NMAC - N, 1/15/01

Part 10 Collections

N.M. Admin. Code § 3.1.10.1 Issuing Agency

Taxation and Revenue Department, Joseph M. Montoya Building, 1100 South St. Francis Drive, P.O. Box 630, Santa Fe NM 87504-0630

History

10/31/96; 3.1.10.1 NMAC - Rn, 3 NMAC 1.10.1, 1/15/01

N.M. Admin. Code § 3.1.10.2 Scope

History

10/31/96; 3.1.10.2 NMAC - Rn, 3 NMAC 1.10.2, 1/15/01

N.M. Admin. Code § 3.1.10.3 Statutory Authority

Section 9-11-6.2 NMSA 1978.

History

10/31/96; 3.1.10.3 NMAC - Rn, 3 NMAC 1.10.3, 1/15/01

N.M. Admin. Code § 3.1.10.4 Duration

Permanent.

History

10/31/96; 3.1.10.4 NMAC - Rn, 3 NMAC 1.10.4, 1/15/01

N.M. Admin. Code § 3.1.10.5 Effective Date

10/31/96, unless a later date is cited at the end of a section, in which case the later date is the effective date.

History

10/31/96; 3.1.10.5 NMAC - Rn & A, 3 NMAC 1.10.5, 1/15/01

N.M. Admin. Code § 3.1.10.6 Objective

The objective of this part is to interpret, exemplify, implement and enforce the provisions of the Tax Administration Act.

History

10/31/96; 3.1.10.6 NMAC - Rn, 3 NMAC 1.10.6, 1/15/01

N.M. Admin. Code § 3.1.10.7 Definitions

[Reserved.]

History

10/31/96; 3.1.10.7 NMAC - Rn, 3 NMAC 1.10.7, 1/15/01

N.M. Admin. Code § 3.1.10.8 Seizure of Real Property by Levy

A levy on real property is made by personal service of a copy of the warrant of levy on the taxpayer-owner of the property, and by recording a copy of the levy in the county in which the property is located. The secretary or delegate shall make every reasonable effort to send notice of the levy to each party with a recorded interest in the property. Real property seized under warrant of levy shall be sold pursuant to the provisions of Sections 7-1-44 through 7-1-51 NMSA 1978.

History

7/19/67, 11/5/85, 8/15/90, 10/31/96; 3.1.10.8 NMAC - Rn & A, 3 NMAC 1.10.8, 1/15/01

N.M. Admin. Code § 3.1.10.9 Surrender of Property Upon Service of Levy on a Financial Institution

A. If a warrant of levy is served upon a financial institution in New Mexico, the financial institution must survey all checking accounts, savings accounts, escrows for collection, safety deposit boxes, trusts, certificates of deposit and all other accounts or places in which it may possess or hold any property or rights to property belonging to the taxpayer as of the date of service of the warrant of levy.

B. The financial institution upon which a warrant of levy is served must immediately surrender to the department any property or rights to property of the taxpayer which that institution possesses or holds as of the date of service of the warrant. Failure to do so makes the financial institution liable to the state of New Mexico in a sum equal to the value of the property or rights not surrendered. If a financial institution upon which a warrant of levy is served knows of property or rights to property of the taxpayer in the possession of another as of the date of the service of the warrant of levy, it must immediately report this fact to the agent of the department. A mere expectation that funds of the taxpayer will come into the possession of the institution, however, absent a contractual or other legal obligation between the taxpayer, the financial institution or any third parties, is not required to be revealed by the financial institution since the mere expectation does not constitute possession of funds by the institution.

C. If a financial institution upon which a levy has been served complies with all of the requirements of Sections 7-1-31 and 7-1-34 NMSA 1978, and the taxpayer subsequently deposits funds or property with the institution, the institution is not required to reveal this fact to the department until a new warrant of levy is served.

D. For the purposes of Section 3.1.10.9 NMAC, the term “financial institution” shall mean any bank, savings and loan association, credit union, pawn shop or any other similar entity which acts as a depository for another person's funds.

E. Example: X Bank is served with a warrant of levy in an amount of $2,000 by the department pursuant to Sections 7-1-31 and 7-1-32. The bank is required by the warrant of levy to reveal the amount of property in its possession that belongs to D, a delinquent taxpayer, and to surrender the property up to $2,000, if available. D's account at X Bank contains a balance of $100 on the date the warrant of levy is served on X. X also knows that D makes a deposit of $1,000 every month and receives a $50 royalty check every month; but on the date the warrant of levy is served, these deposits have not been made and will not be made for another week. X Bank is not required to reveal or surrender the $1,050 which will come into its possession one week after the date the warrant of levy is served. It is required to disclose and surrender the $100 of D's account which is in its possession on the date the warrant of levy is served. If X Bank is served with another levy, pursuant to the provisions of Section 7-1-33 NMSA 1978, after D has deposited the additional $1,050, it will then be required to disclose and surrender that amount.

History

5/24/90, 8/15/90, 10/31/96; 3.1.10.9 NMAC - Rn & A, 3 NMAC 1.10.9, 1/15/01

N.M. Admin. Code § 3.1.10.10 Release of Levy

The secretary or secretary's delegate is authorized by Section 7-1-52 NMSA 1978 to release all or any part of property levied upon under the following conditions:

A. the release of levy will cause the collection of the taxes to be facilitated; and

B. the interests of the state will continue to be protected.

History

7/19/67, 11/5/85, 8/15/90, 10/31/96; 3.1.10.10 NMAC - Rn & A, 3 NMAC 1.10.10, 1/15/01

N.M. Admin. Code § 3.1.10.11 Injunctions

The secretary has statutory authority to apply to a district court of New Mexico to have any delinquent taxpayer or other person who may be or may become liable for any tax enjoined from engaging in business in the state. The following examples illustrate some, but not all, situations where the secretary may make application to a district court for a temporary restraining order and an injunction against delinquent taxpayers or persons for the purpose of protecting the revenues of the state:

A. a taxpayer who has established a record of recurring tax delinquency as defined by Section 7-1-16 NMSA 1978;

B. a taxpayer who has neglected or refused to respond to a jeopardy assessment, issued pursuant to Section 7-1-59 NMSA 1978, by either paying the amount of tax demanded or furnishing satisfactory security;

C. a taxpayer who has established a recurring record of attempting to pay taxes due with bad checks as defined in Section 7-1-70 NMSA 1978;

D. a successor in business who has wrongfully failed to withhold and pay over tax or has not made payment or surrendered property after demand as provided by Section 7-1-63 NMSA 1978;

E. a person who self-denominates by declaration or actions as a “tax protestor” and who, as a means of protesting taxation or other issues, refuses to comply with the provisions of the Tax Administration Act;

F. a person who fails, neglects or refuses to collect and pay over withholding tax from that person's employees who perform personal services in New Mexico as provided by the Withholding Tax Act;

G. a prime construction contractor with principal place of business located outside New Mexico, performing construction services in New Mexico, and who has failed to comply with acceptable security requirements pursuant to Section 7-1-55 NMSA 1978;

H. a person who has failed within 90 days to respond to a demand from the department to file any tax return which was required to be filed on a date which occurred at least 45 days prior to the date the demand to file was made by the department.

History

7/19/67, 11/5/85, 8/15/90, 10/31/96; 3.1.10.11 NMAC - Rn & A, 3 NMAC 1.10.11, 1/15/01

N.M. Admin. Code § 3.1.10.12 Methods to Avoid Impending Injunction

Persons who are subject to an impending injunction action by the secretary may take any of the following actions to avoid an injunction:

A. pay the assessed tax and, if applicable, submit a claim for refund pursuant to Section 7-1-26 NMSA 1978;

B. furnish acceptable security as provided by Section 7-1-54 and Section 7-1-55 NMSA 1978;

C. make application for an extension of time as provided by Section 7-1-13 NMSA 1978; or

D. make application for and enter into an installment agreement as provided by Section 7-1-21 NMSA 1978.

History

7/19/67, 11/5/85, 8/15/90, 10/31/96; 3.1.10.12 NMAC - Rn & A, 3 NMAC 1.10.12, 1/15/01

N.M. Admin. Code § 3.1.10.13 General Provisions for Providing Security

A. When the secretary or secretary's delegate believes that it is necessary to ensure payment of any tax due, or reasonably expected to become due, the secretary or secretary's delegate may require or allow a person subject to the Tax Administration Act to furnish acceptable security. The secretary or secretary's delegate will notify the person by mailing or hand-delivering a written notice of requirement to furnish security in the amount stated in the notice. If the person addressed does not promptly comply, the secretary or secretary's delegate will make a written demand of the person by certified mail or in person that the person furnish security in the stated amount. Upon the failure of any person to comply within ten days of the date of the written demand for furnishing security, the secretary may institute a proceeding to enjoin that person from engaging in business in the state as provided in Section 7-1-53 NMSA 1978. The following examples illustrate some, but not all, situations in which the secretary or secretary's delegate may require or allow the furnishing of security:

(1) the taxpayer is a delinquent taxpayer;

(2) the taxpayer is granted an extension of time to pay taxes;

(3) the taxpayer enters into an installment agreement;

(4) the taxpayer requests a stay of levy;

(5) the taxpayer requests permission to report and pay certain taxes on a quarterly or semiannual basis;

(6) the taxpayer wishes to avoid an impending restraining order or an injunction proceeding;

(7) the taxpayer wishes to stay the enforcement of a jeopardy assessment;

(8) a successor in business has failed to withhold the amount of the tax liability of the predecessor or to pay the tax or surrender the property;

(9) a corporation is dissolving or withdrawing from the state;

(10) the taxpayer is conducting a business of a transient nature;

(11) the taxpayer has a recurring record of attempted payment of tax liabilities with bad checks;

(12) the taxpayer has failed to file any required tax returns within 45 days from the date the return was required to be filed;

(13) the taxpayer has engaged in business for more than three months during which period of time the taxpayer was not registered with the department or did not maintain an active identification number issued by the department.

B. The furnishing of security by a person liable for the payment of taxes will not prevent the imposition of interest due on deficiencies as provided by Section 7-1-67 NMSA 1978 nor prevent the imposition of civil penalty for failure to pay tax or file a return as provided by Section 7-1-69 NMSA 1978.

History

7/19/67, 11/5/85, 8/15/90, 10/31/96; 3.1.10.13 NMAC - Rn & A, 3 NMAC 1.10.13, 1/15/01

N.M. Admin. Code § 3.1.10.14 Surety Bonds

The secretary will accept only those surety bonds underwritten by a company qualified to do business in New Mexico.

3.1.10.15 LIMITATION ON ACTIONS

A. LIMITATION ON ACTIONS TO COLLECT TAX DEBT: Pursuant to the provisions of Section 7-1-19 NMSA 1978, the secretary or attorney general may not bring an action or proceeding to collect taxes after ten years from the date of the assessment of taxes.

B. INTEREST ASSESSED FOR PRIOR TAX LIABILITIES: When the secretary or delegate has, within the last ten years, caused interest to be assessed on a tax liability due under a self-assessment or notice of assessment of taxes made more than ten years ago, no action or proceeding to collect on the interest assessments may be brought by the secretary or secretary's delegate after ten years from the date of the underlying assessment, even though the interest assessment may have been made less than ten years ago. Subsection 3.1.10.15B NMAC is applicable to liabilities which originally became due on or after October 31, 1986 and to the related interest assessments.

C. TEN-YEAR LIMITATION OVERRIDES OTHER STATUTES: The ten-year limitation in Section 7-1-19 NMSA 1978 overrides the permanence of tax debt provided for in Section 7-1-58 NMSA 1978 and Subsection 7-1-17D NMSA 1978.

History

7/19/67, 11/5/85, 8/15/90, 10/31/96; 3.1.10.14 NMAC - Rn, 3 NMAC 1.10.14, 1/15/01
7/19/67, 11/5/85, 8/15/90, 10/31/96, 7/31/97; 3.1.10.15 NMAC - Rn & A, 3 NMAC 1.10.15, 1/15/01

N.M. Admin. Code § 3.1.10.16 Determination of Successor in Business

A. The following indicia are used by the secretary or secretary's delegate as factors in determining whether a business is a successor:

(1) Has a sale and purchase of a major part of the materials, supplies, equipment, merchandise or other inventory of a business enterprise occurred between a transferor and a transferee in a single or limited number of transactions?

(2) Was a transfer not in the ordinary course of the transferor's business?

(3) Was a substantial part of both equipment and inventories transferred?

(4) Was a substantial portion of the business enterprise that had been conducted by the transferor continued by the transferee?

(5) By express or implied agreement did the transferor's goodwill follow the transfer of the business properties?

(6) Were uncompleted sales, service or lease contracts of the transferor honored by the transferee?

(7) Was unpaid indebtedness to suppliers, utility companies, service contractors, landlords or employees of the transferor paid by the transferee?

(8) Was there an agreement precluding the transferor from engaging in a competing business to that which was transferred?

B. If one or more of the indicia mentioned above are present, the secretary or secretary's delegate may presume that ownership of a business enterprise has transferred to a successor in business.

C. Example 1: A father owning a business enterprise in sole proprietorship decided to retire. He transferred the substantial part of all tangible and intangible business property to his son. The father was liable for payment of state, municipal and county gross receipts taxes in the amount of $10,000 on the date of transfer. The son continued the business enterprise, but changed the trade name, added some new product lines, sold off some obsolete equipment and rented new store, warehouse and office business locations. The son is a successor in business to his father and shall follow the provisions of Subsection 7-1-61C NMSA 1978 by withholding or paying over the amount due.

D. Example 2: A person owning a road construction company sold one-half of the company's new and used heavy equipment to another person to reduce the company's inventory of construction equipment because the person planned to discontinue bidding on out-of-state road projects. The person plans to continue road construction services in New Mexico using the remaining equipment. The purchaser of the heavy equipment is not a successor in business to the seller since few of the indicia are present for determination of a successor in business.

E. Example 3: A title and abstract company which had been inactive for several months sold its remaining assets to a purchaser who incorporated the tangible and intangible property into the purchaser's own business. The seller was liable for payment of gross receipts taxes on the date of the transfer of the business assets and the purchaser failed to withhold and place into a trust account a sufficient amount of the purchase price to cover the taxes owed or to pay over to the department the seller's unpaid assessments of gross receipts taxes. The purchaser claimed to be unaware of the seller's tax liabilities. The department made a demand on the purchaser for payment and gave the amount and basis of the unpaid assessments of tax for which the seller was liable, in accordance with Subsection 7-1-63A NMSA 1978. The New Mexico court of appeals upheld the department's determination that a business which changes hands need not be an active or solvent business to come under the provisions of Section 7-1-61 NMSA 1978. Although not all the separate indicia listed in Section 3.1.10.16 NMAC were applicable to this illustration, the indicia of Paragraphs 3.1.10.16A(1) through (4) NMAC used by the department did apply and supported a presumption to meet the statutory requirements of Section 7-1-61 NMSA 1978. (Sterling Title Co. v. Commissioner of Revenue, 85 N.M. 279)

F. For the purposes of Sections 7-1-61 through 7-1-63 NMSA 1978 and Section 3.1.10.16 NMAC:

(1) “mere continuation” is determined by the “substantial continuity test” used in other contexts where the government is seeking to impose successor liability and is determined by addressing whether the successor maintains the same business with the same employees doing the same jobs under the same supervisors, work conditions and production process and produces the same product for the same customers. See B.F. Goodrich v. Betkoski, 99 F.3d 505 (2nd Cir. 1996);

(2) “successor” means any transferee of a business or property of a business, except to the extent it would be materially inconsistent with the rights of secured creditors that have perfected security interests or other perfected liens on the business or property of the business. A “successor” may include a business that is a mere continuation of the predecessor after those connected with the business re-acquire at a foreclosure sale property used in the predecessor’s business, a business that is acquired and run for indefinite period by a creditor of the predecessor and any business that assumes the liabilities of the predecessor. A “successor” does not include a disinterested third party who purchases property at a commercially reasonable foreclosure sale, a bank or other financial institution or government that acquires and operates a business for a limited period of time in order to protect its collateral for eventual resale in a commercially reasonable manner or a franchisor that cancels a franchise agreement due to material default by the franchisee;

(3) “transfer” means every mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with the property of a business; and

(4) “used in any business” means reasonably necessary for the business’s continued operations, whether or not the property is actually owned by the business.

3.1.10.17 [Reserved.]

3.1.10.18 INTEREST

A. INTEREST:

(1) Interest on the unpaid portion of a tax indebtedness is due to the State of New Mexico at the rate of 15% per year computed on a daily basis for amounts due on or after January 1, 2001. The daily rate will be determined by dividing the annual rate by 365 or 366 as appropriate.

(2) Except as otherwise provided in Subsection 7-1-67A NMSA 1978, interest on the unpaid portion of a tax indebtedness shall begin to accrue on the day following the date on which payment of the tax is required by law. Interest shall continue to accrue until the tax indebtedness is paid.

(3) [Reserved.]

(4) The following are instances when interest is accrued on the unpaid balance of a taxpayer's tax indebtedness under the Tax Administration Act from the day following the due date:

(a) granting of an extension of time pursuant to Subsection 7-1-13E NMSA 1978;

(b) entering into a closing agreement pursuant to Section 7-1-20 NMSA 1978;

(d) making of a protest of an assessment of tax pursuant to Section 7-1-24 NMSA 1978 unless payment has been made under the provisions of Section 3.1.7.9 NMAC, in which case interest will accrue only until the date payment is tendered to the department;

(e) an appeal by a taxpayer from an adverse decision rendered at an administrative hearing;

(f) the granting of a partial abatement of an assessment of tax;

(g) seizure of property under levy pursuant to Section 7-1-34 NMSA 1978;

(h) imposition of an injunction or temporary restraining order against a taxpayer pursuant to Section 7-1-53;

(i) furnishing of security by the taxpayer pursuant to Sections 7-1-54 and 7-1-55 NMSA 1978;

(j) in the case where a tax liability was incurred by a predecessor in business, ignorance of a successor in business of a tax liability;

(k) an attempt to pay tax by a bad check; and

(l) proper dissolution of a corporation.

(5) In the case where the due date has not yet passed, interest will begin to accrue on the sixth day following the jeopardy assessment made pursuant to Section 7-1-59 NMSA 1978.

B. APPLICATION OF INTEREST PROVISIONS TO GOVERNMENTS:

(1) Interest on the unpaid portion of a tax indebtedness is due to the state of New Mexico when the tax indebtedness is owed by any agency, institution, instrumentality or political subdivision of the state of New Mexico.

(2) To the extent permitted by the constitution, treaties and laws of the United States, interest on the unpaid portion of a tax indebtedness is due to the state of New Mexico when the tax indebtedness is owed by any other state, any Indian tribe, nation or pueblo, the United States, any alien government or any agency, institution, instrumentality or political subdivision of any of the foregoing.

(3) Subsection 3.1.10.18B NMAC is retroactively applicable to unpaid tax indebtedness due on or after July 1, 1992.

C. WHEN INTEREST APPLIES TO REPAYMENTS OF EXCESS REFUNDS:

(1) “Tax”, as defined by the Tax Administration Act, includes any amount of any credit, rebate or refund paid by the department contrary to any law subject to administration under the Tax Administration Act. An excess credit, rebate or refund paid is a tax owed to the state. When no due date is specified by statute, the due date of such a tax is thirty days after the excess credit, rebate or refund is received by the taxpayer. Interest shall be applied for each month or fraction thereof from the due date until the excess credit, rebate or refund is paid.

(2) Unless the preponderance of evidence indicates another date, the person to whom the department mails an excess credit, rebate or refund shall be presumed to have received the excess credit, rebate or refund seven days after the department mailing.

(3) Subsection 3.1.10.18C NMAC applies to any excess credit, rebate or refund paid by the department after January 1, 1994.

3.1.10.19 [Reserved.]

HISTORY OF 3.1.10 NMAC:

Pre-NMAC History: The material in this part was derived from that previously filed with the State Records Center:

BOR 67-1, Tax Administration Act, 7/19/67, filed 7/28/67.

R.D./OGAD Rule No. 1985, Regulations Pertaining to the Tax Administration Act, filed 11/5/85.

TRD Rule TA-90, Regulations Pertaining to the Tax Administration Act, Sections 7-1-1 to 7-1-82 NMSA 1978, filed 8/15/90.

History of Repealed Material: [RESERVED]

NMAC History:

3 NMAC 1.10, Tax Administration - Collections, filed 10/17/96.

3.1.10 NMAC, Tax Administration - Collections, filed 1/4/2001.

History

7/19/67, 11/5/85, 8/15/90, 10/31/96; 6/15/98; 3.1.10.16 NMAC - Rn & A, 3 NMAC 1.10.16, 1/15/01
10/31/96; 6/15/98 - Repealed; 3.1.10.17 NMAC - Rn, 3 NMAC 1.10.17, 1/15/01
7/19/67, 11/5/85, 8/15/90, 10/31/96, 7/31/97; 3.1.10.18 NMAC - Rn & A, 3 NMAC 1.10.18, 1/15/01
7/3/92, 10/31/96; 7/31/97 - Repealed; 3.1.10.19 NMAC - Rn, 3 NMAC 1.10.19, 1/15/01

Part 11 Penalties

N.M. Admin. Code § 3.1.11.1 Issuing Agency

Taxation and Revenue Department, Joseph M. Montoya Building, 1100 South St. Francis Drive, P.O. Box 630, Santa Fe NM 87504-0630

History

3/15/96; 3.1.11.1 NMAC - Rn, 3 NMAC 1.11.1, 1/15/01

N.M. Admin. Code § 3.1.11.2 Scope

History

3/15/96, 10/31/96; 3.1.11.2 NMAC - Rn, 3 NMAC 1.11.2, 1/15/01

N.M. Admin. Code § 3.1.11.3 Statutory Authority

Section 9-11-6.2 NMSA 1978.

History

3/15/96; 3.1.11.3 NMAC - Rn, 3 NMAC 1.11.3, 1/15/01

N.M. Admin. Code § 3.1.11.4 Duration

Permanent.

History

3/15/96; 3.1.11.4 NMAC - Rn, 3 NMAC 1.11.4, 1/15/01

N.M. Admin. Code § 3.1.11.5 Effective Date

3/15/96, unless a later date is cited at the end of a section, in which case the later date is the effective date.

History

3/15/96, 10/31/96; 3.1.11.5 NMAC - Rn & A, 3 NMAC 1.11.5, 1/15/01

N.M. Admin. Code § 3.1.11.6 Objective

The objective of this part is to interpret, exemplify, implement and enforce the provisions of the Tax Administration Act.

History

3/15/96; 3.1.11.6 NMAC - Rn, 3 NMAC 1.11.6, 1/15/01

N.M. Admin. Code § 3.1.11.7 Definitions

[Reserved.]

History

3/15/96; 3.1.11.7 NMAC - Rn, 3 NMAC 1.11.7, 1/15/01

N.M. Admin. Code § 3.1.11.8 Assessment and Protest of Penalty

A. Civil penalty is assessed by the secretary or delegate in the manner provided for issuing assessments in Paragraph 7-1-17B(2) NMSA 1978 and any regulations thereunder. Any assessment of civil penalty or demand for payment made by the department is presumed to be correct under Subsection 7-1-17C NMSA 1978.

B. Civil penalty shall be collected in the same manner as, and concurrently with, the amount of tax to which it relates, in accordance with Section 7-1-30 NMSA 1978.

C. A taxpayer who has been assessed civil penalty and who believes that the taxpayer has been neither negligent nor in disregard of rules or regulations has available all the legal remedies in the Tax Administration Act that are available for any assessed taxpayer, whether for tax, taxes, interest or penalty.

D. The effect of the presumption of correctness of assessment of civil penalty is that the taxpayer has the burden of coming forward with some evidence showing that the assessment made by the department is not correct. When not correct, the assessment shall be abated by the secretary or secretary's delegate as provided by Section 7-1-28 NMSA 1978.

History

7/19/67, 11/5/85, 8/15/90, 10/31/96; 3.1.11.8 NMAC - Rn & A, 3 NMAC 1.11.8, 1/15/01

N.M. Admin. Code § 3.1.11.9 Compromise by Secretary

The secretary may compromise the assessment of civil penalty by entering into a written closing agreement if and when the secretary has a good faith doubt of the taxpayer's liability. The secretary may not compromise the civil penalty because of the taxpayer's inability to pay. The secretary may not compromise the civil penalty solely because of the threat of litigation. The secretary may not compromise the civil penalty solely as an expedient means of disposing of a controversy.

History

11/5/85, 8/15/90, 10/31/96; 3.1.11.9 NMAC - Rn & A, 3 NMAC 1.11.9, 1/15/01

N.M. Admin. Code § 3.1.11.10 Negligence

Taxpayer “negligence” under Subsection 7-1-69A NMSA 1978 means:

A. failure to exercise that degree of ordinary business care and prudence which reasonable taxpayers would exercise under like circumstances;

B. inaction by taxpayers where action is required;

C. inadvertance, indifference, thoughtlessness, carelessness, erroneous belief or inattention.

History

11/5/85, 8/15/90, 10/31/96; 3.1.11.10 NMAC - Rn & A, 3 NMAC 1.11.10, 1/15/01

N.M. Admin. Code § 3.1.11.11 Indications of Nonnegligence

The following situations may indicate that a taxpayer has not been negligent or in disregard of rules and regulations and the secretary will consider these circumstances in deciding whether to assess civil penalty as provided by Section 7-1-69 NMSA 1978, or whether to abate assessed civil penalty as provided by Section 7-1-28 NMSA 1978:

A. the taxpayer proves the taxpayer was affirmatively misled by a department employee;

B. the taxpayer, disabled because of injury or prolonged illness, demonstrates the inability to prepare a return and make payment and was unable to procure the services of another person to prepare a return because of the injury or illness;

C. the taxpayer shows that physical damage to the taxpayer's records or place of business caused a delay in filing a return or making payment of tax;

D. the taxpayer proves that the failure to pay tax or to file a return was caused by reasonable reliance on the advice of competent tax counsel or accountant as to the taxpayer's liability after full disclosure of all relevant facts; failure to make a timely filing of a tax return, however, is not excused by the taxpayer's reliance on an agent;

E. a taxpayer, within twelve months of the filing of a return by the original due date or by the extended due date and without action of the secretary or delegate, files an amended return reflecting tax due or additional tax due and full payment of any tax due accompanies the amended return;

F. with regard to income tax returns only, the internal revenue service abates federal penalty originally assessed for the same or similar reason as the New Mexico penalty. If the taxpayer, however, without requesting and receiving an extension of time in which to file under the provisions of Subsection 7-1-13E NMSA 1978, has failed to timely file and pay additional income tax due within the time required in Subsection 7-1-13C NMSA 1978, the penalty will be assessed;

G. with regard to oil and gas tax returns only, the taxpayer receives final approval from the appropriate government agency of the taxpayer's participation in production from a state or federal property and pays all oil and gas taxes due on production from the property attributable to the taxpayer no later than the twenty-fifth day of the second month following the month in which the approval is received; or

H. with regard to an out-of-state business when a good faith doubt exists as to whether the taxpayer has established nexus with New Mexico and whether the state has jurisdiction over the taxpayer and its transactions into New Mexico for current or prior reporting periods, the business volunteers to enter into an agreement with the department to register, report and pay gross receipts tax, corporate income tax or franchise tax or to collect and remit compensating tax as an agent under the provisions of Section 7-9-10 NMSA 1978.

History

11/5/85, 1/4/88, 5/24/90, 9/20/93, 2/9/95, 3/15/96, 4/15/98; 3.1.11.11 NMAC - Rn & A, 3 NMAC 1.11.11, 1/15/01

N.M. Admin. Code § 3.1.11.12 Failure to File a Return

If a taxpayer does not file a return on the date on which payment of tax is due, as required by Subsection 7-1-13B NMSA 1978, the minimum penalty of $5.00 imposed by Section 7-1-69 NMSA 1978 will apply only once per return, regardless of the number of tax programs included in the return.

History

11/5/85, 8/15/90, 10/31/96; 3.1.11.12 NMAC - Rn & A, 3 NMAC 1.11.12, 1/15/01

N.M. Admin. Code § 3.1.11.13 Fraudulent Return Filed When No Tax Is Due

When a taxpayer files a return with intent to defraud the state by making a claim for a tax credit or rebate, and no amount of tax is required to be paid on the return, the provisions of Section 7-1-69 NMSA 1978 will not apply. Nothing in Section 3.1.11.13 NMAC, however, shall be construed to prohibit criminal prosecution of such person for false statement and fraud under Section 7-1-73 NMSA 1978.

History

11/5/85, 8/15/90, 10/31/96; 3.1.11.13 NMAC - Rn & A, 3 NMAC 1.11.13, 1/15/01

N.M. Admin. Code § 3.1.11.14 Application of Penalty Provisions to Governments

A. Penalty with respect to the unpaid portion of a tax indebtedness or with respect to the failure to file a return by the date required is due to the state of New Mexico when the tax indebtedness is owed by any agency, institution, instrumentality or political subdivision of the state of New Mexico.

B. To the extent permitted by the constitution, treaties and laws of the United States, penalty with respect to the unpaid portion of a tax indebtedness or with respect to the failure to file a return by the date required is due to the state of New Mexico when the tax indebtedness is owed by any other state, any Indian tribe, nation or pueblo, the United States, any alien government or any agency, institution, instrumentality or political subdivision of any of the foregoing.

C. Section 3.1.11.14 NMAC is retroactively applicable on July 1, 1992.

History

7/3/92, 10/31/96; 3.1.11.14 NMAC - Rn & A, 3 NMAC 1.11.14, 1/15/01

N.M. Admin. Code § 3.1.11.15 Application of Penalty Upon Expiration of Extension

Penalty for failing to file a required return or, if tax is due, to pay tax by an extended due date will be computed beginning with the first day following the extended due date.

History

9/20/93, 10/31/96; 3.1.11.15 NMAC - Rn, 3 NMAC 1.11.15, 1/15/01

N.M. Admin. Code § 3.1.11.16 Definition of Bad Check

A bad check is a check or draft to the order of the department which the bank, as drawee, dishonors upon presentment by the department. “Dishonor” means the bank refuses to pay the amount of the check to the order of the department. The burden is on the taxpayer to prove that the taxpayer was not responsible for the bank's dishonoring of the check. “Bank” includes any financial institution upon which a check or draft is drawn.

History

7/19/67, 11/5/85, 8/15/90, 10/31/96; 3.1.11.16 NMAC - Rn, 3 NMAC 1.11.16, 1/15/01

N.M. Admin. Code § 3.1.11.17 Imposition of Penalty on Bad Checks

A. A penalty in the amount of twenty dollars ($20.00) will be imposed under Section 7-1-70 NMSA 1978 for each instance in which a check tendered to the department is not paid upon presentment. This penalty is in addition to any penalty imposed under Section 7-1-69 NMSA 1978.

B. This version of Section 3.1.11.17 NMAC is applicable January 1, 1995.

3.1.11.18 WILLFUL ATTEMPT TO EVADE OR DEFEAT TAX

A. “WILLFUL ATTEMPT TO EVADE OR DEFEAT” DEFINED:

(1) As used in the Tax Administration Act, the term “willful attempt to evade” or “willful attempt to evade or defeat” means conscious awareness of the obligation to pay taxes coupled with either reckless disregard for, or gross negligence with respect to, whether the tax obligation is paid. A willful attempt to evade or a willful attempt to evade or defeat may occur either with respect to the obligation to report or the obligation to pay.

(2) A willful attempt to evade or defeat may include, but is not limited to:

(a) engaging in business while not filing tax returns coupled with the knowledge that the business is subject to tax;

(b) filing tax returns without payment for an extended period of time while staying in business and paying other creditors;

(c) knowingly completing false tax returns or claiming exemptions, deductions, credits or other reductions of taxable amounts or taxes to which the taxpayer knows he is not entitled;

(d) hiding or transferring assets to hinder collection activity of the department; or

(e) advising or counseling any of the foregoing in the course of one’s business as an attorney, accountant, bookkeeper, business consulting firm or tax preparer.

(3) The following are examples of a willful attempt to evade or defeat a tax or to cause or attempt to cause the evasion of another’s tax.

(a) A is the primary shareholder, controlling officer and sole employee of B, a closely held corporation. B is engaged in an on-going business and, on its billings to its customers, separately states and collects an amount denominated “gross receipts tax”. B has not filed monthly gross receipts returns for eight consecutive months. B, however, has received frequent notices from the department and has received telephone calls from department personnel requesting that the returns be filed for the non-filed months and any tax due be paid. As a result of the frequent contact from the department, B files the gross receipts tax returns, each of which shows tax due, but refuses to pay the outstanding tax, penalty and interest due and does not protest the tax due. B is willfully evading or defeating the gross receipts tax due and A is willfully causing B to evade that tax.

(b) C is the primary shareholder and controlling officer of D, a corporation. D hires the services of a professional accounting firm. The firm prepares D’s tax returns and forwards them to C. C receives the returns but simply stores them. D never files the tax returns or pays the taxes due. C has willfully caused the evasion of D’s taxes.

(c) B keeps C’s books. C is a corporation. E is the primary shareholder and controlling officer of C. B prepares the tax returns for C and drafts checks for E to sign. E signs the returns and the checks. B never sends the returns or checks to the department but endorses the checks to himself. B intercepts all mail and telephone calls from the department. When E becomes aware of what B is doing, E promptly contacts the department to make arrangements for the filing of the returns and payment of the taxes. Making the payments, however, proves unfeasible and C goes out of business. B has willfully caused C to evade its taxes but E has not.

(d) L is an attorney who is familiar with business and tax law and is the primary shareholder in PC, a professional corporation. PC has reported and paid gross receipts tax in the past. PC stops reporting and paying gross receipts tax; L is aware of this. L has willfully caused the evasion of PC’s taxes.

(e) N is the primary shareholder and controlling officer of C, a corporation. C is assessed a substantial amount of tax as the result of an audit. N causes C to cease operations. N’s brother, M, who has also worked in the business forms a new corporation D. D takes over C’s business and assets, including C’s customer lists, employees and goodwill. D operates at C’s place of business, with strictly cosmetic changes in signs and stationery. Both N and M know of C’s tax obligations and intended the change in form to strip the tax liability from the on-going business. Both N and M have willfully caused C to evade taxes.

(f) O is a company that researches tax liens. It contacts businesses with tax trouble as indicated by the existence of tax liens. It advises businesses in the use of techniques to avoid holding balances in bank accounts, thereby defeating any levy by the department on the business’s bank accounts. O is willfully causing or attempting to cause another to evade or defeat taxes owed and may be assessed for the amount its clients acting owe in tax.

(4) The following examples illustrate situations which do not give rise to a willful attempt to evade or defeat tax.

(a) G is the primary shareholder and principal officer of C, a corporation. C is audited and is assessed a substantial amount of tax. C had never reported or paid gross receipts tax because G erroneously believed C’s business was exempt from gross receipts tax. C files bankruptcy under Chapter 11 and attempts to resolve the tax liability under the bankruptcy laws. While in bankruptcy, C reports and pays its current gross receipts tax obligations. Regardless of the outcome of the bankruptcy proceedings, G has not willfully caused C to evade tax.

(b) H owns C, a corporation. C encounters considerable cash flow problems. It becomes obvious that C is insolvent. C files three monthly tax returns without payment before going out of business. H has not willfully caused C to evade tax.

B. BURDEN OF PROOF:

(1) The department has the burden of proving tax evasion or the causing or attempting to cause another to evade tax.

(2) In a protest before a department hearing officer pursuant to Section 7-1-24 NMSA 1978, the hearing officer must find by a preponderance of the evidence that either the taxpayer or other person who has been assessed for causing or attempting to cause the evasion of another’s tax knew of the obligation to pay tax. The issue of whether the taxpayer or the other person actually knew of the obligation to pay tax can be proved by reasonable inference from circumstantial evidence, and notwithstanding testimony to the contrary which the hearing officer finds not credible.

(3) The issue of whether the taxpayer or other person exercised gross negligence or willful disregard for whether taxes were paid is an objective standard to be determined by the facts and circumstances.

C. INTEREST CONTINUES TO RUN ON ORIGINAL PRINCIPAL OF TAX ATTEMPTED TO BE EVADED: Although interest does not run ordinarily on penalty pursuant to Subsection 7-1-67D NMSA 1978, interest continues to run on the penalty imposed under Section 7-1-72.1 NMSA 1978 to the extent of the unpaid principal of the underlying tax liability because Section 7-1-72.1 NMSA 1978 specifically authorizes the assessment of penalty and interest upon the tax which was evaded or attempted to be evaded.

3.1.11.19 [RESERVED]

HISTORY OF 3.1.11 NMAC:

Pre-NMAC History: The material in this part was derived from that previously filed with the State Records Center:

BOR 67-1, Tax Administration Act, 7/19/67, filed 7/28/67.

R.D./OGAD Rule No. 1985, Regulations Pertaining to the Tax Administration Act, filed 11/5/85.

TRD Rule TA-90, Regulations Pertaining to the Tax Administration Act, Sections 7-1-1 to 7-1-82 NMSA 1978, filed 8/15/90.

History of Repealed Material: [RESERVED]

NMAC History:

3 NMAC 1.11, Tax Administration - Penalties, filed 3/4/96.

3.1.11 NMAC, Tax Administration - Penalties, filed 1/4/2001.

History

7/19/67, 11/5/85, 8/15/90, 10/28/94, 10/31/96; 3.1.11.17 NMAC - Rn & A, 3 NMAC 1.11.17, 1/15/01
6/15/98; 3.1.11.18 NMAC - Rn & A, 3 NMAC 1.11.18, 1/15/01
3.1.11.19 NMAC - N, 1/31/05; A, 11/30/05; Repealed, 1/31/08

Part 12 Miscellaneous Provisions

N.M. Admin. Code § 3.1.12.1 Issuing Agency

Taxation and Revenue Department, Joseph M. Montoya Building, 1100 South St. Francis Drive, P.O. Box 630, Santa Fe NM 87504-0630

History

10/31/96; 3.1.12.1 NMAC - Rn, 3 NMAC 1.12.1, 1/15/01

N.M. Admin. Code § 3.1.12.2 Scope

History

10/31/96; 3.1.12.2 NMAC - Rn, 3 NMAC 1.12.2, 1/15/01

N.M. Admin. Code § 3.1.12.3 Statutory Authority

Section 9-11-6.2 NMSA 1978.

History

10/31/96; 3.1.12.3 NMAC - Rn, 3 NMAC 1.12.3, 1/15/01

N.M. Admin. Code § 3.1.12.4 Duration

Permanent.

History

10/31/96; 3.1.12.4 NMAC - Rn, 3 NMAC 1.12.4, 1/15/01

N.M. Admin. Code § 3.1.12.5 Effective Date

10/31/96, unless a later date is cited at the end of a section, in which case the later date is the effective date.

History

10/31/96; 3.1.12.5 NMAC - Rn & A, 3 NMAC 1.12.5, 1/15/01

N.M. Admin. Code § 3.1.12.6 Objective

The objective of this part is to interpret, exemplify, implement and enforce the provisions of the Tax Administration Act.

History

10/31/96; 3.1.12.6 NMAC - Rn, 3 NMAC 1.12.6, 1/15/01

N.M. Admin. Code § 3.1.12.7 Definitions

Reserved.

History

10/31/96; 3.1.12.7 NMAC - Rn, 3 NMAC 1.12.7, 1/15/01

N.M. Admin. Code § 3.1.12.8 Reporting Sale or Use of Fuel for Turboprop or Jet-Type Engines

A. Each month, the department shall distribute to the state aviation fund a percentage of the gross receipts or value attributable to the sale or use of fuel specially prepared and sold for use in turboprop or jet-type engines as specified in Section 7-1-6.7 NMSA 1978.

B. In order for the department to be able to determine the correct amount to be distributed to the aviation fund, the department requires, pursuant to Subsection 7‑1‑10E NMSA 1978, taxpayers who are in the business of selling fuel for use in turboprop and jet engines, users who are direct purchasers of such fuel from out‑of‑state sources and users who purchase such fuel through the use of nontaxable transaction certificates are required to report the dollar amount of such sales or purchases to the department on forms to be supplied by the department. This information shall be submitted to the department as an attachment to the taxpayer's monthly CRS‑1 report and is due by the 25th day of the month following the end of the period covered by the CRS-1 report.

History

7/2/82, 11/5/85, 8/15/90, 10/31/96; 3.1.12.8 NMAC - Rn & A, 3 NMAC 1.12.8, 1/15/01; A, 12/15/11

N.M. Admin. Code § 3.1.12.9 Ethanol Producers' Reporting Requirements

Any person doing business in the state of New Mexico as an ethanol producer (manufacturer) shall file monthly reports, providing information necessary to the administration of the Gasoline Tax Act, in form and content as prescribed by the department.

History

2/19/86, 8/15/90, 10/31/96; 3.1.12.9 NMAC - Rn, 3 NMAC 1.12.9, 1/15/01

N.M. Admin. Code § 3.1.12.10 Tax Identification on Vending Machines

All coin-operated vending machine owners shall prominently display on the front of each machine a plaque or sticker which bears the owner's name, complete address and combined reporting system (CRS) taxpayer identification number.

History

10/12/71, 11/5/85, 8/15/90, 10/31/96; 3.1.12.10 NMAC - Rn, 3 NMAC 1.12.10, 1/15/01

N.M. Admin. Code § 3.1.12.11 Security Posted by Gasoline Distributors

Registered gasoline distributors shall post security as required by the secretary or secretary's delegate pursuant to 3.16.7.10 NMAC.

History

2/19/86, 8/15/90, 10/31/96; 3.1.12.11 NMAC - Rn & A, 3 NMAC 1.12.11, 1/15/01

N.M. Admin. Code § 3.1.12.12 Liquor Wholesale Reporting Requirements

Any person doing business in the state of New Mexico as a liquor wholesaler shall file monthly reports, providing sales information necessary to the administration of the Gross Receipts and Compensating Tax Act, in form and content as prescribed by the department. The monthly report is due by the 25th day of the month following the close of the calendar month in which the alcoholic beverages are sold.

History

3.1.12.12 NMAC - N, 4/28/06

N.M. Admin. Code § 3.1.12.13 Collection of Community Debt Against a Spouse or Former Spouse

The secretary or secretary’s delegate may decline to bring an action or proceeding to collect community debt against a spouse or former spouse when bringing an action or proceeding would be inequitable.

A. In the case of community tax debt arising from a jointly-filed income tax return, the secretary or the secretary’s delegate may decline to bring an action or proceeding to collect such taxes against the spouse or former spouse of a taxpayer who is granted relief by the internal revenue service (IRS) pursuant to 26 U.S.C. Section 6015. Where relief is granted in writing by the IRS, the spouse who received such relief may provide a copy of the IRS’s determination and request that the secretary cease any collection activity against that spouse or former spouse to the extent such relief was allowed by the IRS. The secretary or the secretary’s delegate may decline to pursue collection activity against a spouse or former spouse for community debt while an application for such relief is pending before the IRS, but the failure to seek or obtain such relief shall not preclude the secretary or secretary’s delegate from declining to bring an action or proceeding against a spouse or former spouse for collection of a community debt when bringing an action or proceeding would be inequitable. The secretary or the secretary’s delegate shall consider the following facts and circumstances when determining whether to bring an action or proceeding to collect community debt:

(1) Did the spouse or former spouse have knowledge of the tax liability at the time that liability arose?

(2) Did the spouse or former spouse have a meaningful opportunity to contest the assessment of tax at the time the assessment was made?

(3) Has the spouse or former spouse cooperated with the department in collection and compliance efforts?

(4) Can the state protect its interests without pursuing active collection efforts against the spouse or former spouse, including collection efforts against the other spouse or former spouse?

(5) Has the spouse or former spouse benefited from the transfer of significant amounts of property from the other spouse or former spouse?

(6) Was the spouse or former spouse given an opportunity to participate in the business decisions of the household during the periods when the debt arose?

B. In addition to the facts and circumstances listed in Subsection A above, in the case of a community debt arising from the conduct of a business within the state, including taxes collected under the combined reporting system, the secretary or the secretary’s delegate shall also consider the following facts and circumstances when determining whether to bring an action or proceeding to collect community debt:

(1) Did the spouse or former spouse participate in the conduct of the business, including responsibility for payment of taxes and other debts?

(2) Has the spouse or former spouse benefited from the conduct of the business?

(3) Did the spouse or former spouse know that the other spouse or former spouse had a business?

C. The secretary or the secretary’s delegate shall weigh all applicable factors when determining whether to decline to bring an action or proceeding. No one factor shall be considered determinative. Each of these factors may be given different relative weight, depending on the facts and circumstances of each case, therefore the presence of a majority of said factors tending to indicate “innocent spouse” in a particular case may not necessarily indicate that the taxpayer in question qualifies as an “innocent spouse” for New Mexico tax purposes.

D. Nothing in this regulation shall be construed to apply to offsets of refunds or credits to collect on community debts.

E. The secretary and the secretary’s delegate has discretion to allow relief under this section. A spouse or former spouse who believes he or she is entitled to relief under this section may petition for such relief to the secretary in writing. The spouse or former spouse has the burden of proof in establishing his or her entitlement to the relief requested. A spouse or former spouse who believes that the request for relief under this section has been improperly denied may protest that decision under Section 7-1-24 NMSA 1978.

HISTORY OF 3.1.12 NMAC:

Pre-NMAC History: The material in this part was derived from that previously filed with the State Records Center:

BOR 67-1, Tax Administration Act, 7/19/67, filed 7/28/67.

R.D./OGAD Rule No. 1985, Regulations Pertaining to the Tax Administration Act, filed 11/5/85.

TRD Rule TA-90, Regulations Pertaining to the Tax Administration Act, Sections 7-1-1 to 7-1-82 NMSA 1978, filed 8/15/90.

History of Repealed Material: [RESERVED]

NMAC History:

3 NMAC 1.12, Tax Administration - Miscellaneous Provisions, filed 10/17/96.

3.1.12 NMAC, Tax Administration - Miscellaneous Provisions, filed 1/4/2001.

History

3.1.12.13 NMAC - N, 10/31/07

Chapter 2 Gross Receipts Taxes

Part 1 General Provisions

N.M. Admin. Code § 3.2.1.1 Issuing Agency

Taxation and Revenue Department, Joseph M. Montoya Building, 1100 South St. Francis Drive, P.O. Box 630, Santa Fe NM 87504-0630.

History

3.2.1.1 NMAC - Rp, 3.2.1.1 NMAC 10/13/2021

N.M. Admin. Code § 3.2.1.2 Scope

This part applies to all persons engaging in business in New Mexico.

History

3.2.1.2 NMAC - Rp, 3.2.1.2 NMAC 10/13/2021

N.M. Admin. Code § 3.2.1.3 Statutory Authority

Section 9-11-6.2 NMSA 1978.

History

3.2.1.3 NMAC - Rp, 3.2.1.3 NMAC 10/13/2021

N.M. Admin. Code § 3.2.1.4 Duration

Permanent.

History

3.2.1.4 NMAC - Rp, 3.2.1.4 NMAC 10/13/2021

N.M. Admin. Code § 3.2.1.5 Effective Date

October 13, 2021, unless a later date is cited at the end of a section, in which case the later date is the effective date.

History

3.2.1.5 NMAC - Rp, 3.2.1.5 NMAC 10/13/2021

N.M. Admin. Code § 3.2.1.6 Objective

The objective of this part is to interpret, exemplify, implement and enforce the provisions of the Gross Receipts and Compensating Tax Act.

History

3.2.1.6 NMAC - Rp, 3.2.1.6 NMAC 10/13/2021

N.M. Admin. Code § 3.2.1.7 Definitions

The terms defined in 3.2.1.7 NMAC apply throughout 3.2 NMAC.

A. Benefit: A “benefit” is any consideration to either party. “Benefit” is not limited to profits, pecuniary gains, or any particular kind of advantage.

B. Consideration: “consideration” is any benefit, interest, gain or advantage to one party, usually the seller, or any detriment, forbearance, prejudice, inconvenience, disadvantage, loss of responsibility, act or service given, suffered, or undertaken by the other party, usually the buyer.

C. Detriment: A “detriment” is a forbearance of either party of a right which the party is entitled to exercise or any consideration flowing from either party, not limited to payment of money or transfer of property.

D. Digital good: A “digital good” means a digital product delivered electronically, including software, music, photography, video, reading material, an application and a ringtone. A digital good generally takes the form of a license to use and which property is stored, conveyed, and used in a digital or electronic format. Digital goods are generally intangible property for purposes of the Gross Receipts and Compensating Tax Act.

E. Financial corporations:

(1) A financial corporation is any corporation primarily dealing in moneyed capital and in substantial competition with commercial banks.

(2) Example 1: FC is a corporation which is primarily engaged in the following activities:

(a) buying and selling mortgages on real estate,

(b) initiating mortgages on real estate and selling these mortgages, and

(c) servicing mortgages. FC is a financial corporation because it is primarily dealing in moneyed capital and is in substantial competition with commercial banks.

(3) Example 2: IA is an insurance agency which, as an adjunct of its primary business, loans money to finance premiums. IA is not a financial corporation because it is not primarily dealing in moneyed capital and it is not in substantial competition with commercial banks.

(4) Example 3: A corporation which receives a commission on sales of money orders to its customers as an adjunct of its primary business is not a financial corporation within the meaning of Subsection C of Section 7-9-3 NMSA 1978 simply because it engages in this business activity.

(5) Example 4: A corporation which is engaged in the following activities is not a financial corporation because it is not primarily dealing in moneyed capital and is not in substantial competition with commercial banks:

(a) acting as an investment advisor to a mutual fund and others and receiving a fee for such services;

(b) acting as principal underwriter for the same mutual fund as in Paragraph (2) of Subsection E of 3.2.1.7 NMAC above and receiving a fixed percentage of the selling price of the securities sold as a commission or fee; or

(c) issuing a weekly stock analysis report as an advisory service, receiving for this service payment in the form of subscription fees.

F. Franchise:

(1) A "franchise" is an agreement in which the franchisee agrees to undertake certain business activities or to sell a particular type of product or service in accordance with methods and procedures prescribed by the franchisor, and the franchisor agrees to assist the franchisee through advertising, promotion and other advisory services. The franchise usually conveys to the franchisee a license to use the franchisor's trademark or trade name in the operation of the franchisee's business.

(2) Example: Y, a pie company of Cambridge, Massachusetts, grants to X of Virden, New Mexico, the right to make pies according to their exclusive recipe and to operate Y Pie shops throughout New Mexico. The right to make the pies and operate the pie shops, whether granted for a "one-time" payment or for a continuing percentage of the proceeds of the shops, is a franchise. Therefore, the receipts of Y, from its granting of the franchise are subject to gross receipts tax.

G. Computer-related terms:

(1) "Computer software" means computer programming in whatever form or medium.

(2) "Custom software" means computer programming developed specifically at the order of another or for a specific purpose. "Custom software" includes the modification of existing computer programming.

(3) "Packaged software" means computer programming embodied in electronic, electromagnetic or optical materials for transfer from one person to another, with or without explanatory materials, instructions or other programming and intended to be sold or licensed without modification to multiple buyers or users.

(4) “Digital software” means packaged software that is transmitted electronically rather on any type of material.

(5) "Software" means "computer software".

H. “Marketplace provider: A “marketplace provider” means a person who facilitates the sale, lease or license of tangible personal property or services or licenses for use of real property on a marketplace seller's behalf, or on the marketplace provider's own behalf. To “facilitate”, as that term is used here, means listing or advertising the sale, lease or license, by any means, whether physical or electronic, including by catalog, internet website or television or radio broadcast; and either directly or indirectly, through agreements or arrangements with third parties collecting payment from the customer and transmitting that payment to the seller, regardless of whether the marketplace provider receives compensation or other consideration in exchange for the marketplace provider's services. A marketplace provider also includes a person that has gross receipts as a marketplace provider under Section 7-9-3.5 NMSA 1978 from the sales of licenses, including digital goods.

I. Marketplace seller: A “marketplace seller” means a person who sells, leases or licenses tangible personal property or services or who licenses the use of real property through a marketplace provider. A marketplace seller also includes a seller that sells licenses through a marketplace provider.

J. Practitioner of the healing arts: A "practitioner of the healing arts" is a person licensed to practice in this state medicine, osteopathic medicine, acupuncture and oriental medicine, dentistry, podiatry, optometry, chiropractic, nursing or similar medical services for human beings. The term also includes veterinarians licensed to practice in this state.

K. Person engaged in the construction business: A "person engaged in the construction business" is a person who performs construction services as defined in Section 7-9-3.4 NMSA 1978.

History

3.2.1.7 NMAC - Rp, 3.2.1.7 NMAC 10/13/2021

N.M. Admin. Code § 3.2.1.8 Citation of Regulations

Unless otherwise stated, all citations of statutes in Chapter 3.2 NMAC with respect to the Gross Receipts and Compensating Tax Act are to the New Mexico Statutes Annotated, 1978 (NMSA 1978).

3.2.1.9 [RESERVED]

3.2.1.10 [RESERVED]

History

3.2.1.8 NMAC - Rp, 3.2.1.8 NMAC 10/13/2021

N.M. Admin. Code § 3.2.1.11 Construction

A. Construction service as distinguished from other services.

(1) The term "construction" is limited to the activities, or management of the activities, which are listed in Section 7-9-3.4 NMSA 1978 and which physically change the land or physically create, change or demolish a building, structure or other facility as part of a construction project.

(2) “Construction" does not include services that do not physically change the land or physically create, change or demolish a building, structure or other facility as part of a construction project, even though they may be related to a construction project. The fact that a service may be a necessary prerequisite or ancillary to construction or a construction project does not in itself make the service a construction service. Excluded from the meaning of "construction" are activities such as, but not limited to: hauling to or from the construction site, maintenance work, landscape upkeep, the repair of equipment or appliances, laboratory work or accounting, architectural, engineering, surveying, traffic safety or legal services. Some of these activities may qualify as construction-related services; see Section 7-9-52 NMSA 1978.

B. Construction includes: Pursuant to Section 7-9-3.4 NMSA 1978 the term "construction" includes the painting of structures, the installation of sprinkler systems and the building of irrigation pipelines.

C. Construction does not include:

(1) The term "construction" does not include the installation of carpets or the installation of draperies, but see 3.2.209.25 NMAC.

(2) The term “construction”, as defined in Section 7-9-3.4 NMSA 1978, does not include leasing or renting tangible personal property, such as construction equipment, with or without an operator but see Section 7-9-52.1 NMSA 1978 for transactions on or after January 1, 2013.

D. Oil and gas industry construction:

(1) "Construction", as this term is used in Section 7-9-3.4 NMSA 1978, includes the following activities related to the oil and gas industry:

(a) building and altering of gas compression plant facilities and pump stations, including: clearing of property sites; excavating for foundations; building and setting foundation forms; mixing, pouring, and finishing concrete foundations for buildings and plant equipment on foundations; fabricating and installing piping; installing electrical equipment, insulation, and instruments; erecting buildings; placing sidewalks, drives, parking areas; installing storage tanks; and dismantling equipment and reinstalling elsewhere;

(b) building of or extension of gas-gathering pipelines, including: connecting gathering lines to lease separators, fabricating and installing meter runs, digging trenches, beveling pipe, welding pipe, wrapping pipe, backfilling trenches, testing pipelines, fabricating and installing pipeline drips and installing conduit for pipelines crossing roads or railroads;

(c) building of or extension of product pipelines, including: building pressure-reducing stations; connecting pipelines to storage tanks, fabricating and installing valve assemblies, digging trenches, beveling pipe, welding pipe, wrapping pipe, laying pipe, backfilling trenches, testing pipelines and installing conduit for pipeline crossing roads or railroads;

(d) building secondary-recovery systems, including: excavating and building foundations, installing engines and water pumps, installing pipelines for water intake, installing pipelines for carrying pressured water to input wells, installing instruments and controls and erecting buildings;

(e) installing lease facilities, including: installing wellheads, flow lines, chemical injectors, separators, heater-treaters, tanks, stairways and walkways; building foundations; and setting pump units and engines, central power units and rod lines;

(f) demolishing pipelines, including: digging trenches to uncover pipelines, dismantling and removing drips and meter runs, backfilling trenches, tamping and smoothing right-of-way;

(g) increasing pipeline capacity, including: removing small pipelines and replacing with larger lines, and digging adjoining trenches and laying new pipelines;

(h) repairing plant, including: replacing tubing in atmospheric condensers, replacing plugged boiler tubing; removing cracked, broken or damaged portions of foundations and replacing anew; replacing compressors, compressor engines, or pumps; and regrouting and realigning compressors;

(i) drilling wells, including: drilling ratholes, excavating cellars and pits, casing crew services, cementing services, directional drilling, drill stem testing and fishing jobs in connection with drilling operations;

(j) general dirt work, including: building roads, paving with caliche or other surfacing materials; digging pits, trenches, and disposal ponds, building firewalls and foundation footing; and constructing pads from caliche or other materials.

(2) "Construction", as the term is used in Section 7-9-3.4 NMSA 1978, does not include the following activities related to the oil and gas industry:

(a) well servicing, including: acidizing and fracturing formations; pulling and rerunning rods or tubing; loading or unloading a well; shooting; scraping paraffin; steaming flow lines and tubing; inspecting equipment; fishing jobs, other than in connection with drilling operations; bailing cave-ins; reverse circulating and resetting packers;

(b) lease and plant maintenance, including: cleaning; weed-control; preventive care of machinery, pipelines, gathering systems, and engines; tank cleaning; testing of flow lines by pressure or X-ray means; cleaning lines and tubing by acid treatment or mechanical means, or replacing and restoring machinery components;

(c) transporting equipment, including: transporting drilling rigs, rigging-up and rigging-down, and hauling water and mud;

(d) salvaging of materials from a "production unit", as defined in the Oil and Gas Emergency School Tax Act, such as: killing the gas pressure, removing casing heads, welding pull nipples on the casing, cutting or shooting casing strings, pulling casings from the well bore, cementing to fill the abandoned well or plug the well, filling the cellar, and welding steel pipe markers;

(e) rental of equipment such as: power tongs, blowout preventors, tanks, pipe racks, core barrels, integral parts of a drilling rig or integral parts of a circulation unit, for transactions on or after January 1, 2013, see Section 7-9-52.1 NMSA 1978;

(f) measuring, "logging" and surveying services in connection with the drilling of an oil or gas well are construction-related services as of January 1, 2013, see Section 7-9-52 NMSA 1978. "Logging" as that term is used in this subsection is a method of testing or measuring an oil or gas well by recording various aspects of the geological formations penetrated by the well.

E. Construction includes prefabricated buildings; prefabricated versus modular buildings:

(1) The sale of prefabricated buildings, whether constructed from metal or other material, is the sale of construction. A prefabricated building is a building designed to be permanently affixed to land and manufactured (usually off-site) in components or sub-assemblies which are then assembled at the building site. Prefabricated buildings are not designed to be portable nor are they capable of being relocated.

(2) A portable building or a modular building is a building manufactured (usually off-site) which is designed to be moveable or is capable of being relocated and, when delivered to the installation site, generally requires only blocking, levelling and, in the case of modular buildings, joining of modules. For the purposes of Subsection F of 3.2.1.11 NMAC, neither portable buildings, modular buildings nor manufactured homes defined as vehicles by Section 66-1-4.11 NMSA 1978 are prefabricated buildings.

F. Construction materials and services; landscaping:

(1) Landscaping items, such as ornaments, rocks, trees, plants, shrubs, sod and seed, which are sold to a person engaged in the construction business, that are an integral part of the construction project, are construction materials. Persons who seed, lay sod or install landscape items in conjunction with a construction project are performing construction services.

(2) Receipts from selling landscaping items to, and from seeding, laying sod or installing landscape items for, persons engaged in the construction business may be deducted from gross receipts if the buyer delivers a nontaxable transaction certificate to the seller as provided in Section 7-9-51 and Section 7-9-52 NMSA 1978, respectively.

G. Nontaxable transaction certificates:

(1) Nontaxable transaction certificates are available from the department for persons who are engaged in the construction business and performing activities, as set forth in Sections 7-9-3.4, 7-9-52 and 7-9-52.1 NMSA 1978 to execute to providers of construction materials, construction services, construction-related services and lessors of construction equipment. See 3.2.201.11 NMAC for additional requirements on construction contractors to obtain nontaxable transaction certificates.

(2) Only persons who are licensed by the state of New Mexico as construction contractors may apply for and execute nontaxable transaction certificates under the provisions of Sections 7-9-51 NMSA 1978, 7-9-52 NMSA 1978, and 7-9-52.1 NMSA 1978, except that a person who performs construction activities as defined in Section 7-9-3.4 NMSA 1978 in the ordinary course of business, and who is exempt from the laws of the state of New Mexico requiring licensing as a contractor may apply for and execute such certificates.

H. Construction materials; general:

(1) The term "construction materials" means tangible personal property which is intended to become an ingredient or component part of a construction project.

(2) Tangible personal property intended ultimately to become an ingredient or component part of a construction project although not purchased for a specific project is nonetheless a construction material. Example: A government agency makes bulk purchases of asphalt which is stored by the agency for use in future road construction or repair projects. The asphalt is a construction material.

(3) Tools, equipment and other tangible personal property not designed or intended to become ingredients or component parts of a construction project are not construction materials if such materials accidentally become part of a construction project. Example: A workman accidentally drops a pair of gloves and a hammer into a form into which concrete is being poured. Because the gloves and the hammer are not intended to be included in the concrete structure, they are not construction materials.

History

3.2.1.11 NMAC - Rp, 3.2.1.11 NMAC 10/13/2021

N.M. Admin. Code § 3.2.1.12 Engaging in Business

A. Engaging in business:

(1) Generally: For periods beginning July 1, 2020, “engaging in business” conforms to the constitutional requirement for substantial nexus under South Dakota v. Wayfair, 585 U.S. (2018). A person that has physical presence in the state and is also conducting activity with the purpose of direct or indirect benefit is engaging in business and subject to the imposition of gross receipts tax. A person that does not have physical presence in the state is nevertheless engaging in business and has substantial nexus in New Mexico if, in the preceding calendar year, that person has total taxable gross receipts from sales, leases and licenses of tangible personal property, sales of licenses and sales of services and licenses for use of real property sourced to this state pursuant to Section 7-1-14 NMSA 1978, of at least one hundred thousand dollars ($100,000).

(2) A person who is required to register with the department for the purposes of the gross receipts tax may close its gross receipts tax account following any calendar year in which it no longer meets the requirements for engaging in business set out in Section 7-9-3.3 NMSA 1978. For example, a person who does not currently have physical presence in New Mexico and who did not have total taxable gross receipts from sales, leases and licenses of tangible personal property, sales of licenses and sales of services and licenses for use of real property sourced to this state pursuant to Section 7-1-14 NMSA 1978 of at least $100,000, may close its gross receipts tax account for the 20XX calendar year. In order to close its registration and its future filing obligations, such person must submit its request to close its registration and specify the closure date on a form prescribed by the department. The person’s duty to register will resume in any calendar year in which it meets the requirements of Section 7-9-3.3 NMSA 1978.

(3) A person who has not registered or been otherwise identified is nonetheless a “taxpayer” subject to the provisions of the Tax Administration Act, 3.1.1.13 NMAC.

B. Affiliated corporations:

(1) When a corporation is carrying on or causing to be carried on, with a wholly owned subsidiary, any activity with the purpose of direct or indirect benefit, both the corporation and the subsidiary are "engaging in business".

(2) Example: B corporation, which operates a hotel supply house, sells supplies only to C Hotel Corporation, which owns all the stock in B Corporation. B claims that since it sells only to C, its parent corporation, it is not engaging in business. B and C are each engaging in business because the purpose of their activities is to benefit either or both corporations.

C. Corporation not for profit: When a corporation not for profit is carrying on or is causing to be carried on any activity with the purpose of direct or indirect benefit it is "engaging in business".

D. Leasing property:

(1) Persons leasing property employed in New Mexico are engaging in business within the state for the purpose of direct or indirect benefit.

(2) Example: X, an out of state business, leases construction machinery to Y who employs the leased property in New Mexico. X asks if X is engaged in business in New Mexico for purpose of registration, reporting and paying the gross receipts tax. X is engaged in business in New Mexico.

E. Hotels and motels providing interstate telecommunications service to guests:

(1) Hotels, motels and similar establishments offering interstate telecommunications service to guests in conjunction with the rental of rooms or other facilities are not "engaging in interstate telecommunications business" for purposes of the Interstate Telecommunications Gross Receipts Tax Act.

(2) A hotel, motel or similar establishment is primarily engaged in the business of renting rooms and meeting facilities to the general public. Providing interstate telephone service or other interstate telecommunications services to guests is incidental to the primary business of the hotel, motel or similar establishment. Receipts from providing such service are additional receipts from engaging in the primary business and are subject to the provisions of the Gross Receipts and Compensating Tax Act.

(3) Subsection D of 3.2.1.12 NMAC is retroactively applicable to transactions occurring on or after July 1, 1992.

F. Persons not engaging in business - foster parents: Individuals who enter into an agreement with the state of New Mexico to provide foster family care for children placed with them by the state are not thereby engaging in business. Receipts of the individuals from providing foster care pursuant to such an agreement are not receipts from engaging in business.

G. Persons not engaging in business - certain caretakers: Individuals who enter into an agreement with the state of New Mexico to provide non-medical personal care and housekeeping assistance to low income disabled adults pursuant to the critical in home care program are not thereby engaging in business. Receipts of the individuals from such caretaking activities are not receipts from engaging in business.

H. Persons not engaging in business - home care for developmentally disabled family members: Any individual who enters into an agreement with the state of New Mexico to provide home based support services for developmentally disabled individuals in the home of the developmentally disabled individuals or the home of the support provider and receives payments which under 26 USCA 131 are "qualified foster care payments" is not thereby engaging in business. Receipts of the individuals which are "qualified foster care payments" from providing such home based support services pursuant to such an agreement are not receipts from engaging in business.

I. Owner engaged in business when selling to an owned entity:

(1) Except as provided in Paragraph (2) of this Subsection, when an owner of an entity sells property in New Mexico to, leases property employed in New Mexico to, or performs services in New Mexico for the entity or other owners of the entity, the owner is engaging in business in New Mexico except when the transaction may be characterized for federal income tax purposes as a contribution of capital.

(2) When a partner or interest holder in an entity taxed as a partnership is allocated profits or receives a guaranteed payment or other distributions for activities undertaken as a partner on behalf of the partnership such as administrative services done solely for the benefit of the partnership or for activities for third -parties transacting business with the partnership, the partner is not engaging in business separately from the partnership and the allocations, payments, or distributions are not gross receipts. A partner may, however engage in business separately from the partnership and any transactions between that partner and the partnership, where the partner is not acting as a partner on behalf of the partnership, constitute gross receipts from engaging in business. Indicia that a partner is not acting as a partner on behalf of the partnership may include:

(a) that the partner engages in similar transactions with third parties other than the partnership; or

(b) that the allocation, payment, or distribution made by the partnership is not made under the partnership agreement; or

(c) that the partner's transaction(s) with the partnership involve the sale or lease of goods or the sale of services not provided by the partnership to third parties.

(3) For the purposes of Subsection H of 3.2.1.12 NMAC, an "entity" means any business organization or association other than a sole proprietorship.

J. Persons not engaging in business - sale or exchange of renewable-fueled electricity generated from a system installed in a personal residence. Any individual who sells or transfers electricity to an entity engaged in the business of selling electricity, for which the individual receives monetary compensation or credit against a future month's electricity use, is not engaged in business if the electricity is generated from a renewable-fueled system installed in a personal residence.

3.2.1.13 [RESERVED]

History

3.2.1.12 NMAC - Rp, 3.2.1.12 NMAC 10/13/2021; A, 12/19/2023

N.M. Admin. Code § 3.2.1.14 Gross Receipts - General

A. Credit card sales: Gross receipts of the seller of property or services or the lessor of property include the full sale or lease contract amount of any property or service sold or of any property leased when payment is made through the use of a credit card which has been issued by a third party. The seller or lessor may not deduct from gross receipts the amount charged by the credit card company for converting the account into cash.

B. Consideration other than money:

(1) If the consideration received by the seller or lessor for the item sold or leased or for the service performed is in a form other than money, the fair market value of the consideration received or the fair market value of the item sold or of the lease or of the service performed must be included in gross receipts. The value of the consideration received or the item sold or of the lease or of the service performed is the fair market value at the time of the transaction.

(2) Example 1: X has Y, a garage owner, repair X's automobile. In exchange for the service performed by Y, X gives Y a deer rifle. The fair market value of the rifle at the time of the transaction is the measure of Y's gross receipts.

(3) Example 2: X, a New Mexico construction company, contracts with Y Electric Co-op Association for the construction of transmission lines. The contract requires X to furnish all materials and labor for a fixed price; however, it permits a reduction of the contract price in the amount of the value of materials furnished by Y. The gross receipts of X include the value of any material supplied by the cooperative.

(4) Example 3: X is a firm engaged in the construction business in New Mexico. The receipts of X from the sale of a completed construction project include the value of construction services performed by the buyer of the construction project pursuant to a “sweat labor contract” if the performance of services are required to fulfill a contractual obligation of X. A “sweat labor contract”, as used in this example, is a contract whereby the buyer of a completed construction project agrees to perform certain construction services for the seller of the construction project as partial payment of the sale price of the construction project.

(5) Example 4: M agrees to drill an oil well for the XYZ Oil Company. The contract provides that M will drill the well for $7.50 per foot and a one-eighth interest in the minerals which belong to XYZ. The well, when completed, produces forty barrels of oil per day for a period which is expected to last for 10 years. M admits that the $7.50 per foot that is received from drilling the well are gross receipts subject to the gross receipts tax. M questions whether the value of the one-eighth interest is gross receipts. The value of the mineral interest is consideration and must be included in M's gross receipts. It will be valued at its fair market value at the time the well is completed.

(6) Example 5: The A Oil Company hires the B Drilling Company to drill a well on its property. A furnishes drill bits to B, but A has the right to deduct the rental value of the bits from the total footage or day rate price it agrees to pay B for the drilling. The use of the drill bits is partial consideration, furnished by A, for the performance of the drilling service by B and the reasonable value of their use must be included in B's gross receipts. A also must include the rental value of the bits in its gross receipts because it is leasing the drill bits to B. However, if A furnishes drill bits to B and does not have the right to deduct the rental value of the bits from the total footage or day rate price which it has agreed to pay B for the drilling, then no amounts from the drill bit transaction are includable in either A's or B's gross receipts. The same applies if B furnishes the drill bits.

C. Consideration less than fair market value:

(1) In a transaction where the actual consideration received does not represent the fair market value of the property sold or leased or of the service sold, the fair market value shall be included in the gross receipts of the seller or lessor. Fair market value is the value which the property or service can command in an arms length transaction between two independent parties in an open market.

(2) The following example illustrates the application of Section 7-9-3.5 NMSA 1978 with respect to consideration less than fair market value. Example: X, a land and cattle company, is a corporation which is affiliated with Y, an equipment company. Because of their affiliation, X leases a $30,000 tractor from Y for $l.00 a month. Y reports that its gross receipts from this transaction are $l.00. Y's gross receipts are the market value of a monthly lease of a $30,000 tractor. Y must pay gross receipts tax on the adjusted amount.

D. Sale of commercial paper:

(1) The full sale or leasing contract amount of property or service sold, excluding any type of time price differential, is included in the seller's gross receipts even though the seller subsequently sells the contract and does not receive the total contract price in money. No deduction is allowed for discounts suffered from the sale of commercial paper arising from a sale or lease.

(2) Example: X sells a washing machine to Y under a conditional sales contract in which the full sale contract amount, excluding time price differential, is $120. The principal on the washing machine is to be paid for over a twelve month period at $10 a month. X collects $20 of principal under the contract and then assigns its rights to W for $90. Depending upon the method regularly used for reporting gross receipts, X would either pay tax on the full contract amount for the month in which the sale was made (accrual basis) or pay tax measured by the receipts as they were received (cash basis). If X had elected to pay tax measured by its receipts as they were received, X would have reported $20 during the first two months from this transaction. When X assigned the contract, X would have to include $100 in the gross receipts for the third month since a deduction is not allowed for a discount suffered upon the transfer of a conditional sales contract.

E. Interdepartmental transfers:

(1) Receipts derived from an interdepartmental transfer of services or property are not subject to the gross receipts tax. To qualify as an interdepartmental transfer, the transfer must be a transfer of services or property within the same corporation or other taxable entity.

(2) Example: C, a company located in New Mexico, operates both an electric utility and a water utility. C records on its books the sale of the electricity to the water utility in order to comply with the public service commission regulations but does not thereby incur gross receipts as that term is used in the Gross Receipts and Compensating Tax Act. Such book entries do not record receipts from selling property in New Mexico but record interdepartmental transfers. However, the value of the electricity at the time of its conversion to use by the water utility is subject to the compensating tax.

F. Service charges computed on balances:

(1) Service charges on accounts receivable balances or installment sales contracts which are not computed at the time of sale, are time-price differential charges, are not subject to the gross receipts tax and are not to be included in the sales price of an item brought into New Mexico for the purpose of computing the compensating tax.

(2) Example: X corporation located outside New Mexico is engaged in the business of publishing books. X has several nonemployee salesmen soliciting orders on a commission basis in New Mexico. Every such order is forwarded to X's main office where it is reviewed and then either accepted or rejected. Accepted orders are shipped directly to the purchaser from X's binderies located outside of New Mexico. Since X has salesmen in New Mexico, it is an agent for collection of the compensating tax, pursuant to Section 7 9 10 NMSA 1978. The purchaser may elect to pay for the books on an installment basis. If after 90 days from purchase, the balance has not been paid, a one percent per month service charge is added to the balance. This charge is not precomputed and no portion thereof is due unless the purchaser elects to pay on an installment plan extending over 90 days. Such a charge is a time-price differential and is not a part of the sales price of the item. Therefore, it should not be included in the sales price when considering the amount of compensating tax that should be paid over to the state of New Mexico.

G. Corporations and organizations not organized for profit - fund raising activities:

(1) Receipts of a corporation or organization not organized for profit, other than an organization granted a 501(c)(3) determination by the internal revenue service, derived from fund raising activities which are in the nature of donations, gifts, and contributions are not subject to the gross receipts tax.

(2) The department will presume that the total receipts of such a nonprofit organization from a fund raising activity are receipts derived from a taxable activity if the project involves the performance of any service or the sale or lease of any property by the organization. This presumption may be overcome by establishing the following:

(a) the purchaser or lessee of the property or service intended by the purchase or lease to make a gift, donation, or contribution to the organization; and

(b) the purchase or lease price clearly exceeded the fair market value of the service or property or the fair rental value of the property.

(3) If these conditions are satisfied, the amount of consideration received by the organization in excess of the fair market price or fair rental value is not subject to the gross receipts tax.

H. Discount coupons: The gross receipts attributable to a sale in which a seller accepts discount coupons provided by buyers are measured by the cash received plus the value of the coupon. However, if the discount coupon is not redeemable by the seller, the acceptance of the coupon constitutes a cash discount allowed and taken and is excluded from gross receipts.

I. Gross receipts embezzled: Receipts that have been embezzled or lost through bookkeeping errors are not a cash discount allowed and taken; such receipts are not deductible under Section 7 9 67 NMSA 1978 because they are not a refund, allowance or uncollectible debt.

J. Vending machines:

(1) A vending machine is a device that, when the appropriate payment has been inserted into it, whether payment is made by coins, tokens, paper money, credit card, debit card or other means, dispenses tangible personal property, performs a service (including entertainment) or dispenses tickets, tokens or similar objects redeemable for money, tangible personal property or services; but “vending machine” does not include any device which is designed to primarily or solely to play a game of chance, such as slot machines, video gaming machines and the like.

(2) Amounts received from allowing the vending machine to be placed in a location as well as amounts received from use of or sales from vending machines are gross receipts and are subject to the gross receipts tax. The vending machine owner is responsible for reporting the receipts and paying the gross receipts tax.

(3) Receipts derived from allowing vending machines to be placed in a location not owned or rented by the vending machine owner are gross receipts and are subject to the gross receipts tax. Except as provided otherwise in Subsection K of Section 3.2.1.14 NMAC, the person receiving the receipts is responsible for reporting the receipts and paying the gross receipts tax with respect to such receipts.

(4) If the vending machine owner and a person controlling the premises where the machine is located enter into a written agreement similar to the one below, the department will presume that a joint venture has been created, that the joint venture is registered with the department and that the vending machine owner has agreed to pay all gross receipts tax due with respect to the joint venture. In such a case, the person owning the machine, on behalf of the joint venture, will report and pay the gross receipts tax due on all the receipts derived from either allowing the vending machine to be placed in a location or sales from the vending machine for all parties in the joint venture and the person controlling the premises is relieved of the duty to report or pay gross receipts tax on those same receipts.

(5) Agreement: Total amounts collected from the vending machine shall be allocated between the vending machine owner and the person controlling the location. The vending machine owner will receive a percentage of the amounts collected net of gross receipts tax due, plus an amount equal to the gross receipts tax payable on the entire proceeds from the vending machine. The person controlling the location will receive a percentage of the amounts collected net of gross receipts tax due. The vending machine owner will report and pay any gross receipts tax due on all the receipts derived from either the use of or sales from the vending machine.

(6) In the event that no such agreement exists, the department will presume that no joint venture exists. In such a case, the vending machine owner will be subject to gross receipts tax on the entire amounts collected from the use of or sales from the vending machine, and the person controlling the premises will be subject to gross receipts tax on the amount that person receives from the vending machine owner for allowing the placement of the machine on the premises.

(7) In the event the vending machines are leased to the person who services them, the term “vending machine owner” means the lessee of the vending machines.

K. “Gross receipts” excludes leased vehicle surcharge: For the purposes of Subparagraph (b) of Paragraph (3) of Subsection A of Section 7-9-3.5 NMSA 1978, the term “leased vehicle gross receipts tax” includes the leased vehicle surcharge. The amount of any leased vehicle surcharge may be excluded from gross receipts.

L. Receipts from furnishing parts or labor under automotive service contract:

(1) When an automobile dealer, who is the promisor under an automotive service contract as that term is defined under Subsection C of Section 3.2.1.16 NMAC, furnishes parts or labor or both to satisfy the promisor's obligation to repair the breakdown involving a part specified in the contract, the dealer has taxable gross receipts equal to the retail value of the parts and labor furnished. A transfer of property or performance of service for a consideration has occurred and therefore a receipt from selling property or performing services has been realized by the dealer.

(2) The consideration received by the dealer is the discharge of the dealer's obligation to make the repair which obligation arose when the covered breakdown occurred.

(3) Receipts of a repair facility, including an automobile dealer, from furnishing parts and labor to fulfill the obligation of another person under an automotive service contract are gross receipts and not deductible under Sections 7 9 47 and 7 9 48 NMSA 1978, even though the seller has received NTTCs for other transactions.

M. Receipts from deductibles/co-payments under automotive service contracts: The receipts of a New Mexico automotive dealer or other repair facility, including the promisor under an automotive service contract, from the “deductible” or “co-payment” amount paid by a customer as required by automotive service contract as that term is defined in Subsection C of Section 3.2.1.16 NMAC in connection with the provision of repair services under contract are gross receipts.

N. Receipts of dealer from own reserve:

(1) The receipts of a New Mexico auto dealer for repairs provided by the dealer under an automotive service contract as that term is defined in Subsection C of Section 3.2.1.16 NMAC, on which the dealer is obligated as promisor are not gross receipts if:

(a) the receipts are paid from a reserve account established by the dealer under an agreement with an auto service contract administrator or an insurance company, or both, and

(b) the dealer is entitled to a return of any amounts in the reserve account not used to pay for parts and labor or to pay other charges against the dealer in connection with the auto service contract.

(2) In this situation, the dealer is being “paid” from the dealer's own funds and has no receipts. However, the dealer as promisor is liable for gross receipts tax on the retail value of the parts or labor or both furnished to discharge the dealer's obligation.

O. Water conservation fee: Section 74-1-13 NMSA 1978 imposes the water conservation fee on the operator of a public water supply system. The fee is measured by the amount of water produced. The operator is not authorized to impose the water conservation fee on the operator's customers. If the operator of the system separately bills an amount characterized as a reimbursement of the water conservation fee to the operator's customers, the separately stated amount is simply an element of the price of the water sold and the “reimbursement” is included in gross receipts. The definition of “gross receipts” does not exclude the water conservation fee or amounts characterized as reimbursements of water conservation fee paid.

P. Sales of items subject to the federal manufacturer’s excise tax:

(1) The gross receipts from sales of items such as motor vehicle tires include the total amount of money or the value of other consideration received even though this amount includes the Federal Manufacturer's Excise Tax, 26 U.S.C.A. Section 4061 et seq., (1986) which is separately stated on the invoice. Gross receipts do not include the amount of money attributable to the Federal Communications Excise Tax, 26 U.S.C.A. Section 4251, et seq., (1986), and the Federal Air Transportation Excise Tax, 26 U.S.C.A. Section 4261 et seq., (1986), which are user's taxes.

(2) Example: A tire dealer sells a tire in New Mexico to a retail customer for $40.00 and separately states $l.00 for Federal Manufacturer's Excise Tax on the sales ticket. The seller's gross receipts for this transaction are $41.00.

Q. Transactions among related persons are gross receipts

(1) Each person engaging in business in New Mexico is subject to the provisions of the Gross Receipts and Compensating Tax Act. Each person who is a member of any group of related or affiliated persons and who engages in business in New Mexico is a taxpayer. The provisions of the Gross Receipts and Compensating Tax Act apply to the transactions between that taxpayer and all other persons, including the other related or affiliated persons, even though consideration is not received in the form of cash or other monetary remuneration.

(2) Example 1: A cooperative association and X both engage in business in New Mexico. The cooperative sells services to X, one of its members. The cooperative is a taxpayer and the receipts from this transaction are subject to the provisions of the Gross Receipts and Compensating Tax Act.

(3) Example 2: Both X and a cooperative association engage in business in New Mexico. X is a member of the cooperative and sells services to it. X is a taxpayer and the receipts from this transaction are subject to the provisions of the Gross Receipts and Compensating Tax Act.

(4) Example 3: X engages in business in New Mexico, specifically by selling office supplies. X is also a partner in a partnership. Sales by X to the partnership are subject to the provisions of the Gross Receipts and Compensating Tax Act.

(5) Example 4: C is a corporation engaging in business in New Mexico. S, an individual who is the majority stockholder in C, buys in New Mexico services and goods from C. C's receipts from these transactions with S are subject to the provisions of the Gross Receipts and Compensating Tax Act.

(6) Example 5: C and S are corporations engaging in business in New Mexico. S is a wholly-owned subsidiary of C. C sells tangible personal property in New Mexico to S. C's receipts from the transaction are subject to the provisions of the Gross Receipts and Compensating Tax Act.

(7) Example 6: X and Y are both divisions of corporation Z. X and Y are both parts of the same person, Z, and are not “related persons”. Receipts from transactions between these two divisions are activities within Z and do not constitute gross receipts.

(8) Example 7: P, an individual, operates two businesses as sole proprietorships. One of P's businesses transfers tangible personal property to the other. Since both businesses and P are the same person, they are not “related persons” and the transaction does not constitute gross receipts.

R. Owner’s receipts from transactions with owned entity are gross receipts

(1) Except as provided in Paragraph (2) of this Subsection, when a person who owns all or part of an entity has receipts from the sale of property in New Mexico to, the lease of property employed in New Mexico to or the performance of services in New Mexico for the entity, the person’s receipts are gross receipts except when the transaction may be characterized for federal income tax purposes as a contribution of capital. The person’s receipts include the actual amount of money received by the person plus the value of any additional consideration. Additional consideration includes forbearance of charges against the person’s ownership interest. These gross receipts are subject to the gross receipts tax unless an exemption or deduction applies.

(2) When a partner or interest holder in an entity is allocated profits or receives a guaranteed payment or other distributions for activities undertaken as a partner on behalf of the partnership such as administrative services done solely for the benefit of the partnership or for activities for third-parties transacting business with the partnership, these receipts of the partner are not gross receipts and are not subject to the gross receipts tax. When a partner engages in business separately from the partnership any transactions of that partner with the partnership, where the partner is not acting as a partner on behalf of the partnership, are gross receipts. Indicia that a partner is not acting as a partner on behalf of the partnership may include:

(a) that the partner engages in similar transactions with third parties other than the partnership;

(b) that the allocation, payment, or distribution made by the partnership is not made under the partnership agreement;

(c) that the partner’s transaction(s) with the partnership involve the sale or lease of goods or the sale of services not provided by the partnership to third parties.

(3) For the purposes of Subsection S of Section 3.2.1.14 NMAC, an “entity” means any business organization or association other than a sole proprietorship.

(4) Example: C is a corporation and S is C’s wholly owned subsidiary corporation. C and S create L, a limited liability company; C and S each own fifty percent of L. L purchases a twenty percent interest in P, a limited partnership. C sells goods to P. P pays the amount charged. C has gross receipts from this transaction equal to the amount received for the goods.

History

3.2.1.14 NMAC - Rp, 3.2.1.14 NMAC 10/13/2021

N.M. Admin. Code § 3.2.1.15 Gross Receipts; Tangible Personal Property

A. Lease purchase agreement as a sale: The receipts from a two party “lease-purchase” or “paid-out lease” agreement for tangible personal property will be treated as receipts from the sale of tangible personal property under the Gross Receipts and Compensating Tax Act if the lessee-buyer treats the property as an asset and depreciates the property pursuant to generally accepted accounting practices.

B. Consignment sales: Receipts of both a consignor and a consignee from the sale of tangible personal property handled on consignment are subject to the gross receipts tax.

C. Delivery expenses:

(1) Receipts from charges by a seller of tangible personal property for delivery costs, including postage and transportation charges, paid by the seller and passed on to the buyer, are an element of the sales price of the property.

(2) Example: X sells tangible personal property in the state of New Mexico and transports property to buyers located in New Mexico in its own equipment from its factory and warehouse. In some instances the contracts of sale which X has with its buyers stipulate that title passes on completion of manufacturing; in other cases there is no stipulation regarding passage of title. On its billing to buyers, X separately states amounts categorized as "warehouse charges" and "delivery charges". These separately stated charges are elements of the sale price of the property.

D. Freight charges:

(1) Transportation costs that are paid by the seller to the carrier are an element of the sales price of the property.

(2) Transportation costs that are paid to the carrier by the buyer are not an element of the sales price of the property. If the buyer transports the property with the buyer's own equipment, the cost of the transportation does not increase the value of the property.

(3) If the seller transports the property with its own equipment, and the cost of the transportation is already included in the price of the property, it is considered as an element of the sales price of the property. If extra separate charges are made, receipts from such charges are gross receipts.

E. Refundable deposits: Amounts received in the form of refundable deposits on bottles, cartons, cases and the like are to be included in gross receipts of the seller or lessor and are subject to the gross receipts tax.

F. Buyer's financing costs: In a situation where:

(1) a lending institution lends money directly to a buyer of tangible personal property;

(2) the buyer executes a promissory or installment note together with a security agreement or a retail financing agreement directly to the lending institution;

(3) neither the note nor the agreement is endorsed or guaranteed in any manner by the seller of the property; and

(4) the lending institution as agent for the buyer, pays the seller by crediting the account of the seller with an amount equal to the loan against the property, with no amount added or later rebated, the receipts of the seller from the sale of the property include any down payment and the amount credited to the account of the seller unless that amount is less than the fair market value of the property sold, in which case the fair market value would be the measure of the seller's gross receipts.

G. Sale of items subject to the state Cigarette Tax Act: The gross receipts from sales of cigarettes include the total amount of money or the value of other consideration received even though this amount includes the excise tax levied by the Cigarette Tax Act.

H. Florist receipts: Receipts of a New Mexico florist are gross receipts when the florist:

(1) receives an order and payment for flowers under an agreement that the flowers are to be delivered at another location by another florist; and

(2) uses long distance communication to authorize the other florist to make delivery; and

(3) pays the other florist for the flowers.

I. Sale of food and beverage at horse racetracks: Receipts from the sale of food and beverage either by a concessionaire or the owner of a New Mexico horse racetrack, including the track at the state fair grounds, are subject to the gross receipts tax. If a concessionaire pays a racetrack owner a consideration for operating a food and beverage concession, the racetrack owner's receipts are subject to the gross receipts tax.

J. Packaged software:

(1) The transaction constitutes a sale of tangible personal property or a digital good, as defined by 3.2.1.7 NMAC when a person sells a packaged software where:

(a) no extraordinary services are performed in order to furnish the packaged software; and

(b) the buyer pays a fixed amount for the packaged software and the license to use the software; and

(2) Sale of such property for resale is subject to the deduction provided in Section 7-9-47 NMSA 1978.

(3) This version of Subsection J of Section 3.2.1.15 NMAC is retroactively applicable to transactions occurring on or after July 1, 1991.

K. Sale of postage stamps:

(1) Receipts in excess of the face value of the postage stamps from reselling un-canceled postage stamps issued by the United States postal service or any foreign government are gross receipts. Receipts in excess of the face value of the postage from imprinting, mechanically or by other means, the amount of postage on documents to be mailed are gross receipts.

(2) Receipts from selling canceled postage stamps issued by the United States postal service or any foreign government are gross receipts.

L. Refined metals: The receipts of a person who sells refined metals in New Mexico are gross receipts subject to the gross receipts tax regardless of whether the seller is a severer or processor as defined in the Resources Excise Tax Act or the Severance Tax Act.

History

3.2.1.15 NMAC - Rp, 3.2.1.15 NMAC 10/13/2021

N.M. Admin. Code § 3.2.1.16 Gross Receipts - Real Estate and Intangible Property

A. Insurance proceeds:

(1) Receipts of an insured derived from payments made by an insurer pursuant to an insurance policy are not subject to the gross receipts tax. Such receipts are not receipts derived from the sale of property in New Mexico, the leasing of property employed in New Mexico, or the performance of a service.

(2) Example: ABC is an auto dealer in the business of selling new and used cars. In addition to selling cars, ABC also maintains a service garage with a large inventory of automobile parts. As part of its regular sales practice, ABC allows potential purchasers to test drive the cars. ABC carries automobile insurance which is applicable in the situation where the potential purchaser is test driving the car. When an accident occurs, even though some or all the parts used to repair the automobile are taken from ABC's inventory of parts and ABC does the actual repair work, payment received from the insurance company for the damaged automobile is not gross receipts. Such a payment is not received as consideration for selling property in New Mexico, leasing property employed in New Mexico, or for performing services. ABC is not liable for compensating tax on the value of the parts used or the labor.

B. Receipts from sale of automotive service contracts:

(1) “Automotive service contract” means an undertaking, promise or obligation of the promisor, for a consideration separate from the sale price of a motor vehicle, to furnish or to pay for parts and labor to repair specified parts of the covered motor vehicle only if breakdowns (failures) of those specified parts occur within certain time or mileage limits. The promisor's obligation is conditioned upon regular maintenance of the motor vehicle by the purchaser of the automotive service contract at the purchaser's expense. The automotive service contract may also obligate the promisor to reimburse the purchaser for certain breakdown related rental and towing charges. The automotive service contract may require the payment of a specified “deductible” or “co-payment” by the purchaser in connection with each repair.

(2) The receipts of a person from selling an automotive service contract are not gross receipts. The undertaking, promise or obligation of the promisor under the automotive service contract to pay for or to furnish parts and service if an uncertain future event (breakdown) occurs is not within the definition of property under Subsection J of Section 7-9-3 NMSA 1978. Since the receipts from selling an automotive service contract do not arise “from selling property in New Mexico, from leasing property employed in New Mexico or from performing services in New Mexico”, the receipts are not gross receipts as defined in Section 7-9-3.5 NMSA 1978 and are not subject to the tax imposed by Section 7-9-4 NMSA 1978.

(3) The furnishing by the promisor of parts or labor or both to fulfill the promisor's obligation when a breakdown occurs is a taxable event.

C. Receipts from insurance company under an automotive service contract program: The receipts of a New Mexico automotive dealer from an insurance company are not taxable gross receipts if the payments by the insurance company are to reimburse the dealer, who is promisor under an automotive service contract as that term is defined in Subsection C of 3.2.1.16 NMAC, for all parts and labor furnished by the dealer under the contract or for parts and labor furnished by the dealer under the contract in an amount in excess of a specified reserve established by the dealer under an agreement with the insurance company. The receipt of the payments from the insurance company are not receipts from the sale of parts and labor but are payments to indemnify the dealer for the dealer's expense in fulfilling the dealer's obligation. The value of parts and labor furnished to make the repairs was subject to the gross receipts tax when the parts and labor were furnished to discharge the dealer's obligation as the promisor under the automotive service contracts.

D. Gift certificates:

(1) Receipts from the sale of gift certificates are receipts from the sale of intangible personal property of a type not included in the definition of “property” and, therefore, are not gross receipts.

(2) When a gift certificate is redeemed for merchandise, services or leasing, the person accepting the gift certificate in payment receives consideration, which is gross receipts subject to the gross receipts tax unless an exemption or deduction applies. The value of the consideration is the face value of the gift certificate.

(3) When a gift certificate is purchased during the time period set out in Laws 2005, Chapter 104, Section 25 subsequent redemption of the gift certificate for the purchase of qualified tangible personal property after that period is not deductible under Laws 2005, Chapter 104, Section 25.

(4) When a gift certificate is redeemed during the time period set out in Laws 2005, Chapter 104, Section 25 for the purchase of qualified tangible personal property, the receipts from the sale are deductible under Laws 2005, Chapter 104, Section 25.

E. Merchant discount and interchange rate fee receipts: Bank receipts derived from credit and debit card merchant discounts and bank interchange rate fees are not gross receipts within the meaning of the Gross Receipts and Compensating Tax Act and therefore are not taxable.

F. Prepaid telephone cards - “calling cards”:

(1) Receipts from the sale of an unexpired prepaid telephone card, sometimes known as a “calling card”, are receipts from the sale of a license to use the telecommunications system and, therefore, are gross receipts and are not interstate telecommunications gross receipts. Receipts from selling an expired prepaid telephone card are receipts from the sale of tangible personal property and are gross receipts and are not interstate telecommunications gross receipts.

(2) Receipts from recharging a rechargeable prepaid telephone card are receipts from the sale of a license to use the telecommunications system and are gross receipts and are not interstate telecommunications gross receipts.

(3) Subsection F of 3.2.1.16 NMAC is retroactively applicable to transactions and receipts on or after September 1, 1998.

History

3.2.1.16 NMAC - Rp, 3.2.1.16 NMAC 10/13/2021

N.M. Admin. Code § 3.2.1.17 Gross Receipts - Leasing

A. Leasing of property employed in New Mexico:

(1) Receipts derived from the rental or leasing of property employed in New Mexico are subject to the gross receipts tax.

(2) Example 1: A is in the business of leasing heavy equipment used in construction projects. The receipts from the leasing of such equipment employed in New Mexico prior to January 1, 2013, are subject to the gross receipts tax. See Section 7-9-52.1 NMSA 1978 for deductibility of receipts from such leases on or after January 1, 2013.

(3) Example 2: Y, a New York corporation, leases four block‑making machines to X who uses the machines in X's block making business in New Mexico. The rental contract is signed in Nebraska. The receipts which Y receives from the rental of the equipment employed in New Mexico are taxable.

(4) Example 3: P corporation leases photocopying machines to Q, a state agency. The receipts of P corporation from leasing these machines to the state agency are subject to the gross receipts tax.

B. Additional charges:

(1) Receipts derived from additional charges made in conjunction with the rental or leasing of property employed in New Mexico are subject to the gross receipts tax.

(2) Example 1: C owns and operates a business which leases gas cylinders. There is a clause in the lease whereby the lessee will be liable for an additional charge if the gas cylinders are kept past a specific date provided in the lease contract. Receipts from these penalties or demurrage charges for keeping the gas cylinders past the specified date provided are receipts from leasing property employed in New Mexico and are subject to the gross receipts tax.

(3) Example 2: D is in the business of leasing concrete forms which are employed in New Mexico. The terms of the lease agreement require that the property leased be returned to the lessor in the condition in which it was leased. Any receipts from charges for repairing and cleaning concrete forms returned to the lessor in a damaged condition, for any material used in repair of such forms, or from charges for the purchase price of forms which are not returned to the lessor, are receipts from leasing property employed in New Mexico and are subject to the gross receipts tax.

C. Lease of license - franchise agreement: Receipts derived from the lease of a license, such as a liquor license, or from a franchise agreement, are subject to the gross receipts tax.

D. Multistate use of leased equipment:

(1) Where property is rented or leased for employment both within and outside New Mexico the renter or lessor will be subject to the gross receipts tax on that portion of the receipts which is derived from the renting or leasing of property employed in New Mexico.

(2) In order to determine the portion of the receipts which are subject to the gross receipts tax, the total receipts from the lease are to be multiplied by whichever of the following fractions more accurately reflects the receipts from the period of employment of the leased item inside New Mexico:

(a) the numerator is the total miles traveled by the leased items in New Mexico and the denominator is the total miles traveled by the leased items during the lease period; or

(b) the numerator is the total time the leased items were employed in New Mexico and the denominator is the total time of the lease period.

(3) The department will allow a person engaged in the business of leasing property employed both within and without New Mexico to use other methods of apportioning the receipts of such leasing activities upon showing that the other methods more accurately reflect the portion of employment of leased items within New Mexico.

(4) Example: B owns and operates a business located in Santa Fe, New Mexico, which rents or leases vehicles, airplanes, and mobile equipment. The items leased are employed both within and without New Mexico. B is subject to the gross receipts tax on that portion of the receipts which is from employment of the vehicles, airplanes, and mobile equipment within New Mexico.

E. Leasing of property employed outside New Mexico:

(1) Receipts derived from the rental or leasing of property employed outside New Mexico are not subject to the gross receipts tax.

(2) Example: L, a resident of Hobbs, New Mexico, owns a sawmill in Wyoming which is leased to S for three thousand dollars ($3,000) per year. These receipts are not derived from selling property in New Mexico, leasing property employed in New Mexico, performing services outside of New Mexico the product of which is initially used in New Mexico, or performing services in New Mexico. These receipts are not includable in L's gross receipts.

F. Use of vehicles in New Mexico:

(1) Receipts from the rental or leasing of vehicles, airplanes, or mobile equipment which are employed both within and outside New Mexico are subject to the gross receipts tax on that portion of the receipts which are from employment of the vehicles, airplanes, or mobile equipment within New Mexico.

(2) In order to determine the portion of receipts described in the above paragraph which are subject to the gross receipts tax, the total receipts from the lease are to be multiplied by whichever of the following fractions more accurately reflects the receipts from the period of employment of the leased item inside New Mexico:

(a) the numerator is the total miles traveled by the leased items in New Mexico and the denominator is the total miles traveled by the leased items during the period of lease; or

(b) the numerator is the total time the leased items were physically present in New Mexico and the denominator is the total time of the lease period.

(3) The department will allow a person engaged in leasing the above described items to use other methods of apportionment upon a showing that the other methods will more accurately reflect the period of employment of the leased item within New Mexico.

G. Safe harbor lease - purchaser/lessor: A purchaser/lessor who enters into a qualified “safe harbor lease” transaction as defined in Section 168 of the Internal Revenue Code will be subject to the gross receipts tax on the receipts if the property being leased is located in New Mexico.

H. Leasing computers: Receipts from renting or leasing the use of computers or related equipment in New Mexico, on either a part-time or a full-time basis, are subject to the gross receipts tax.

History

3.2.1.17 NMAC - Rp, 3.2.1.17 NMAC 10/13/2021

N.M. Admin. Code § 3.2.1.18 Gross Receipts

SERVICES GENERALLY:

A. Receipts from performing a service in New Mexico or performing a service outside New Mexico the product of which is initially used in New Mexico. Receipts derived from performing a service in New Mexico or performing a service outside New Mexico the product of which is initially used in New Mexico are subject to the gross receipts tax unless a specific exemption or deduction provided for in the Gross Receipts and Compensating Tax Act applies.

B. Sales of state licenses by nongovernmental entities:

(1) Amounts retained by nongovernmental entities as compensation for services performed in selling state licenses are gross receipts.

(2) Example: G owns and operates a small grocery store in rural New Mexico which is located near a popular fishing area. As a convenience to the public, G sells New Mexico game and fish licenses. For its services in selling these licenses, G retains a small percentage of the total license fee. The amounts retained are gross receipts because they are receipts derived from services performed in New Mexico. G may not deduct the amounts retained pursuant to Section 7-9-66 NMSA 1978 which deals with commissions derived from the sale of tangible personal property not subject to the gross receipts tax. A New Mexico game and fish license is not tangible personal property pursuant to Section 7-9-3 NMSA 1978.

C. Stockbrokers' commissions: Gross receipts include commissions received by stockbrokers for handling transactions. The commissions are receipts from performing a service.

D. Directors' or trustees' fees: Receipts from attending a board of directors or board of trustees meeting in New Mexico are gross receipts from performing services in New Mexico. Receipts from attending a board of directors or board of trustees meeting outside New Mexico are not gross receipts because the initial use of the product of the service is not in New Mexico.

E. Racing receipts:

(1) Unless the receipts are exempt under Section 7-9-40 NMSA 1978:

(a) the receipts of vehicle or animal owners from winning purse money at races held in New Mexico are receipts from performing services in New Mexico and are subject to the gross receipts tax if any charge is made for attending, observing or broadcasting the race.

(b) receipts of vehicle drivers, animal riders and drivers and other persons from receiving a percentage of the owner's purse are receipts from performing services in New Mexico and are subject to the gross receipts tax, unless the person receiving the percentage of purse money is an employee, as that term is defined in 3.2.105.7 NMAC, of the owner.

(2) Where there is an agreement between the driver, rider or other person and the owner for distribution of the winning purse, then only the amount received pursuant to the agreement is gross receipts of the driver, rider or other person receiving the distribution.

(3) Racetrack operators. Receipts of operators of racetracks other than horse racetracks, from gate admission fees and entrance fees paid by drivers are subject to the gross receipts tax. Any portion of these fees paid out by the operator as prizes are not exempt or deductible since the payments are part of the operator's cost of doing business.

F. Advertising services: The service of advertising is performed and initially used at the location of the intended recipient or viewer regardless of where related services may be performed or the location of the advertiser who purchases the advertising services.

(1) Advertising receipts of a newspaper or broadcaster. The receipts of a New Mexico newspaper or a person engaged in the business of radio or television broadcasting from performing advertising services in New Mexico do not include the customary commission paid to or received by a nonemployee advertising agency or a nonemployee solicitation representative, when said advertising services are performed pursuant to an allocation or apportionment agreement entered into between them prior to the date of payment.

(2) Advertising space in pamphlets. Receipts from selling advertising service to New Mexico merchants in a pamphlet printed outside New Mexico and distributed wholly inside New Mexico are receipts from performing an advertising service in New Mexico. Such receipts are subject to the gross receipts tax.

(3) Billboard advertising. Receipts derived from contracts to place advertising on outdoor billboards located within the state of New Mexico are receipts from performing an advertising service in New Mexico. Such receipts are subject to the gross receipts tax, regardless of the location of the advertiser.

G. Day care centers or licensed child care assistance programs:

(1) Receipts from providing day care are receipts from performing a service and are subject to the gross receipts tax unless an applicable deduction exists.

(2) Receipts from providing day care for children in a situation where a commercial day care center provides day care for the children and the expenses of the care for some of these children is paid for by the state of New Mexico are subject to the gross receipts tax. However, the deduction under Section 7-9-77.2 NMSA 1978 may apply.

(3) Receipts from providing day care for children in a situation where a person provides day care for children in a residence and the care for all these children is paid for by the state of New Mexico are subject to the gross receipts tax. However, the deduction under Section 7-9-77.2 NMSA 1978 may apply.

(4) Receipts from providing day care for children in a situation where a person provides day care for children in the children's home and the care for the children is paid for by the state of New Mexico are subject to the gross receipts tax. However, the deduction under Section 7-9-77.2 NMSA 1978 may apply.

H. Child care:

(1) Receipts derived by a corporation for providing child care facilities for its employees are subject to the gross receipts tax on the amount received from its employees.

(2) Example: The X corporation operates a licensed child care facility to accommodate dependent children of its employees. In order to defray a portion of the cost of the facility, the corporation charges each employee a fee per child per week for the use of the facility. All receipts from the fee per child per week are subject to the gross receipts tax.

I. Service charges; tips:

(1) Except for tips, receipts of hotels, motels, guest lodges, restaurants and other similar establishments from amounts determined by and added to the customer's bill by the establishment for employee services, whether or not such amounts are separately stated on the customer's bill, are gross receipts of the establishment.

(2) A tip is a gratuity offered to service personnel to acknowledge service given. An amount added to a bill by the customer as a tip is a tip. Because the tip is a gratuity, it is not gross receipts.

(3) Amounts denominated as a "tip" but determined by and added to the customer's bill by the establishment may or may not be gross receipts. If the customer is required to pay the added amount and the establishment retains the amount for general business purposes, clearly it is not a gratuity. Amounts retained by the establishment are gross receipts, even if labeled as "tips". If the customer is not required to pay the added amount and any such amounts are distributed entirely to the service personnel, the amounts are tips and not gross receipts of the establishment.

(4) Examples:

(a) Restaurant R has a policy of charging parties of six or more a set percentage of the bill for food and drink served as a tip. If a customer insists on another arrangement, however, the set amount will be removed. R places all amounts collected from the set tip percentage into a pool that is distributed to the service staff at the end of each shift. The amounts designated as tips and collected and distributed by R to the service staff are tips and not gross receipts. If R retains any amounts derived from the set tip percentage, the amounts retained are gross receipts.

(b) Hotel H rents rooms for banquets and other functions. In addition to the rental fee for the room, H charges amounts for set-up and post-function cleaning. H retains these amounts for use in its business. These amounts are gross receipts. They are gross receipts even if H denominates them as "tips".

J. Entertainers: The receipts of entertainers or performers of musical, theatrical or similar services in New Mexico are subject to the gross receipts tax.

K. Data access charges: Receipts from fees or charges made in connection with property owned, leased or provided by the person providing the service are subject to the gross receipts tax when the information or data accessed is utilized in this state.

L. Allied company underwriting automotive service contracts: When a New Mexico automotive dealer pays an entity that is allied or affiliated with that dealer (allied company) to undertake all of the dealer's obligations under automotive service contracts as that term is defined in Subsection C of 3.2.1.16 NMAC on which the dealer is promisor, the undertaking of the allied company does not involve the sale of property in New Mexico or the lease of property employed in New Mexico. The undertaking principally involves an obligation of the allied company to indemnify the dealer by paying the dealer for furnishing parts and labor to fulfill the dealer's obligation to furnish the parts and labor. However, the undertaking also involves the performance of services by the allied company for the dealer since the allied company undertakes to handle the claims of automotive service contract purchasers and otherwise perform the dealer's task under the contract. Absent a showing of a different value by the allied company or the department, seven and a half percent of the contract amount paid by the dealer to the allied company will be treated as consideration received for services performed in New Mexico.

M. Custom software:

(1) Receipts derived by a person from developing custom software are receipts from performing a service.

(2) When custom software is developed by a seller for a customer, but the terms of the transaction restrict the customer's ability without the seller's consent to sell the software to another or to authorize another to use the software, the seller's receipts from the customer are receipts from the performance of a service. The seller's receipts from authorizing the customer's sublicensing of the software to another person are receipts from granting a license.

N. Check cashing is a service: Receipts from charges made for cashing checks, money orders and similar instruments by a person other than the person upon whom the check, money order or similar instrument is drawn are receipts from providing a service, not from originating, making or assuming a loan. Such charges are not interest.

O. Receipts of collection agencies:

(1) The fee charged by a collection agency for collecting the accounts of others is gross receipts subject to the gross receipts tax, regardless of whether the receipts of the client are subject to gross receipts tax and regardless of whether the agency is prohibited by law from adding its gross receipts tax amount to the amount collected from the debtor.

(2) Example 1: X is a cash basis taxpayer utilizing the services of Z collection agency for the collection of delinquent accounts receivable. From its New Mexico offices, Z collects from X's New Mexico debtors in the name of X, retains a percentage for its services and turns over the balance to X. The percentage retained by Z is its fee for performing services in New Mexico. The fee is subject to the gross receipts tax. It makes no difference that federal law prohibits Z from passing the cost of the tax to the debtor by adding it to the amount to be collected. X's gross receipts include the full amount collected by Z.

(3) Amounts received by collection agencies from collecting accounts sold to the collection agency are not gross receipts.

(4) Example 2: X, a cash basis taxpayer, sells its delinquent accounts receivable to Z, a collection agency, for a percentage of the face amount of the accounts. X's gross receipts include the full amount of the receivables, excluding any time-price differential. The amount subsequently collected by Z from those accounts, however, is not subject to gross receipts tax because the amount is not included within the definition of gross receipts. In this situation Z is buying and selling intangible property of a type not included within the definition of property in Section 7-9-3 NMSA 1978.

P. Commissions of independent contractors when another pays gross receipts tax on the receipts from the underlying transaction. The following regulations address independent contractors, including commissioned sales agents, who are not consignees or marketplace providers.

(1) Commissions and other consideration received by an independent contractor from performing a sales service in New Mexico with respect to the tangible or intangible personal property of other persons are gross receipts whether or not the other person reports and pays gross receipts tax with respect to the receipts from the sale of the property. This situation involves two separate transactions. The first is the sale of the property by its owner to the customer and the second is the performance of a sales service by the independent contractor for the owner of the property. The receipts from the sale of the property are gross receipts of the person whose property was sold. Receipts, whether in the form of commissions or other remuneration, of the person performing a sales service in New Mexico are gross receipts of the person performing the sales service.

(2) Example 1: S is a national purveyor of tangible personal property. S has stores and employees in New Mexico. S also has catalogue stores in less populated parts of New Mexico. Catalogue stores maintain minimal inventories; their primary purpose is to make S's catalogues available to customers, to take orders of merchandise selected from the catalogues, to place the orders with S and to provide general customer service. The catalogue stores are operated by independent contractors and not by S. S pays the contractors commissions based on the orders placed. In charging its customers, S charges the amount shown in the catalogue and does not add any separate amount to cover the cost of the contractors' commissions. S pays gross receipts tax on its receipts from the sale of catalogue merchandise. The contractors contend that the cost of their selling services is included in the amount S charges for its merchandise and so their commissions are not gross receipts. The contention is erroneous. The contractors have receipts from performing a service in New Mexico; it is immaterial that S paid the amount of gross receipts tax S owed on S's receipts. See, however, the deduction at Subsection B of Section 7-9-66 NMSA 1978.

(3) Example 2: M is a nationwide, multi-level sales company with presence in New Mexico. M sells products to households mainly through a network of individual, independent contractors. The network of sellers is controlled by one or more sets of individuals, also independent contractors, who train and supervise the individuals selling the merchandise; these supervisory contractors may also sell merchandise. The sellers display, promote and take orders for M's products. Payment for orders are sent to M along with the orders. M ships the merchandise directly to the final customers. M has agreed to, and does, pay the gross receipts tax on the retail value of the merchandise sold, whether sold by M or one of the independent contractors. Based on the volume and value of merchandise sold, M pays both the selling and supervisory independent contractors a commission. The commissions received by the independent contractors engaging in business in New Mexico with respect to merchandise sold in New Mexico are gross receipts subject to the gross receipts tax. The commissions are receipts from performing a service in New Mexico. The fact that M pays gross receipts tax on M's receipts from the sale of the property is immaterial in determining the liability of the independent contractors.

(4) Commissions and other consideration received by an independent contractor from performing a sales service in New Mexico with respect to a service to be performed by other persons are gross receipts whether or not the other person reports and pays gross receipts tax with respect to the receipts from the performance of the underlying service. This situation involves two transactions. The first is the performance of the underlying service by the other person for the customer and the second is the performance of the sales service by the independent contractor for the performer of the underlying service. The receipts from the performance of the underlying service for the customer are gross receipts of the person performing that service. Receipts, whether in the form of commissions or other remuneration, of the person performing the sales service are gross receipts of the person performing the sales service.

(5) Example 3: P is the publisher of a magazine published in New Mexico. P enters into arrangements with independent contractors to solicit ads to be placed in P's publication. P pays each contractor a percentage of the billings for the ads placed by the contractor as a commission. The independent contractors claim that they owe no gross receipts tax with respect to ads solicited in New Mexico because P has paid gross receipts tax on P's advertising revenues. The contractors are incorrect. There are two transactions in this situation, P's service of publishing advertisements and the contractors' service of soliciting ads for P. The fact that P paid the amount of gross receipts tax due on P's advertising revenues is immaterial regarding the contractors' gross receipts tax obligations on their receipts.

(6) If the receipts from the underlying sale of the tangible property are exempt or deductible, the commission received by an independent contractor from selling the tangible property of another may be subject to the deduction provided by Section 7-9-66 NMSA 1978.

Q. Consignees and Marketplace Providers: Consignees and marketplace providers have gross receipts from amounts collected by those persons for the sale, lease or license of property or the sale of services to customers as defined under Section 7-9-3.5, regardless of whether the consignee or marketplace provider is obligated to pay the consignor or marketplace seller some part of the amounts collected or whether the contract between the consignee and consignor or the marketplace provider and marketplace seller calls for the consignor or marketplace provider to perform certain services in conjunction with the sale, lease or license of property or the sale of services to the customer. A consignee or marketplace provider will be considered to be selling a separate service for the consignor or marketplace seller only if the contract requires the performance of the service separate and apart from any sale, lease or license of property or sale of a service to the customer.

R. Receipts from winning contest:

(1) Receipts of a contestant from winning purse money in a rodeo or an athletic game, match or tournament held in New Mexico are gross receipts from performing services if any charge is made for attending, observing or broadcasting the event. Such receipts are subject to the gross receipts tax unless an exemption or deduction applies. Where the contestant is a team and there is an agreement among the team members governing distribution of the purse money, then only the amount received by each team member pursuant to the agreement is gross receipts of the team member.

(2) Subsection R of 3.2.1.18 NMAC does not apply to receipts exempt under Section 7-9-40 NMSA 1978 nor does it apply to activities that are primarily or solely gambling.

History

3.2.1.18 NMAC - Rp, 3.2.1.18 NMAC 10/13/2021; A, 02/25/2025

N.M. Admin. Code § 3.2.1.19 Gross Receipts; Receipts of Agents

A. Nonemployee agents:

(1) The receipts of nonemployee agents are subject to the gross receipts tax to the extent the education provided by Section 7-9-66 NMSA 1978 is not applicable. The indicia outlined in 3.2.105.7 NMAC will be considered in determining whether a person is an employee or a nonemployee agent.

(2) Example 1: S is a nonemployee salesperson for Z Corporation, an out-of-state business. Z Corporation arranges for S to sell securities belonging to corporation shareholders. Z accepts payment from the purchasers of the security, deposits this payment in a trust account, pays S the commission and then distributes the balance to the seller of the securities. Z does not incur gross receipts tax liability as the result of its activity because it is not selling property or performing services in New Mexico for a consideration. The commissions received by S for selling securities in New Mexico are receipts for performing services in New Mexico and are subject to the gross receipts tax.

(3) Example 2: The receipts of a nonemployee agent or sub-agent derived from commissions received from;

(a) correspondence schools for enrolling persons in those schools;

(b) freight companies, bus transportation firms, and similar business concerns for rendering services; and

B. Receipts of condominium and other real property owners associations:

(1) As of March 8, 1988, the provisions of this subsection do not apply to receipts which are exempt under the provisions of Section 7-9-20 NMSA 1978.

(2) Associations in which common areas are owned by unit owners:

(a) Amounts received by this type of association from unit owners (owners of homes, offices, apartments or other real property) for accumulation in a trust account owned by the unit owners and expended to provide insurance and pay taxes on the common areas, elements or facilities are not taxable gross receipts since such amounts are not receipts of the association.

(b) Amounts received by an association of this type from unit owners for accumulation in a trust account owned by the unit owners for current or future expenditures for the improvement, maintenance or rehabilitation of the common areas, elements or facilities are not taxable gross receipts since such amounts are not receipts of the association. However, with respect to receipts not exempt under Section 7-9-20 NMSA 1978, when payments are made from the trust account to the association or its employees, officers or representatives for the improvement, maintenance or rehabilitation, these payments are taxable gross receipts of the association under Section 7-9-3.5 NMSA 1978. When payments are made directly from the account to third parties, those third parties will be liable for the gross receipts tax on those receipts.

(c) With respect to receipts which are not exempt under Section 7-9-20 NMSA 1978, associations of this type which bill unit owners may issue nontaxable transaction certificates (NTTCs) when appropriate under Section 7-9-48 NMSA 1978 (sale of a service for resale) to suppliers of these services, unless the service is deductible by the association under the Internal Revenue Code as an ordinary and necessary business expense. The association must report and pay gross receipts taxes on all its receipts for services, including those for which NTTCs are given. This version of Paragraph (2) of Subsection B of 3.2.1.19 NMAC applies to transactions occurring on or after July 1, 2000.

(3) Example A 1: Property Owners Association A receives monthly payments from each individual owner of property located in XYZ condominiums. The funds are held in a separate trust account by Association A for the XYZ unit owners to pay, on behalf of themselves, the property tax accruing to the common areas, insurance covering the common areas, maintenance and repair of the common areas and future improvements and additions to the common areas. On November 10, Association A, as trustee of such funds, issues a check directly from the trust account to the county treasurer for payment of property taxes on the common areas. This payment goes from the trust account directly to the county treasurer with Association A acting as agent for the actual owners of property; therefore, these funds do not become a part of Association A's gross receipts.

(4) Example A 2: Association A employs a maintenance person to maintain and clean the common areas. The maintenance person is responsible for mowing lawns, maintaining the landscape, cleaning halls, lobbies and other common areas and making minor repairs to common facilities. Funds received by Association A from the trust account to pay the maintenance person's wages and to pay various payroll taxes and employee benefits are gross receipts for the performance of service on which Association A is required to pay tax.

(5) Example A 3: NMO Construction Co. contracts to paint and remodel the halls, lobbies and other common areas of the condominiums. Association A, acting as agent, draws funds from the trust account which are paid directly to NMO Construction Co. Since such funds do not become receipts of Association A, the association is not liable for tax on these funds. The funds pass directly to NMO Construction Co. who becomes liable for the gross receipts tax on its receipts for performing construction services.

(6) Example A 4: For the last 10 years, funds have accumulated in the trust for construction of a swimming pool. A Pool Co. builds the pool and is paid directly from the trust account. A Pool Co. is subject to gross receipts tax on the receipts from the construction of the pool. Association A, acting as agent for the property owners, has no receipts and pays no tax on this transaction.

(7) Example A 5: Association A purchases, with its own funds, chemicals which its employee will use to maintain the new swimming pool. To recover this expense, Association A increases the amount it charges the property owners each month and draws funds from the trust account which it places with its own funds. These receipts of Association A are subject to the tax since Association A is performing services for the property owners. This treatment of receipts applies to purchases of other maintenance or cleaning supplies which Association A consumes in the performance of maintenance and cleaning services. Association A may not execute a non-taxable transaction certificate for the purchase of these chemicals or other cleaning supplies, because the chemicals and supplies are consumed in the performance of services by the association.

(8) Associations in which common areas are owned by the association with long-term real property rights held by individual unit owners:

(a) An association of unit owners in a real estate development in which the common elements, areas or facilities are owned by the association but subject to long-term (10 or more years) real property rights of the unit owners (as defined in Paragraph (2) of Subsection B of 3.2.1.19 NMAC) granted by deed or covenant, appurtenant to and inseparable from unit ownership, transferable only by the unit owner or upon acceptance of deed, and not extinguishable by the association shall be subject to tax in the same manner as associations described in Subsection B of this section. If the unit owners cease to hold or possess such real property rights, the association shall become subject to tax in the same manner as associations described in Paragraph (9) of Subsection B of 3.2.1.19 NMAC.

(b) All examples in Paragraphs (3) through (7) of Subsection B of 3.2.1.19 NMAC also apply to associations of unit owners identified in Paragraph (8) of Subsection B of 3.2.1.19 NMAC.

(9) Associations in which common areas are owned by association: Different treatment is required for an association of unit owners in a real estate development in which the common elements, areas or facilities are owned by the association and the unit owners (as defined in Subparagraph (a) of Paragraph (2) of Subsection B of 3.2.1.19 NMAC) do not possess the real property rights to the common elements described in Paragraphs (2) and (8) of Subsection B of 3.2.1.19 NMAC. All receipts of this type of association (e.g., payments by unit owners for maintenance and use of the common areas) are fully taxable and no NTTCs may be issued for services purchased. Because of the association's status as owner and the absence of real property rights of the unit owners in the common areas, the association is not acting as the unit owners' agent, nor is it reselling a service.

(10) Example C 1: Association C holds title to all common areas of a development which includes a clubhouse, golf course, swimming pool and tennis courts. Each owner of property within the development is a member of Association C and pays a membership fee. In consideration for the fees received, Association C grants each member a license to use facilities owned by the association. Association C is liable for gross receipts tax on its receipts from granting the licenses to use the facilities.

(11) Example C 2: Association C contracts with a security services company to provide a security officer to patrol the facilities which the association owns. Association C does not resell these services provided by the security services company and may not execute a non-taxable transaction certificate to purchase these services.

(12) Example C 3: Association A, Association B and Association C maintain vending machines from which soft drinks, snacks and other items of tangible personal property are sold. The associations are deriving gross receipts from the sale of tangible personal property and must pay gross receipts tax on these receipts. However, they may also execute a non-taxable transaction certificate when purchasing the soft drinks, snacks and other tangibles, since these items are resold by the associations.

C. Reimbursed expenditures: The receipts of any person received as a reimbursement of expenditures incurred in connection with the performance of a service or the sale or lease of property are gross receipts as defined by Section 7-9-3.5 NMSA 1978, unless that person incurs such expense as agent on behalf of a principal while acting in a disclosed agency capacity.

D. Reimbursement of expenditures made to volunteers:

(1) A volunteer who contributes time, effort or talent without expectation of consideration or remuneration is not selling the services performed. When a volunteer receives reimbursement for out-of-pocket expenses incurred in the performance of a service as a volunteer which were directly related to the work volunteered, reimbursement of those expenses is not gross receipts.

(2) For purposes of Paragraph (1) of Subsection D of 3.2.1.19 NMAC, the term "volunteer" means any person who contributes time, effort or talent for the direct benefit of an organization which is exempt from taxation under the Internal Revenue Code. The term also extends to any person who contributes time, effort or talent without the receipt of consideration or remuneration to the state of New Mexico or any agency or any political subdivision of the state, or to the United States or any agency of the United States. "Volunteer" further includes any elected official serving without consideration or remuneration and any appointive non-employee member of any public commission or board serving without consideration or remuneration, whether the appointment was made by the governor, any other elected official or a public body.

(3) For purposes of Paragraph (1) of Subsection D of 3.2.1.19 NMAC, "reimbursement" includes per diem amounts set by statute to reimburse uncompensated elected and appointed governmental officials for the expense of carrying out official duties.

3.2.1.20 Gross Receipts of Marketplace Providers and Marketplace Sellers:

A. Gross Receipts of Marketplace Providers: Under Section 7-9-3.5 NMSA 1978, the receipts of marketplace providers are defined to include receipts collected by a marketplace provider engaging in business in the state from sales, leases and licenses of tangible personal property, sales of licenses and sales of services or licenses for use of real property that are sourced to this state and are facilitated by the marketplace provider on behalf of marketplace sellers, regardless of whether the marketplace sellers are engaging in business in the state. As used here, the term “collected by a marketplace provider” means amounts paid by the customer directly to the marketplace provider or indirectly through third parties, where the marketplace provider either retains the receipts or transmits all or part of the receipts to the marketplace seller, regardless of whether the marketplace provider retains any portion of the gross receipts as consideration in exchange for the marketplace provider's services . The receipts of the marketplace provider, therefore, include all gross receipts collected from the customer for the sales, leases and licenses, regardless of whether any amount is paid over to the marketplace seller. The gross receipts collected by the marketplace provider are treated as receipts of that marketplace provider from sales, leases and licenses for purposes of the Gross Receipts and Compensating Tax Act, including exemptions and deductions, as though the marketplace provider had gross receipts from selling, leasing or licensing.

B. Gross Receipts of Marketplace Sellers: Under Section 7-9-3.5 NMSA 1978, a marketplace seller that sells, licenses or leases through a marketplace provider to customers in New Mexico has gross receipts in New Mexico from selling, licensing or leasing under Section 7-9-3.5 NMSA 1978. A marketplace seller may be entitled to deduct gross receipts for sales, licenses or leases facilitated on its behalf by a marketplace provider under Section 7-9-117 NMSA 1978. A marketplace seller that is not entitled to deduct gross receipts for sales, licenses or leases facilitated on its behalf by a marketplace provider under Section 7-9-117 NMSA 1978 may be entitled to other exemptions and deductions under the Gross Receipts and Compensating Tax Act that would otherwise apply to those gross receipts.

History

3.2.1.19 NMAC - Rp, 3.2.1.19 NMAC 10/13/2021; A, 11/29/2022
3.2.1.20 NMAC - N, 10/13/2021

N.M. Admin. Code § 3.2.1.21 Tax on Gross Receipts from Services Performed Outside the State

A. Beginning July 1, 2021 most services performed outside New Mexico the product of which is initially used in New Mexico are not exempt under Section 7-9-13.1 NMSA 1978.

B. The term “initial use” is used here as defined in Section 7-9-3 NMSA 1978 and in other regulations under the Gross Receipts and Compensating Tax Act. Gross receipts from selling services performed outside New Mexico are subject to the gross receipts tax only if the product of the service is initially used in the state. If the product of the service performed outside of New Mexico is delivered in New Mexico but not initially used in the state, receipts from selling the service are not taxable in the state.

C. If the product of a service performed outside of New Mexico is initially used in the state, then the business location to which the gross receipts and related deductions are reported and the applicable tax rate will be determined under Section 7-1-14 NMSA 1978, which, depending on the type of service, may look to the location of delivery of the service to the customer.

History

3.2.1.21 NMAC - Rp, 3.2.1.21 NMAC 10/13/2021

N.M. Admin. Code § 3.2.1.22 Leasing

Security agreement distinguished from a lease - tax consequences:

A. The gross receipts from leasing equipment to a lessee for the lessee's own use and not for subsequent leasing are subject to the gross receipts tax unless the presence of all or a majority of the following or similar indicia indicates that the transaction between lessor and lessee is in fact a financing transaction between a secured party and a buyer:

(1) There is a written agreement which provides that, upon compliance with the terms of the agreement, the buyer has the option to purchase the property without additional consideration or with nominal consideration; exercise of the option in itself is not sufficient to establish the transaction as an installment sale.

(2) The secured party pays for the equipment selected by the buyer from the stock of an independent vendor with funds allocable to a line of credit previously extended by the secured party to the buyer.

(3) The payments made by the buyer to the secured party are determined by the cost of the equipment selected by the buyer plus an interest charge added by the secured party.

(4) If the buyer is not a federal, state, local or Indian government, the equipment is carried as an asset on the books of the buyer and depreciated by the buyer, not the secured party, and if the buyer is a federal, state, local or Indian government, the tangible personal property is not carried as an asset on the books of the seller or depreciated by the seller.

(5) The secured party treats the total amount of payment as receivables on its books and treats the interest charged the buyer as “unearned income”, transferring amounts to “income” as payments are received.

B. The presence of these or other such factors between the parties to an agreement denominated as a “lease agreement” will lead to the conclusion that the lessee under such an arrangement is the purchaser of the equipment, and that the lessor as the seller of the equipment is a secured party financing the sale and is using the “lease” as a form of security agreement. In such cases the rental receipts of the lessor will not be gross receipts from leasing and, unless all or a portion of the rental receipts are gross receipts from the installment sale of property, will not be subject to the gross receipts tax. However, the gross receipts from the sale of such equipment by a vendor in New Mexico who also may be the secured party in a two party transaction will be subject to the gross receipts tax unless an exemption or deduction applies.

C. The buyer, other than a federal, state, local or Indian government, in such an arrangement will be liable for payment of the compensating tax if the buyer introduces property into this state which was acquired outside the state as a result of a transaction that would have been subject to the gross receipts tax had it occurred within the state and if the property is not subject to any exemption from payment of the compensating tax.

3.2.1.23 “PERFORMANCE OF A SERVICE”, “PRODUCT OF THE SERVICE”, “INITIAL USE”, AND “DELIVERY”; PRESUMPTIONS:

A. Relationship between certain terms and consistency in use of those terms. The terms “sale of a service performed,” “performance of a service,” “product of the service,” “initial use” and “delivery” are defined or used in the Gross Receipts and Compensating Tax Act and regulations in a way that makes them closely related in their application. The terms are used in Section 7-9-3.5 NMSA 1978, the definition of “gross receipts,” to describe gross receipts from performing or selling services that will be subject to tax and in Section 7-9-57 NMSA 1978 to describe a deduction for sales to out-of-state buyers. Regardless of the context in which they are used, or whether the service is performed inside or outside the state, these terms will be interpreted and applied consistently.

B. Delivery and initial use of the product of construction services and construction related services, in-person services, and services which that produce tangible personal property.

(1) The product of a construction service or a construction related service is delivered and initially used in New Mexico if the related construction site is located in New Mexico.

(2) The product of an in-person service is delivered and initially used in New Mexico if the location of the performance of the service is in New Mexico.

(3) The product of a service, the primary purpose of which is to produce tangible personal property, is delivered and initially used in New Mexico if the tangible personal property is delivered to the purchaser or a person designated to receive the property in New Mexico.

C. Delivery and initial use of the product of a service other than construction services, construction related services, in-person services, or services which produce tangible personal property - generally.

(1) As defined under Subsection E of Section 7-9-3 NMSA 1978, “initial use” or “initially used” means the first employment for the intended purpose and expressly excludes the following:

(a) observation of tests conducted by the performer of services;

(b) participation in progress reviews, briefings, consultations and conferences conducted by the performer of services;

(d) inspection of preliminary prototypes developed by the performer of services; or

(e) similar activities.

(2) The location of delivery or initial use of the product of a service is determined based on relevant facts and circumstances, including primarily:

(a) The location of the purchaser or the person to whom the service is intended to be delivered.

(b) The terms of the agreement between the parties, as evidenced by any formal writing or documentation as well as the parties’ behavior, including, but not limited to, any behavior which constitutes an alteration of the parties’ agreement.

(3) The delivery and initial use of the product of a separate service, which is sold with other services or property, will be determined based on the facts and circumstances relating to that separate service. For this purpose, a “separate service” is a service that would be considered a service under 3.2.1.29 NMAC, but may be sold together with property or other services, and which the seller could have sold separately to the buyer, though it was in fact sold as part of a single transaction or contract along with other services or property. Similarly, a single contract may involve services that are to be performed in multiple phases, where each phase may constitute a separate service under 3.2.1.29 NMAC. The delivery and initial use of the product of each separate service, as described in this Paragraph (3), may occur at different locations under the relevant facts and circumstances.

(4) A single or separate service, as that term is used in Paragraph (3) of Subsection C of 3.2.1.23 NMAC may, under all the relevant facts and circumstances, appear to have multiple points of delivery or initial use both inside and outside the state. In particular, this may be the case for services sold to businesses or organizations. If there is a primary location of delivery or initial use, this location will be deemed the location of delivery or initial use for purposes of the Gross Receipts and Compensating Tax Act. The primary location of delivery may be determined by facts and circumstances that show the location of the persons or offices that contracted for or oversee the service or that approve payment of the service or determine if the service has been completed properly. The primary location of initial use may be determined by the primary location of delivery or the place in which the most significant portion of initial use takes place.

D. Presumptions as to delivery and initial use of the product of the service in New Mexico; reliance on purchaser representations. Other than services described in Subsection B, of 3.2.1.23 NMAC, the following presumptions apply to all sales of services unless the seller has information and evidence sufficient to rebut the presumptions:

(1) if the purchaser of the service is an individual, then delivery and initial use of the product of the service are presumed to occur in New Mexico if the seller has information showing a billing address or other primary location for that purchaser in New Mexico;

(2) if the purchaser of the service is a person other than an individual, then delivery and initial use of the product of the service are presumed to occur in New Mexico if that person’s domicile or primary place of business or operations is in New Mexico;

(3) if the purchaser of the service is a person other than an individual and the person has its domicile or primary place of business or operations outside New Mexico, then delivery and initial use of the product of the services are presumed to occur in New Mexico if the seller’s primary contact for purposes of the contract or the billing address for the services is located in New Mexico; and

(4) in a case where the facts and circumstances demonstrate that delivery of the product of the service occurs in New Mexico, initial use of the product of the service is presumed to occur in New Mexico.

In order to rebut these presumptions, the seller must show that delivery or initial use of the product of the service is not in New Mexico considering the relevant facts and circumstances as generally described in this Subsection C of 3.2.1.23 NMAC. The seller may also rely in good faith on written representations made by the purchaser of the service that the initial use of the service will not be made in New Mexico, provided that the seller has no indication that this representation is untrue.

E. Partial performance of service inside the state If a seller performs services partially inside and outside New Mexico which are delivered in New Mexico but are initially used outside the state, only the portion of the gross receipts from the service performed inside New Mexico will be subject to the gross receipts under Sections 7-9-3.5 and 7-9-57 NMSA 1978. Because the seller delivers the product of the service in New Mexico, the portion of gross receipts from the service performed in the state is not deductible under Section 7-9-57 NMSA 1978. The seller may apportion the gross receipts from the service performed inside and outside the state using the relative direct costs incurred.

F. Change in facts and circumstances during the performance of a service and incomplete services. A change in facts and circumstances during the performance of a service may change the delivery or initial use of the product of a service. Likewise, the failure to complete the performance of a service may change the delivery or initial use of the product of a service.

G. No effect on compensating tax due. The provisions of this regulation apply only to a seller’s determination of whether the delivery or initial use of the product of a service are in New Mexico. A purchaser who makes a taxable use of a service in New Mexico may owe the compensating tax even if the seller was not required to pay tax on the gross receipts from the performance or sale of that service.

H. Examples:

(1) A lawyer in New Mexico and her New Mexico client, with a New Mexico billing address, agree that the lawyer will perform the legal service of drafting a will. The lawyer charges for her service on an hourly basis. The lawyer reviews the client’s finances and other information. The lawyer completes the will and provides it to the client. After reviewing the will, the client executes the will. Under Subsection D of 3.2.1.23 NMAC, delivery and initial use of the product of the service are presumed to be in New Mexico. Nor would the lawyer be able to rebut these presumptions since, under all the facts and circumstances, delivery of the product of the service occurs in New Mexico when the client receives the draft will from the lawyer and initial use of the product of the service occurs in New Mexico when the client executes the will.

(2) Same facts as in Paragraph (1) of Subsection H of 3.2.1.23 NMAC, except that before the will is finally drafted, the client tells the lawyer she has changed her mind and will not need the will. The lawyer and the client agree that the lawyer will not provide any documentation of advice or a draft of the will based on the work done, even though the client will pay for the hours already worked. As in Paragraph (1) of Subsection D of 3.2.1.23 NMAC, delivery and initial use of the product of the service are presumed to be in New Mexico. Nor would the lawyer be able to rebut this presumption since under the product of this incomplete service is the work done by the lawyer for the client in New Mexico and there are no facts that would rebut the presumption that delivery and initial use of this product occur in New Mexico.

(3) Same facts as in Paragraph (1) of Subsection H of 3.2.1.23 NMAC, except the client is outside New Mexico and the lawyer delivers the will to the client outside New Mexico where the client executes the will. In this case, there is no presumption under Subsection D of 3.2.1.23 NMAC that delivery or initial use of the product of the service is in New Mexico. Under the facts and circumstances, the product of the service, the will, is delivered and initially used outside New Mexico. Therefore, the lawyer will be entitled to a deduction under Section 7-9-57 NMSA 1978 provided the lawyer has evidence required to support the deduction.

(4) Same facts as in Paragraph (1) of Subsection H of 3.2.1.23 NMAC, except the lawyer performs the service outside New Mexico and the lawyer delivers the will to the client in New Mexico, where the client executes the will. As in Paragraph (1) of Subsection D of 3.2.1.23 NMAC, delivery and initial use of the product of the service are presumed to be in New Mexico. Nor would the lawyer be able to rebut this presumption since under the facts and circumstances, the product of the service, the will, is delivered and initially used in New Mexico. Note that while lawyer in this case would have gross receipts subject to tax because the service is initially used in the state, under 3.1.4.13 NMAC, because the service is a professional service, the gross receipts would be sourced to the state reporting location and subject to tax at the state rate.

(5) Same facts as in Paragraph (2) of Subsection H of 3.2.1.23 NMAC except the lawyer is outside New Mexico. As in Paragraph (2) of Subsection D of 3.2.1.23 NMAC, delivery and initial use of the product of the service are presumed to be in New Mexico. In this case, however, the product of this incomplete service is the work done by the lawyer for the client outside New Mexico and the lawyer may, therefore, be able to rebut the presumption that delivery or initial use of this product occurs inside New Mexico. Assuming the lawyer can rebut the presumption and show that initial use of the product of the service occurs outside New Mexico, the lawyer would have no gross receipts subject to tax.

(6) A New Mexico seller agrees to provide a consulting service to a federal government agency, contracting and overseeing the performance of the service at an out-of-state location. The contract for the service provides that the seller is required to prepare a report summarizing the work and deliver that report to the out-of-state location. The contract also provides that the government will use the report to select products for purchase at facilities outside New Mexico. During the contract, the government agency, which has offices in New Mexico, answers questions posed by the New Mexico seller and responds to requests for data. Here, there is no presumption in this case under Subsection D of 3.2.1.23 NMAC that the delivery or initial use of the product of the service are in New Mexico. Furthermore, under all the facts and circumstances, the product of the service, the report, is delivered and initially used outside the state.

(7) A seller performs website design services outside New Mexico for a client that has business locations inside and outside the state. The seller works with and responds to the client’s technology manager the client’s out-of-state office. The seller and the client agree that the seller will make a demo of the proposed website for the technology manager to test. After the test, the seller will finish the website, with any necessary changes, and will give the client access to operating the website. The operation of the website will be done primarily at offices of the client outside the state, although some operations will also be done in the New Mexico office. Here, there is no presumption under Subsection D of 3.2.1.23 NMAC that the product of the service is delivered or initially used in New Mexico. Furthermore, under all the facts and circumstances, the product of the service, the final website, will be delivered and initially used outside the state.

(8) A seller of medical testing services performed outside New Mexico has a client in New Mexico who purchases the services for its own medical facilities both inside and outside the state. The seller of testing services charges by the test. The results of tests are sent to the client’s medical facilities in New Mexico where they are reviewed and then made available to doctors and patients. Each testing service is a separate sale of a service. Here, for each service, the product of the service is presumed to be delivered and initially used in New Mexico under Subsection D of 3.2.1.23 NMAC. The seller in this case will not be able to rebut the presumption because, under the facts and circumstances, the product of these services are the results which are delivered to New Mexico and initially used at facilities where they are reviewed.

(9) A seller of payroll services performed outside New Mexico has a business client which has offices both inside and outside New Mexico. The seller’s contact is with the business’s headquarters, outside the state, and the seller obtains information to perform the payroll service from the business’s chief accountant located in that office. Each pay period, the seller transmits funds electronically drawing on the business’s accounts to pay employees and to submit tax returns and also transmits reports to the business at the headquarters office. This information is reviewed by the headquarters office and any mistakes are communicated by the business to the seller. Each year the seller also transmits W-2s and other tax information by mail. Here, there is no presumption under Subsection D of 3.2.1.23 NMAC that the product of the service is delivered or initially used in New Mexico. It may appear that the product of the service is delivered and initially used both in and outside New Mexico. Under Paragraph (4) of Subsection C of 3.2.1.23 NMAC and under all the relevant facts and circumstances, the product of the service, payroll information, is deemed delivered to the primary location of delivery outside the state and the initial use of the product of the service is, likewise, deemed delivered to occur at the primary location of initial use outside the state.

(10) Same facts as the example above, except that the seller of payroll services performs those services in New Mexico. Again, as in the previous, while the product of the service may appear to be delivered and initially used both inside and outside New Mexico, under Paragraph (4) of Subsection C of 3.2.1.23 NMAC and under all the relevant facts and circumstances, the product of the service, payroll information, is deemed delivered to the primary location of delivery outside the state and the initial use of the product of the service is, likewise, deemed to occur at the primary location of initial use outside the state.

(11) A seller of video editing services performed inside New Mexico are sold to an out-of-state customer who posts the edited video on-line for use by its customers throughout the United States. After the edited video is delivered and posted on the customer’s website, the customer then asks the seller in New Mexico to test access to the video, and the seller agrees to do so. The fact that the final action related to the service, the testing of the access to the video, occurs in New Mexico does not change the result under all the relevant facts and circumstances that the delivery and initial use of the product of the service, the edited video, occurs outside New Mexico when the video is delivered to and posted by the customer on its website.

(12) Same facts as Paragraph (11) of Subsection H of 3.2.1.23 NMAC except that the seller in New Mexico agrees to both edit the video and provide data from a survey of other websites. The seller charges separately for these services, which it also regularly sells on a separate basis, but the contract and billing information for the two services are combined. These services would be separate services under 3.2.1.29 NMAC and the delivery and initial use of the product of each service would be determined based on the relevant facts and circumstances for each service.

3.2.1.24 [RESERVED]

History

3.2.1.22 NMAC - Rp, 3.2.1.22 NMAC 10/13/2021
3.2.1.23 NMAC - N, 10/13/2021

N.M. Admin. Code § 3.2.1.25 Manufacturing - General Examples

A. For purposes of Subsection H of Section 7-9-3 NMSA 1978, combining means assembling two or more pieces of tangible personal property to create another piece of personal property. Processing means to convert tangible personal property into a marketable form. A person is engaged in the business of manufacturing only if:

(1) that person combines or processes components or materials;

(2) the value of the tangible personal property which has been combined with other tangibles or which has been processed has increased as a direct result of the manufacturing process; and

(3) the person manufacturing sells the same or similar type of manufactured products in the ordinary course of business.

B. The following examples illustrate the application of Subsection H of Section 7-9-3 NMSA 1978.

C. Example 1: Y sells parts and bodies for automobiles to X. X, who owns a used car lot and garage, places the parts and bodies in and on used cars from his lot. X then resells the renovated cars to the general public in the ordinary course of business. X is manufacturing because X is assembling and fabricating the cars to increase their value and is selling them in the ordinary course of business.

D. Example 2: Y, a machine tool firm, assembles three machine tools solely for its own use in producing components. Y does not sell any of these three machine tools. Assembling the machine tools is not “manufacturing” because Y is not assembling the tools to increase their value for sale in the ordinary course of business.

E. Example 3: S, who is in the business of building custom boats, purchases fiberglass and other supplies from F, a fiberglass manufacturer. S is furnished blueprints by customers and all the materials that are to be purchased are specified in those blueprints. After S obtains all the materials from F, S builds the boats to the specifications set out in the blueprints and then sells the boats to customers in the ordinary course of business. S is manufacturing boats. S may therefore give F a nontaxable transaction certificate.

F. Example 4: R is in the business of retreading and recapping pneumatic tires. If R retreads and recaps a tire carcass which R owns in order to increase its value for sale in the ordinary course of business and that tire carcass becomes a component part of a recapped tire, then R is “manufacturing”.

G. Example 5: P is in the business of printing and silk screening. If P uses only printing supplies which P owns as an ingredient or component part of the end product which P sells in the ordinary course of business, then P is “manufacturing”. If P uses printing supplies such as paper, ink, staples, glue, binding, chemicals, and dyes provided by the customer, then even though such supplies become ingredient or component parts of an end product which P sells in the ordinary course of business, P is “performing a service” and not “manufacturing”.

H. Example 6: Y is a newspaper publishing company located outside New Mexico with no business location, salespersons or other presence in New Mexico. Z is a printing company inside New Mexico. Y arranges to have Z print the newspapers which it publishes. Z is required to provide newsprint (paper), ink, and all the materials required for the production of newspapers. Z is manufacturing printed material. Z, in the given fact situation, does not have receipts from either publishing a newspaper or selling a newspaper; therefore, the deductions provided by Section 7-9-63 NMSA 1978 and Section 7-9-64 NMSA 1978 do not apply. Z may deduct from its gross receipts its receipts from selling printed material to Y if the printed material is delivered to Y outside New Mexico.

I. Example 7: A is in the business of painting oil and water color pictures for sale in the ordinary course of business. A is a manufacturer of tangible personal property. A combines oils, color pigments, fixing agents, canvas, frames and glass in a painting as components and properly issues a nontaxable transaction certificate to the seller of the components. A cannot properly issue a nontaxable transaction certificate to the seller of brushes, palettes, knives, cleaners, erasers and easels since these items of property are not components for purposes of Subsection H of Section 7-9-3 NMSA 1978.

3.2.1.26 [RESERVED]

History

3.2.1.25 NMAC - Rp, 3.2.1.25 NMAC 10/13/2021

N.M. Admin. Code § 3.2.1.27 Property

A. Bills, notes, etc.: Tangible personal property does not include bills, notes, checks, drafts, bills of exchange, certificates of deposit, letters of credit, or any negotiable instrument. Coins, stamps, and documents which have a historic value or market value in excess of their face value are tangible personal property.

B. Sale of license to use software is sale of property:

(1) The definition of property includes licenses. The sale of a license to use software constitutes a sale of property and comes within the definition of gross receipts.

(2) The transaction constitutes a sale of a license to use the software program when a computer software company sells an already-developed software program where:

(a) no extraordinary services are performed in order to furnish the program;

(b) the buyer pays a fixed amount for the license to use the program and use is generally limited to a specific computer; and

(c) the buyer may not resell to any other person a license to use the program and may not transfer the software package itself to any other person.

C. Granting the right to hunt is the sale of a license to use: For purposes of this section, granting by a landowner to another, a right to access and hunt within the boundaries of the landowner’s real property is a license to use the real property. A license is a form of property as defined in Subsection J of Section 7-9-3 NMSA 1978 and the receipts from the sale of a license are subject to the gross receipts tax. The following are four types of hunting-related transactions, that when sold, may include the sale of a license:

(1) the sale of a hunting package that includes permission to hunt on private land;

(2) the sale of an authorization to hunt on private land granted by the New Mexico department of game and fish;

(3) the granting of permission or access to enter onto the private land to hunt; or

(4) the sale of a license/permit issued by the state to hunt on public land.

D. Receipts from selling a hunting package are subject to gross receipts tax to the extent that the individual components of the package are not deductible or exempt from the gross receipts tax pursuant to the Gross Receipts and Compensating Tax Act. A person that sells a hunting package that consists of taxable and nontaxable components must reasonably allocate the receipts based on the value of the individual components. For purposes of this section, a “hunting package” may include the following components:

(1) lodging;

(2) meals;

(3) delivery and transportation services;

(4) guide services;

(5) license to use the property;

(6) carcass of the hunted animal; or

(7) other services or tangible personal property included in the package.

E. Example: X owns a ranch in New Mexico and sells guided hunting packages. Included in the price for the hunt X guarantees that the hunter will retrieve an animal, lodging at the ranch, meals, experienced hunting guide, retrieval, caping, delivery to local meat processor and taxidermist. Not included in the price are expenses associated with alcohol consumption, meat processing, taxidermy services or gratuities for guides. X receipts from the sale of this type of hunting package includes receipts from providing services, the sale of tangible personal property (meals), the sale of the carcass (possibly livestock) and from granting a license to use the land within the ranch boundaries. X must determine a reasonable method of allocating their receipts between components that are subject to gross receipts tax and those that are exempt from gross receipts tax (sale of livestock).

3.2.1.28 [RESERVED]

History

3.2.1.27 NMAC - Rp, 3.2.1.27 NMAC 10/13/2021

N.M. Admin. Code § 3.2.1.29 Services

A. When a transaction is predominantly a service:

(1) A transaction involving both the transfer of tangible personal property to the buyer and the performance of a service other than a construction or research and development service is predominantly a service when:

(a) the seller is not regularly engaged in selling or leasing the same or similar tangible personal property other than in conjunction with the sale of a service; and

(b) at least one of the following conditions applies:

(i) the transaction is primarily the performance of work and the transfer of any property through the transaction is incidental to the performance of the required work; or

(ii) the transaction requires the performance of work which is substantially greater in value than the value of the tangible personal property involved in the transaction; or

(iii) the performer of the service has the power to influence significantly the degree of involvement of the tangible personal property in the transaction.

(2) When the transaction is predominantly a service other than construction, any tangible personal property transferred in conjunction with the service is incidental to the service and the value of the property becomes an element of and is incorporated into the value of the service sold. Type 2 nontaxable transaction certificates (NTTCs) may not be executed to acquire the property so incorporated.

(3) Example A1: C, a consultant, reviews operations of clients; C does not engage in the business of selling office supplies. C is hired to evaluate certain operations of L. C presents the evaluation to L as a written report, with supplemental data on computer disks. C contends that the paper used for the report and the computer disks were sold to L and therefore C may execute a Type 2 NTTC to acquire these tangibles. The transaction with L is predominantly the performance of a service. The paper and computer disks convey the result of the C's service and are incidental to that service. C may not execute Type 2 NTTCs for the purchase of these tangibles.

(4) Example A2: X is engaged in the business of performing certain services and is not engaged in selling tangible personal property in the ordinary course of business. X enters into a cost plus a fixed fee contract with Y to conduct a survey of residents of this state to determine consumer acceptability of and demand for particular household products which Y manufacturers and plans to distribute into New Mexico. The contract specifies that on completion or termination of the contract any tangible property purchased by X, and billed by X, will be paid by Y as a cost of fulfilling the requirements of the contract. X chooses to purchase a personal computer to use in the performance of the service. X will enter results of the surveys into the computer which will classify the responses and generate reports which X will analyze, interpret and submit to Y. Since X has the power to exert significant influence over the degree of involvement (use) of the computer under the contract and since X is not engaged in selling computers or similar property in the ordinary course of business, X's receipts attributed to the cost of the computer are receipts from performing a service. X may not execute a Type 2 NTTC for the purchase of the computer.

(5) Example A3. A well servicing company uses disposable bits and other disposable “rubber goods” in servicing oil and natural gas wells. The disposable items are used up in the course of the servicing; pieces of the abraded material are left in the well. The company claims it should be allowed to execute Type 2 NTTCs because the disposable items are left with the owner(s) of the well. These materials are incidental to the performance of the service. The company may not execute Type 2 NTTCs in acquiring these disposable items.

(6) Construction is defined to be a service and that service is defined to include all tangible personal property which becomes an ingredient or component part of the construction project. Under the provisions of Section 7-9-51 NMSA 1978, however, a person engaging in the construction business may execute a nontaxable transaction certificate for the purchase of tangible personal property which will become an ingredient or component part of a construction project.

(7) The product of a research and development service may be tangible property, such as prototypes, facsimiles, reports or other similar property. Even though the product of the service may itself be tangible, receipts from the transaction are receipts from the sale of a service and not from the sale of tangible personal property. Accordingly the performer of research and development services may not execute a nontaxable transaction certificate when purchasing tangible personal property used to assemble or create such product of the service, except as provided by Section 3.2.205.11 NMAC.

(8) Example B1: B, an engineering company, contracts to design a product for Y, a manufacturer, who intends to manufacture the product for sale to the general public. The contract requires B to submit plans for the product and a prototype of it. B contends that the plans and prototype are tangible personal property and therefore Type 1 or Type 2 NTTCs may properly be executed. B is performing a research and development service, even though the product of the service is embodied in tangible personal property. The tangibles used are incidental to the performance of the service. Type 1 and Type 2 NTTCs may not be executed to acquire the tangible personal property making up the plans and prototype.

(9) Example B2: B, an engineering company, is a qualified contractor within the meaning of Section 3.2.205.11 NMAC under a contract with D, an agency of the United States. The contract is a research and development contract covered by the agreement between the state of New Mexico and several agencies of the United States, including D. The contract calls for B to design and submit plans for a rocket motor and to develop and deliver a facsimile of the rocket casing to a research facility for testing. B maintains that B is selling tangible personal property to the federal government. B is performing research and development services. The plans and facsimile are products of that service. The transaction is predominantly the performance of a service rather than the sale of tangible personal property. B is not selling tangible personal property to the federal government but may be eligible to execute Type 15 NTTCs if the conditions specified by Section 3.2.205.11 NMAC and the State-Federal agreement are met.

(10) When the performer of the service either is regularly engaged in selling or leasing by itself the type of tangible personal property transferred in the transaction, a single transaction may encompass both the sale of a service and the sale of property as distinct and separable parts of the transaction. In such a case, Type 2 NTTCs may be executed to acquire the tangible personal property resold if the conditions in Subsection A of Section 3.2.205.10 NMAC are met.

(11) Example B3: F, an accountant, performs bookkeeping services for several clients. The accountant transmits various forms and papers to the clients in the course of providing this service. G, another accountant, runs short of certain forms and purchases some from F to tide G over until G's regular suppliers are open for business. F contends that, because F has sold to G tangible personal property by itself of the type sold to F's clients, two separate transactions occur with F's clients. F is not regularly engaged in the business of selling these forms. F's transactions with F's clients are not separable into distinct service and tangible components. F's transactions are predominantly the performance of a service.

(12) Example B4: H, who operates a computer hardware and software company, is hired to write computer programs for one of M's divisions, acquire and set up 25 computer stations for use of the division and to train the division personnel in the use of the stations and programs. H contends that the computer stations are sold to M and therefore H may execute Type 2 NTTCs to acquire them for resale. The transaction encompasses both the performance of services (developing the programs and training the division personnel) as well as the sale of tangible personal property (the computer stations) as separable elements. Therefore H may execute Type 2 NTTCs in acquiring the computer stations.

(13) See Paragraph (8) of Subsection A of Section 3.2.205.10 NMAC for transactions in which buyer regularly sells the tangible personal property by itself.

B. Transactions in which neither the performance of a service or the sale of tangible personal property predominates:

(1) In some cases, a transaction involving the performance of a service other than a construction or research and development service and the sale of tangible personal property may not be predominately either the performance of a service or the sale of tangible personal property, as for example where receipts attributable to each constitutes more than forty percent of the total receipts from the transaction. In such cases, if the market value or costs of the tangible personal property or services is readily ascertainable and if the taxpayer's records adequately reflect the portion of receipts derived from the sale of tangible personal property and the portion derived from the performance of services, the receipts may be apportioned accordingly. The burden rests on the taxpayer to provide that information, and to justify that the portion of receipts attributable to the sale of the tangible personal property or to the performance of services accurately reflects the relative market value or costs, including reasonably apportioned overhead, of the tangible personal property or services. The clearest way of carrying that burden is to specify separately on the invoice the charges for the property and the charges for the services, and to retain sufficient records to allow a determination that the relative value of either the property or the services is not overstated.

(2) Example 1: Taxpayer X enters into a contract with a governmental entity to maintain the entity's computer equipment. The contract obliges X to check and maintain the equipment, providing replacement parts such as toner cartridges on a regular basis, and to repair the equipment, including the replacement of broken parts. X bills the entity separately stating the charges for its maintenance and repair services and for the replacement parts. Receipts from the charges for replacement parts will be receipts from the sale of tangible personal property to a governmental entity and are deductible pursuant to Section 7-9-54 NMSA 1978. Receipts from charges for the services are not deductible.

(3) Subsection E of Section 3.2.1.29 NMAC does not apply to construction or to transactions in which prototypes or other tangible products of a service are transferred.

History

3.2.1.29 NMAC - Rp, 3.2.1.29 NMAC 10/13/2021

N.M. Admin. Code § 3.2.1.30 Use and Using

The definition of “use” and “using” pursuant to Subsection N of Section 7-9-3 NMSA 1978 includes three components: use, consumption and storage.

A. Use: The first component, “use”, means to employ or utilize property or a service for a particular purpose. Use does not include mere ownership or possession of property. Use does not include the mere treatment, processing or servicing of tangible property to make the property fit for utilization when the ultimate use of the property is outside New Mexico. Use does not include the transfer to the customer of tangible personal property in the course of the treatment, processing or servicing or the return of the property to the owner at the conclusion of the treatment, processing or servicing.

(1) Example 1: The uses of a chair are many and varied. Its designed or intended use is being sat on by human beings. A chair, however, may also be “used” to wedge a door shut, as a step-ladder to reach something, as a receptacle to hold objects, as a display item, as a support to prop up a table or shelf and many other purposes not planned by its designer or maker. In contrast, a chair is not “used” by being assembled, polished, painted, upholstered or recaned.

(2) Example 2: B enters into a contract with C, a firm in New Mexico. Under the contract, B sends a gaseous compound to C for separation. C returns the separated materials to B or delivers them to D for further processing. B has not used the compound or the separated materials in New Mexico.

B. Storage:

(1) The term “using” includes storage in New Mexico except where the storage is for subsequent sale of the property in the ordinary course of the seller's business or for use solely outside New Mexico.

(2) Example 1: D, a resident of Utah, buys pipe in Texas to be used solely in Utah. The pipe is shipped into New Mexico, unloaded, and stored for three days. It is then reloaded and shipped to Utah. There is no use of the pipe in New Mexico within the meaning of Subsection N of Section 7-9-3 NMSA 1978. The transaction which occurred was merely storage for use solely outside New Mexico.

(3) Example 2: X Construction Company purchases a bulldozer in Illinois intending to use it in its construction business. The bulldozer is then delivered to X in New Mexico. X does not have any immediate use for the bulldozer so it is stored in the back lot of the construction company with other equipment. Two months later X changes plans and sells the bulldozer to Y Construction Company who needs it for a job. The bulldozer remained in storage from the day X received it until the day it was sold. Since the storage of the tractor was not for subsequent sale in the ordinary course of X's business, the storage of the tractor is a “use” within the meaning of Subsection N of Section 7-9-3 NMSA 1978. Therefore, X Construction Company will be subject to the compensating tax on the value of the tractor because it has used the property in New Mexico.

HISTORY OF 3.2.1 NMAC:

Pre-NMAC History:

BOR 67-2, NM Gross Receipts and Compensating Tax Regulations, September 1967, filed 9/29/1967.

BOR 69-4, Regulations in Effect and Pertaining to the New Mexico Gross Receipts and Compensating Tax Act, 12-5-69, filed 12/5/1969.

BOR 72-4, Regulations in Effect and Pertaining to the New Mexico Gross Receipts and Compensating Tax Act, 3/9/72, filed 3/9/1972.

BOR 74-2, Regulations in Effect and Pertaining to the New Mexico Gross Receipts and Compensating Tax Act, 12/15/73, filed 3/20/1974.

BOR 76-1, Regulations in Effect and Pertaining to the New Mexico Gross Receipts and Compensating Tax Act, 7/26/76, filed 7/26/1976.

R.D.79-1, Gross Receipts and Compensating Tax Act Regulations, filed 6/18/79.

R.D. Rule No. 82, Regulations Pertaining to the Gross Receipts and Compensating Tax Act, Sections 7-9-1 to 7-9-80.1 NMSA 1978, filed 4/7/1982.

R.D. Rule No. 84, Regulations Pertaining to the Gross Receipts and Compensating Tax Act, Sections 7-9-1 to 7-9-80.1 NMSA 1978, filed 5/4/1984.

TRD Rule No. 9-86, Regulations Pertaining to the Gross Receipts and Compensating Tax Act, Sections 7-9-1 to 7-9-80.1 NMSA 1978, filed 4/2/1986.

TRD Rule GR-90, Regulations Pertaining to the Gross Receipts and Compensating Tax Act, Sections 7-9-1 to 7-9-80.1 NMSA 1978, filed 11/26/1990.

History of Repealed Material: 3.2.1 NMAC - Gross Receipts Taxes - General Provisions (filed 4/17/2001) Repealed effective 10/13/2021.

NMAC History:

3 NMAC 2.1, Gross Receipts Taxes - General Provisions, filed 11/4/1996.

3.2.1 NMAC, Gross Receipts Taxes - General Provisions, filed 4/17/2001.

3.2.1 NMAC - Gross Receipts Taxes - General Provisions (filed 4/17/2001) replaced 3.2.1 NMAC - Gross Receipts Taxes General Provisions effective 10/13/2021.

History

3.2.1.30 NMAC - Rp, 3.2.1.30 NMAC 10/13/2021

Part 2 Date Payment Due

N.M. Admin. Code § 3.2.2.1 Issuing Agency

Taxation and Revenue Department, Joseph M. Montoya Building, 1100 South St. Francis Drive, P.O. Box 630, Santa Fe NM 87504-0630.

History

11/15/96; 3.2.2.1 NMAC - Rn, 3 NMAC 2.11.1, 4/30/01

N.M. Admin. Code § 3.2.2.2 Scope

This part applies to each person engaging in business in New Mexico.

History

11/15/96; 3.2.2.2 NMAC - Rn, 3 NMAC 2.11.2, 4/30/01

N.M. Admin. Code § 3.2.2.3 Statutory Authority

Section 9-11-6.2 NMSA 1978.

History

11/15/96; 3.2.2.3 NMAC - Rn, 3 NMAC 2.11.3, 4/30/01

N.M. Admin. Code § 3.2.2.4 Duration

Permanent.

History

11/15/96; 3.2.2.4 NMAC - Rn, 3 NMAC 2.11.4, 4/30/01

N.M. Admin. Code § 3.2.2.5 Effective Date

11/15/96, unless a later date is cited at the end of a section, in which case the later date is the effective date.

History

11/15/96; 3.2.2.5 NMAC - Rn & A, 3 NMAC 2.11.5, 4/30/01

N.M. Admin. Code § 3.2.2.6 Objective

The objective of this part is to interpret, exemplify, implement and enforce the provisions of the Gross Receipts and Compensating Tax Act.

History

11/15/96; 3.2.2.6 NMAC - Rn, 3 NMAC 2.11.6, 4/30/01

N.M. Admin. Code § 3.2.2.7 Definitions

[Reserved.]

History

11/15/96; 3.2.2.7 NMAC - Rn, 3 NMAC 2.11.7, 4/30/01

N.M. Admin. Code § 3.2.2.8 Extension of Time for Payment

The time for payment of the tax may be extended under unusual circumstances upon proper application to the department prior to the due date.

History

9/29/67, 12/5/69, 3/9/72, 11/20/72, 3/20/74, 7/26/76, 6/18/79, 4/7/82, 5/4/84, 4/2/86, 11/26/90, 11/15/96; 3.2.2.8 NMAC - Rn, 3 NMAC 2.11.8, 4/30/01

N.M. Admin. Code § 3.2.2.9 Determination of Timeliness

Determination of what timeliness is in relation to the filing of returns, notices, and applications and the making of payments is governed by Section 7-1-9 NMSA 1978 of the Tax Administration Act and regulations thereunder. Requirements for making payments equal to or in excess of $25,000 are governed by Section 7-1-13.1 NMSA 1978 of the Tax Administration Act and regulations thereunder.

History

3/9/72, 11/20/72, 3/20/74, 7/26/76, 6/18/79, 4/7/82, 5/4/84, 4/2/86, 11/26/90, 11/15/96; 3.2.2.9 NMAC - Rn & A, 3 NMAC 2.11.9, 4/30/01

N.M. Admin. Code § 3.2.2.10 Effect of Saturday, Sunday, or Holiday on Payment Date

When the total tax due is less than $25,000 and the last day for payment of the combined taxes on the CRS-1 Combined Report Form falls on Saturday, Sunday or a legal holiday, the payment shall be considered timely if it is postmarked or filed in person the next succeeding day which is not a Saturday, Sunday or a legal New Mexico or national holiday.

History

12/5/69, 3/9/72, 11/20/72, 3/20/74, 7/26/76, 6/18/79, 4/7/82, 5/4/84, 4/2/86, 11/26/90, 11/15/96, 4/30/99; 3.2.2.10 NMAC - Rn, 3 NMAC 2.11.10, 4/30/01

N.M. Admin. Code § 3.2.2.11 Reporting of Progress Payments

A contractor who receives progress payments or other consideration for services performed on and materials provided for a construction project as defined in Section 7-9-3.4 NMSA 1978 must report such payments or other consideration as gross receipts. If the contractor is a cash-basis taxpayer, the contractor must report any such payments or other consideration actually received in a particular month as receipts for that month. If the contractor is an accrual basis taxpayer, any amounts which the contractor earned or billed or to which the contractor became entitled during a particular month must be reported as receipts for that month as required by Section 7-9-11 NMSA 1978.

History

4/2/75, 7/26/76, 6/18/79, 4/7/82, 5/4/84, 4/2/86, 11/26/90, 11/15/96; 3.2.2.11 NMAC - Rn & A, 3 NMAC 2.11.11, 4/30/01; A, 12/30/03

N.M. Admin. Code § 3.2.2.12 Petition to Change Accounting Methods

A. A taxpayer who elects to report gross receipts tax on either the cash, modified accrual or accrual basis is bound by that election and must report the gross receipts tax on that basis unless the taxpayer petitions the secretary or the secretary's delegate in writing to allow a change in reporting method as required by Subsection C of Section 7-1-10 NMSA 1978 and the petition is granted. A change in accounting method operates prospectively from the date the petition for change of method is granted.

B. A taxpayer who elects to report governmental gross receipts tax on either the cash, modified accrual or accrual basis is bound by that election and must report the governmental gross receipts tax on that basis unless the taxpayer petitions the secretary or the secretary's delegate in writing to allow a change in reporting method as required by Subsection C of Section 7-1-10NMSA 1978 and the petition is granted. A change in accounting method operates prospectively from the date the petition for change of method is granted.

History

7/26/76, 6/18/79, 4/7/82, 1/6/84, 5/4/84, 4/2/86, 11/26/90, 6/28/91, 11/15/96; 3.2.2.12 NMAC - Rn & A, 3 NMAC 2.11.12, 4/30/01

N.M. Admin. Code § 3.2.2.13 Reporting of Gross Receipts - Semi-Annual Reporting or Quarterly Reporting

Taxpayers who have a tax liability which averages less than two hundred dollars ($200) per month and have been granted authority to report gross receipts or governmental gross receipts on either a semi-annual filing basis or quarterly filing basis must file a return with payment on or before the twenty-fifth day of the month following the last month of the semi-annual filing period or of the quarterly filing period. The taxpayer does not have authority to change from one reporting interval to another without the prior approval of the secretary or the secretary's delegate.

History

1/6/84, 5/4/84, 4/2/86, 11/26/90, 6/28/91, 11/15/96; 3.2.2.13 NMAC - Rn, 3 NMAC 2.11.13, 4/30/01

N.M. Admin. Code § 3.2.2.14 Accrual and Cash Basis Reporting

A. Cash basis taxpayers report as gross receipts or governmental gross receipts all cash and other consideration received during the tax reporting period.

B. Accrual basis taxpayers report as gross receipts or governmental gross receipts amounts of sales, including cash and charge sales, made during the tax reporting period.

History

1/21/85, 4/2/86, 11/26/90, 6/28/91, 11/15/96; 3.2.2.14 NMAC - Rn, 3 NMAC 2.11.14, 4/30/01

N.M. Admin. Code § 3.2.2.15 Return Required to Be Filed

Taxpayers who are registered for gross receipts, governmental gross receipts, compensating or withheld income tax purposes must file a CRS-1 Combined Report Form for each reporting period whether or not any tax is due.

HISTORY OF 3.2.2 NMAC:

Pre-NMAC History:

BOR 67-2, NM Gross Receipts and Compensating Tax Regulations, September 1967, filed 9/29/67.

BOR 69-4, Regulations in Effect and Pertaining to the New Mexico Gross Receipts and Compensating Tax Act, 12-5-69, filed 12/5/69.

BOR 72-4, Regulations in Effect and Pertaining to the New Mexico Gross Receipts and Compensating Tax Act, 3/9/72, filed 3/9/72.

BOR 74-2, Regulations in Effect and Pertaining to the New Mexico Gross Receipts and Compensating Tax Act, 12/15/73, filed 3/20/74.

BOR 76-1, Regulations in Effect and Pertaining to the New Mexico Gross Receipts and Compensating Tax Act, 7/26/76, filed 7/26/76.

R.D.79-1, Gross Receipts and Compensating Tax Act Regulations, filed 6/18/79.

R.D. Rule No. 82, Regulations Pertaining to the Gross Receipts and Compensating Tax Act, Sections 7-9-1 to 7-9-80.1 NMSA 1978, filed 4/7/82.

R.D. Rule No. 84, Regulations Pertaining to the Gross Receipts and Compensating Tax Act, Sections 7-9-1 to 7-9-80.1 NMSA 1978, filed 5/4/84.

TRD Rule No. 9-86, Regulations Pertaining to the Gross Receipts and Compensating Tax Act, Sections 7-9-1 to 7-9-80.1 NMSA 1978, filed 4/2/86.

TRD Rule GR-90, Regulations Pertaining to the Gross Receipts and Compensating Tax Act, Sections 7-9-1 to 7-9-80.1 NMSA 1978, filed 11/26/90.

History of Repealed Material: [RESERVED]

NMAC History:

3 NMAC 2.11, Date Payment Due, filed 11/4/96.

3.2.2 NMAC, Date Payment Due, filed 4/17/2001.

History

1/21/85, 4/2/86, 11/26/90, 6/28/91, 11/15/96; 3.2.2.15 NMAC - Rn, 3 NMAC 2.11.15, 4/30/01

Part 4 Imposition and Rate of Tax - Denomination as “Gross Receipts Tax”

N.M. Admin. Code § 3.2.4.1 Issuing Agency

Taxation and Revenue Department, Joseph M. Montoya Building, 1100 South St. Francis Drive, P.O. Box 630, Santa Fe NM 87504-0630

History

11/15/96; 3.2.4.1 NMAC - Rn, 3 NMAC 2.4.1, 4/30/01

N.M. Admin. Code § 3.2.4.2 Scope

This part applies to all persons engaging in business in New Mexico.

History

11/15/96; 3.2.4.2 NMAC - Rn, 3 NMAC 2.4.2, 4/30/01

N.M. Admin. Code § 3.2.4.3 Statutory Authority

Section 9-11-6.2 NMSA 1978.

History

11/15/96; 3.2.4.3 NMAC - Rn, 3 NMAC 2.4.3, 4/30/01

N.M. Admin. Code § 3.2.4.4 Duration

Permanent.

History

11/15/96; 3.2.4.4 NMAC - Rn, 3 NMAC 2.4.4, 4/30/01

N.M. Admin. Code § 3.2.4.5 Effective Date

11/15/96, unless a later date is cited at the end of a section, in which case the later date is the effective date.

History

11/15/96; 3.2.4.5 NMAC - Rn & A, 3 NMAC 2.4.5, 4/30/01

N.M. Admin. Code § 3.2.4.6 Objective

The objective of this part is to interpret, exemplify, implement and enforce the provisions of the Gross Receipts and Compensating Tax Act.

History

11/15/96; 3.2.4.6 NMAC - Rn, 3 NMAC 2.4.6, 4/30/01

N.M. Admin. Code § 3.2.4.7 Definitions

For the purposes of Section 3.2.4.9 NMAC:

A. “Indian tribe” means an Indian nation, tribe or pueblo, including:

(1) any political subdivision, agency or department of that Indian nation, tribe or pueblo;

(2) any incorporated or unincorporated enterprise of the Indian nation, tribe or pueblo or its political subdivisions, agencies or departments; and

(3) any corporation required to be considered an Indian and therefore a member of the Indian nation, tribe or pueblo under Eastern Navaho Industries, Inc. v. Bureau of Revenue, 552 P.2d 805 (N.M. App. 1976); and

B. “tribe's territory” means that part of Indian country in New Mexico reserved formally or informally for that Indian nation, tribe or pueblo, including its dependent Indian communities, and, with respect to a member of that tribe, any land in New Mexico allotted, reserved or held in trust by the United States for that member.

History

3/16/95, 8/30/95, 11/15/96; 3.2.4.7 NMAC - Rn & A, 3 NMAC 2.4.7, 4/30/01

N.M. Admin. Code § 3.2.4.8 Who Is the Taxpayer

The gross receipts tax is imposed on persons engaging in business in New Mexico. Such persons are solely liable for payment of the tax; they are not “collectors” on behalf of the state.

3.2.4.9 FEDERAL PREEMPTION - TRANSACTIONS WITH INDIAN TRIBES

A. Imposition barred by federal law - sale in Indian country of tangible personal property to a tribe or tribal member - general

(1) Except for receipts of a public utility from selling electricity, natural gas or water, receipts from selling tangible personal property to an Indian tribe or member thereof on that tribe's territory are not subject to the gross receipts tax if taxation of such receipts is prohibited by federal law.

(2) The person selling tangible personal property to an Indian tribe or member thereof on that tribe's territory must demonstrate that the sale is to an Indian tribe or member thereof. The person must also demonstrate that the sale takes place on the tribe's territory. The documents demonstrating that the receipts from these sales are not subject to tax under Subsection A of Section 3.2.4.9 NMAC shall be retained in the person's records.

(a) The first requirement may be met by obtaining a statement signed by the purchaser of the tangible personal property that the purchaser is an Indian tribe or member thereof. In the case of the Indian tribe itself, the statement must be attested to by a tribal official. In the case of a tribal member, the statement must either specify the tribal member's official tribal or BIA census number or, in the case in which the Indian tribe does not maintain an official census system, the signature of an official of the member's Indian tribe confirming this statement. This statement may also be provided to the person by the Indian tribe on behalf of one or more of its members if attested to by a tribal official. Upon request, the Secretary may approve additional methods. This documentation shall be conclusive evidence, and the only material evidence, that the purchaser is an Indian tribe or member thereof.

(b) The second requirement may be met if the person keeps records adequate to document that delivery of the tangible personal property to the buyer took place on the tribe's territory and that at least two of the following activities also took place on the tribe's territory:

(i) solicitation of the sale;

(ii) making of the contract of sale; or

(iii) payment for the property sold.

(3) Receipts from the sale of tangible personal property in New Mexico in Indian country to the following persons are subject to the gross receipts tax:

(a) a person who is not an Indian tribe or member thereof;

(b) a person who is an Indian tribe other than the Indian tribe on whose territory the sale takes place; and

(c) a person who is a member of an Indian tribe other than the Indian tribe on whose territory the sale takes place except that, if the person is the spouse of a member of the Indian tribe on whose territory the sale takes place, that person will be considered for the purposes of Subsection A of Section 3.2.4.9 NMAC to be a member of the spouse's Indian tribe.

(4) Receipts from the sale of tangible personal property in New Mexico to an Indian tribe or member thereof are subject to the gross receipts tax when the sale takes place outside the tribe's territory, even if the sale takes place within the territory of another Indian tribe.

B. Imposition barred by federal law - sale in Indian county of tangible personal property to a tribe or tribal member - electricity, natural gas or water sold by public utility:

(1) Receipts of a public utility (as defined in Section 62-3-3 NMSA 1978) from selling electricity, natural gas or water to an Indian tribe or member thereof on that tribe's territory are not subject to the gross receipts tax if taxation of such receipts is prohibited by federal law. A sale occurs on the tribe's territory when the meter measuring the quantity sold is located on the tribe's territory.

(2) The public utility selling electricity, natural gas or water to an Indian tribe or member thereof on that tribe's territory must demonstrate that the sale is to an Indian tribe or member thereof. The public utility must also demonstrate that electricity, natural gas or water being sold is sold through a meter on the tribe's territory. The documents demonstrating that the receipts from these sales are not subject to tax under Subsection B of Section 3.2.4.9 NMAC shall be retained in the public utility's records.

(a) The first requirement may be met by obtaining a statement signed by the purchaser of the electricity, natural gas or water that the purchaser is an Indian tribe or member thereof. In the case of the Indian tribe itself, the statement must be attested to by a tribal official. In the case of a tribal member, the statement must either specify the tribal member's official tribal or BIA census number or, in the case in which the Indian tribe does not maintain an official census system, the signature of an official of the member's Indian tribe confirming this statement. This statement may also be provided to the public utility by the Indian tribe on behalf of one or more of its members if attested to by a tribal official. Upon request, the Secretary may approve additional methods. This documentation shall be conclusive evidence, and the only material evidence, that the purchaser is an Indian tribe or member thereof.

(b) The second requirement may be met if the public utility keeps records adequate to document that the meter through which the electricity, natural gas or water is sold is located on the tribe's territory.

(3) Receipts from the sale of electricity, natural gas or water in New Mexico in Indian country to the following persons are subject to the gross receipts tax:

(a) a person who is not an Indian tribe or member thereof;

(b) a person who is an Indian tribe other than the Indian tribe on whose territory the sale takes place; and

(c) a person who is a member of an Indian tribe other than the Indian tribe on whose territory the sale takes place except that, if the person is the spouse of a member of the Indian tribe on whose territory the sale takes place, that person will be considered for the purposes of Subsection B of Section 3.2.4.9 NMAC to be a member of the spouse's Indian tribe.

(4) Receipts from the sale of electricity, natural gas or water in New Mexico to an Indian tribe or member thereof are subject to the gross receipts tax when the sale takes place outside the tribe's territory, even if the sale takes place within the territory of another Indian tribe.

C. Imposition barred by federal law - leasing in Indian country to tribe or tribal members:

(1) Receipts from leasing property to an Indian tribe or member thereof on that tribe's territory are not subject to gross receipts tax if taxation of such receipts is prohibited by federal law. Leasing occurs on a tribe's territory when the property being leased is located on the tribe's territory.

(2) The lessor must demonstrate that the leased property is leased to an Indian tribe or member thereof. The lessor must also demonstrate that the property being leased is located on the tribe's territory. The documents demonstrating that lease receipts are not subject to tax under Subsection C of Section 3.2.4.9 NMAC shall be retained in the lessor's records.

(a) The first requirement may be met by obtaining a statement signed by the lessee that the lessee is an Indian tribe or member thereof. In the case of the Indian tribe itself, the statement must be attested to by a tribal official. In the case of a member, the statement must also either specify the lessee's official tribal or BIA census number or, when the lessee's Indian tribe does not maintain an official census system, be attested to by an official of the lessee's Indian tribe confirming this statement. This statement may also be provided to the lessor by the Indian tribe on behalf of one or more of its members if attested to by a tribal official. Upon request, the Secretary may approve additional methods. This documentation shall be conclusive evidence, and the only material evidence, that the lessee is an Indian tribe or member thereof.

(b) The second requirement may be met if the lessor keeps records adequate to document that the property being leased is located during the lease on the lessee's tribe's territory. If the property being leased is to be located both on and off the lessee's tribe's territory during the lease, the lessor must keep records documenting the time the property is on the lessee's tribe's territory.

(3) Receipts from leasing property in New Mexico in Indian country to the following persons are subject to the gross receipts tax:

(a) a person who is not an Indian tribe or member thereof;

(b) a person who is an Indian tribe other than the Indian tribe on whose territory the leased property is located; and

(c) a person who is a member of an Indian tribe other than the Indian tribe on whose territory the leased property is located except that, if the person is the spouse of a member of the Indian tribe on whose territory the leased property is located, that person will be considered for the purposes of Subsection C of Section 3.2.4.9 NMAC to be a member of the spouse's Indian tribe.

(4) Receipts from leasing property in New Mexico to an Indian tribe or member thereof are subject to the gross receipts tax when the property being leased is located outside the tribe's territory, even if located within the territory of another Indian tribe.

D. Imposition barred by federal law - services in Indian country for tribe or tribal members - general:

(1) Receipts from performing services, other than construction or telecommunications services, sold to an Indian tribe or member thereof on that tribe's territory are not subject to gross receipts tax if taxation of such receipts is prohibited by federal law.

(2) The seller of the services must demonstrate that the service is sold to an Indian tribe or member thereof. The seller must also demonstrate that the service is performed on the tribe's territory. The documents demonstrating that the receipts are not subject to tax under Subsection D of Section 3.2.4.9 NMAC shall be retained in the seller's records.

(a) The first requirement may be met by obtaining a statement signed by the purchaser that the purchaser is an Indian tribe or member thereof. In the case of the Indian tribe itself, the statement must be attested to by a tribal official. In the case of a member, the statement must also either specify the purchaser's official tribal or BIA census number or, when the purchaser's Indian tribe does not maintain an official census system, be attested to by an official of the purchaser's Indian tribe confirming this statement. This statement may also be provided to the seller by the Indian tribe on behalf of one or more of its members if attested to by a tribal official. Upon request, the Secretary may approve additional methods. This documentation shall be conclusive evidence, and the only material evidence, that the purchaser is an Indian tribe or member thereof.

(b) The second requirement may be met if the seller keeps records adequate to document that the services are performed on the purchaser's tribe's territory. If the services are performed both on and off the purchaser's tribe's territory, the seller must keep records documenting the value of the services performed on the purchaser's tribe's territory.

(3) Receipts from performing services, other than construction or telecommunications services, in New Mexico in Indian country which are sold to the following persons are subject to the gross receipts tax:

(a) a person who is not an Indian tribe or member thereof;

(b) a person who is an Indian tribe other than the Indian tribe on whose territory the sale takes place; and

(c) a person who is a member of an Indian tribe other than the Indian tribe on whose territory the sale takes place except that, if the person is the spouse of a member of the Indian tribe on whose territory the sale takes place, that person will be considered for the purposes of Subsection D of Section 3.2.4.9 NMAC to be a member of the spouse's Indian tribe.

(4) Receipts from performing services, other than construction or telecommunications services, in New Mexico for an Indian tribe or member thereof are subject to the gross receipts tax when the services are performed outside the tribe's territory, even if performance takes place within the territory of another Indian tribe.

E. Imposition barred by federal law - services in Indian country for tribe or tribal members - construction services:

(1) Receipts from construction services sold to an Indian tribe or member thereof on that tribe's territory are not subject to gross receipts tax if taxation of such receipts is prohibited by federal law. Construction occurs on a tribe's territory when the construction site is located on the tribe's territory.

(2) The seller must demonstrate that the construction service is sold to an Indian tribe or member thereof. The seller must also demonstrate that the construction site is located on the tribe's territory. The documents demonstrating that the receipts are not subject to tax under Subsection E of Section 3.2.4.9 NMAC shall be retained in the seller's records.

(a) The first requirement may be met by obtaining a statement signed by the purchaser that the purchaser is an Indian tribe or member thereof. In the case of the Indian tribe itself, the statement must be attested to by a tribal official. In the case of an individual, the statement must also either specify the purchaser's official tribal or BIA census number or, when the purchaser's Indian tribe does not maintain an official census system, be attested to by an official of the purchaser's Indian tribe confirming this statement. This statement may also be provided to the seller by the Indian tribe on behalf of one or more of its members if attested to by a tribal official. Upon request, the Secretary may approve additional methods. This documentation shall be conclusive evidence, and the only material evidence, that the purchaser is an Indian tribe or member thereof.

(b) The second requirement may be met if the seller keeps records adequate to document that the construction site is located on the purchaser's tribe's territory. If the construction site is located partly on and partly off the purchaser's tribe's territory, the seller must keep records documenting the portion of construction occurring on the purchaser's tribe's territory.

(3) Receipts from construction services in Indian country sold to the following persons are subject to the gross receipts tax:

(a) a person who is not an Indian tribe or member thereof;

(b) a person who is an Indian tribe other than the Indian tribe on whose territory the sale takes place; and

(c) a person who is a member of an Indian tribe other than the Indian tribe on whose territory the sale takes place except that, if the person is the spouse of a member of the Indian tribe on whose territory the sale takes place, that person will be considered for the purposes of Subsection E of Section 3.2.4.9 NMAC to be a member of the spouse's Indian tribe.

(4) Receipts from performing construction services in New Mexico for an Indian tribe or member thereof are subject to the gross receipts tax when the construction site is outside the tribe's territory, even if the construction site is within the territory of another Indian tribe.

F. Imposition barred by federal law - services in Indian country for tribe or tribal members - telecommunications services:

(1) Receipts from selling telecommunications services to an Indian tribe or member thereof on that tribe's territory are not subject to gross receipts tax if taxation of such receipts is prohibited by federal law. Telecommunications service occurs on a tribe's territory when:

(a) calls originate or terminate through an instrument on the tribe's territory; and

(b) the service is billed to the Indian tribe or a member thereof.

(2) The seller must demonstrate that the telecommunications service is sold to an Indian tribe or member thereof. The seller must also demonstrate that the telecommunications service originates or terminates through an instrument located on the tribe's territory and is billed to the Indian tribe or member thereof. The documents demonstrating that receipts from providing telecommunications services are not subject to tax under Subsection F of Section 3.2.4.9 NMAC shall be retained in the seller's records.

(a) The first requirement may be met by obtaining a statement signed by the purchaser that the purchaser is an Indian tribe or member thereof. In the case of the Indian tribe itself, the statement must be attested to by a tribal official. In the case of an individual, the statement must also either specify the purchaser's official tribal or BIA census number or, when the purchaser's Indian tribe does not maintain an official census system, be attested to by an official of the purchaser's Indian tribe confirming this statement. This statement may also be provided to the seller by the Indian tribe on behalf of one or more of its members if attested to by a tribal official. Upon request, the Secretary may approve additional methods. This documentation shall be conclusive evidence, and the only material evidence, that the purchaser is an Indian tribe or member thereof.

(b) The second requirement may be met for fixed location instruments if the seller keeps records adequate to document that calls originate or terminate through instruments located on the purchaser's tribe's territory and that the call is billed to the Indian tribe or member thereof. The second requirement may be met for mobile instruments if the seller keeps adequate records to document that:

(i) with respect to charges billed regardless of volume of calls, the purchaser's address is within the purchaser's tribe's territory and

(ii) with respect to charges for calls, the call either originates or terminates within the purchaser's tribe's territory. Sellers of telecommunications services through mobile instruments may estimate the percentage of receipts for the report month from calls through such instruments which do not originate or terminate on the purchaser's tribe's territory. The estimate shall be the total receipts from calls from purchasers whose address is within the purchaser's tribe's territory for the reporting period multiplied by the percentage of actual receipts from calls by those purchasers originating or terminating off the purchaser's tribe's territory during the previous calendar year. The amount of actual receipts during the previous calendar year from off-territory calls shall be determined based upon evidence satisfactory to the department.

(3) Receipts from selling telecommunications services in New Mexico in Indian country to the following persons are subject to the gross receipts tax:

(a) a person who is not an Indian tribe or member thereof;

(b) a person who is an Indian tribe other than the Indian tribe on whose territory the sale takes place; and

(c) a person who is a member of an Indian tribe other than the Indian tribe on whose territory the sale takes place except that, if the person is the spouse of a member of the Indian tribe on whose territory the sale takes place, that person will be considered for the purposes of Subsection F of 3.2.4.9 NMAC to be a member of the spouse's Indian tribe.

(4) Receipts from selling telecommunications services in New Mexico to an Indian tribe or member thereof are subject to the gross receipts tax when the instrument through which the calls originate or terminate is located outside the tribe's territory, even if the location is within the territory of another Indian tribe.

(5) For the purposes of Subsection F of Section 3.2.4.9 NMAC, “telecommunications service” means the transmission of messages or conversations by persons providing telephone or telegraph services; “telecommunications service” excludes the transmission or re-transmission of radio or television programming.

G. Imposition barred by federal law - receipts of federally licensed Indian traders: The receipts of a federally licensed Indian trader as defined in Sections 25 U.S.C. 261 to 264 from trading with an Indian tribe on that tribe's territory are exempt from the gross receipts tax to the extent that the tax is pre-empted by federal law.

H. Imposition barred by federal law - Indian business within tribe’s territory:

(1) The receipts of a qualifying business from transactions occurring within the tribe's territory are exempt from gross receipts tax to the extent that such tax is pre-empted by federal law. The receipts of a qualifying business from transactions occurring anywhere else are not exempt under Subsection H of Section 3.2.4.9 NMAC.

(2) A “qualifying business” is a business that:

(a) is physically located within an Indian tribe's territory; and

(b) is fifty percent or more owned by individuals who are enrolled members of the Indian tribe within whose territory the business is located, provided that for purposes of establishing the percentage of ownership the Indian spouse of an enrolled member of that Indian tribe is to be considered an enrolled member of that Indian tribe.

History

7/26/76, 6/18/79, 4/7/82, 5/4/84, 4/2/86, 11/26/90, 11/15/96; 3.2.4.8 NMAC - Rn, 3 NMAC 2.4.8, 4/30/01
3/16/95, 8/30/95, 11/15/96, 4/30/99; 3.2.4.9 NMAC - Rn & A, 3 NMAC 2.4.9, 4/30/01

N.M. Admin. Code § 3.2.4.10 Federal Preemption and State Exemption - Credit Unions

A. 12 U.S.C. 1768 exempts federal credit unions from state taxation, other than property taxation. Accordingly, the receipts of federal credit unions are exempt from the gross receipts tax.

B. Section 58-11-61 NMSA 1978 exempts from state taxation credit unions organized under or subject to the Credit Union Regulatory Act to the same extent that credit unions chartered under federal law are exempt. Therefore receipts of credit unions organized under or subject to the Credit Union Regulatory Act are also exempt from the gross receipts tax.

History

5/31/97; 3.2.4.10 NMAC - Rn & A, 3 NMAC 2.4.10, 4/30/01

N.M. Admin. Code § 3.2.4.11 Federal Preemption - Job Corps Contractors

29 U.S.C. 1707(c) prohibits states and their subdivisions from imposing gross receipts taxes on receipts of Job Corps contractors from operating any Job Corps center, program or activity. Accordingly the receipts of Job Corps contractors from operating a Job Corps center, program or activity are exempt from the gross receipts tax.

HISTORY OF 3.2.4 NMAC: