2023 New Mexico Statutes › Chapter 7 - Taxation › Article 9 - Gross Receipts and Compensating Tax › Section 7-9-46 - Deduction; gross receipts; governmental gross receipts; sales to manufacturers and manufacturing service providers.

A. Receipts from selling tangible personal property may be deducted from gross receipts or from governmental gross receipts if the sale is made to a person engaged in the business of manufacturing who delivers a nontaxable transaction certificate to the seller or provides alternative evidence pursuant to Section 7-9-43 NMSA 1978. The buyer must incorporate the tangible personal property as an ingredient or component part of the product that the buyer is in the business of manufacturing.
B. Receipts from selling a manufacturing consumable to a manufacturer or a manufacturing service provider may be deducted from gross receipts or from governmental gross receipts if the buyer delivers a nontaxable transaction certificate to the seller or provides alternative evidence pursuant to Section 7-9-43 NMSA 1978; provided that if the seller is a utility company, an agreement with the department pursuant to Section 7-1-21.1 NMSA 1978 and a nontaxable transaction certificate shall be required.
C. Receipts from selling or leasing qualified equipment may be deducted from gross receipts if the sale is made to, or the lease is entered into with, a person engaged in the business of manufacturing or a manufacturing service provider who delivers a nontaxable transaction certificate to the seller or provides alternative evidence pursuant to Section 7-9-43 NMSA 1978; provided that a manufacturer or manufacturing service provider delivering a nontaxable transaction certificate or alternative evidence with respect to the qualified equipment shall not claim an investment credit pursuant to the Investment Credit Act [Chapter 7, Article 9A NMSA 1978] for that same equipment.
D. The purpose of the deductions provided in this section is to encourage manufacturing businesses to locate in New Mexico and to reduce the tax burden, including reducing pyramiding, on the tangible personal property that is consumed in the manufacturing process and that is purchased by manufacturing businesses in New Mexico.
E. The department shall annually report to the revenue stabilization and tax policy committee the aggregate amount of deductions taken pursuant to this section, the number of taxpayers claiming each of the deductions and any other information that is necessary to determine that the deductions are performing the purposes for which they are enacted.
F. A taxpayer deducting gross receipts pursuant to this section shall report the amount deducted separately for each deduction provided in this section and attribute the amount of the deduction to the appropriate authorization provided in this section in a manner required by the department that facilitates the evaluation by the legislature of the benefit to the state of these deductions.
G. As used in this section:
(1) "manufacturing consumable" means tangible personal property, other than qualified equipment or an ingredient or component part of a manufactured product, that is incorporated into, destroyed, depleted or transformed in the process of manufacturing a product, including electricity, fuels, water, manufacturing aids and supplies, chemicals, gases and other tangibles used to manufacture a product;
(2) "manufacturing operation" means a plant operated by a manufacturer or manufacturing service provider that employs personnel to perform production tasks to produce goods, in conjunction with machinery and equipment; and
(3) "qualified equipment" means machinery, equipment and tools, including component, repair, replacement and spare parts thereof, that are used directly in the manufacturing process of a manufacturing operation. "Qualified equipment" includes computer hardware and software used directly in the manufacturing process of a manufacturing operation but excludes any motor vehicle that is required to be registered in this state pursuant to the Motor Vehicle Code [66-1-1 NMSA 1978].
History:
1953 Comp., § 72-16A-14.1, enacted by Laws 1969, ch. 144, § 36; 1992, ch. 100, § 4; 2012, ch. 5, § 4; 2013, ch. 160, § 9; 2021, ch. 65, § 13; 2021, ch. 66, § 2; 2023, ch. 85, § 14.
ANNOTATIONS
Repeals.
— Laws 2023, ch. 85, § 27 repealed Laws 2021, ch. 65, § 13, effective July 1, 2023.
The 2023 amendment,
effective July 1, 2023, clarified when alternative evidence may be used to support the deduction for gross receipts tax for manufacturers and manufacturing service providers; in Subsection A, after "nontaxable transaction certificate to the seller", added "or provides alternative evidence pursuant to Section 7-9-43 NMSA 1978", and after "The buyer", deleted "delivering the nontaxable transaction certificate"; in subsection B, added "or provides alternative evidence pursuant to Section 7-9-43 NMSA 1978; provided that if the seller is a utility company, an agreement with the department pursuant to Section 7-1-21.1 NMSA 1978 and a nontaxable transaction certificate shall be required"; and in Subsection C, after "nontaxable transaction certificate to the seller", added "or provides alternative evidence pursuant to Section 7-9-43 NMSA 1978", and after the next occurrence of "nontaxable transaction certificate", added "or alternative evidence".
The 2021 amendment,
effective January 1, 2022, added manufacturing service providers to a gross receipts tax deduction for manufacturers, and defined "manufacturing consumable", as used in this section; in the section heading, deleted "tax", and added "and manufacturing service providers"; in Subsection B, after "Receipts from selling", deleted "tangible personal property that is", preceding "consumable", added "manufacturing", and after "consumable", deleted "and used in such a way that it is consumed in the manufacturing process of a product, provided that the tangible personal property is not a tool or equipment used to create the manufactured product, to a person engaged in the business of manufacturing that product and who delivers a nontaxable transaction certificate to the seller" and added "to a manufacturer or a manufacturing service provider", after "may be deducted", deleted "in the following percentages", and deleted former Paragraphs B(1) through B(5) and added "if the buyer delivers a nontaxable transaction certificate to the seller"; added a new Subsection C and redesignated former Subsections C through F as Subsection D through G, respectively; and in Subsection G, in the introductory clause, after "As used in", deleted "Subsection B of", in Paragraph G(1), added "manufacturing", after "personal property", added "other than qualified equipment or an ingredient or component part of a manufactured product", after "gases", deleted "repair parts, spares", and deleted former Paragraph F(2) and added Paragraphs G(2) and G(3).
The 2013 amendment,
effective July 1, 2013, provided a definition of "consumable" for purposes of the deduction of receipts from sales to manufacturers; in Subsection B, in the introductory sentence, after "tangible personal property that is", added "a consumable and"; and added Subsection F.
Applicability.
— Laws 2013, ch. 160, § 14 provided that Laws 2013, ch. 160, § 9 applies to gross receipts received on or after July 1, 2013.
The 2012 amendment,
effective January 1, 2013, provided a deduction for receipts from selling tangible personal property that is consumed in the manufacturing process of a product and added Paragraphs B, C, D and E.
The 1992 amendment,
effective July 1, 1992, inserted "governmental gross receipts" in the section heading; inserted "or from governmental gross receipts" in the first sentence; and substituted "that" for "which" in the second sentence.
Entitlement to manufacturing deduction not found.
— A biotechnology company whose expertise was in the diagnosis of genetic disorders that could be detected through the appearance of chromosomes, and who produced tangible objects that were provided to its customers, such as a written report of its experts' diagnosis and a laminated karyotype, which consisted of photographs of chromosomes that were numbered and pasted onto a piece of laminated cardboard, did not establish its entitlement to a manufacturing deduction, since the company could not identify any out-of-state purchases that would be subject to the compensating tax of products incorporated into its reports or laminated karyotypes. The department, whose assessment is assumed correct, had identified as subject to the compensating tax such items as microscopes, sinks, and furniture, which undoubtedly were not incorporated into the documents or laminated karyotypes.
Vivigen, Inc. v. Minzner
, 1994-NMCA-027, 117 N.M. 224, 870 P.2d 1382.
Am. Jur. 2d, A.L.R. and C.J.S. references.
— Sales or use tax upon containers or packaging materials purchased by manufacturer or processor for use with goods he distributes, 4 A.L.R.4th 581.
Items or materials exempt from use tax as becoming component part or ingredient of manufactured or processed article, 89 A.L.R.5th 493.