2023 New Mexico Statutes › Chapter 7 - Taxation › Article 9 - Gross Receipts and Compensating Tax › Section 7-9-54 - Deduction; gross receipts tax; governmental gross receipts tax; sales to governmental agencies.

A. Receipts from selling tangible personal property, or from selling licenses to use digital goods for the purpose of loaning those digital goods to the public, to the United States or to New Mexico or a governmental unit, subdivision, agency, department or instrumentality thereof may be deducted from gross receipts or from governmental gross receipts. Unless contrary to federal law, the deduction provided by this subsection does not apply to:
(1) receipts from selling metalliferous mineral ore;
(2) receipts from selling tangible personal property that is or will be incorporated into a metropolitan redevelopment project created under the Metropolitan Redevelopment Code;
(3) receipts from selling construction material, excluding tangible personal property, whether removable or non-removable, that is or would be classified for depreciation purposes as three-year property, five-year property, seven-year property or ten-year property, including indirect costs related to the asset basis, by Section 168 of the Internal Revenue Code of 1986, as that section may be amended or renumbered; or
(4) that portion of the receipts from performing a "service" that reflects the value of tangible personal property utilized or produced in performance of such service.
B. Receipts from selling tangible personal property, or from selling licenses to use digital goods for the purpose of loaning those digital goods to the public, for any purpose to an Indian tribe, nation or pueblo or a governmental unit, subdivision, agency, department or instrumentality thereof for use on Indian reservations or pueblo grants may be deducted from gross receipts or from governmental gross receipts.
C. When a seller, in good faith, deducts receipts for tangible personal property or licenses to use digital goods for the purpose of loaning those digital goods to the public sold to the state or a governmental unit, subdivision, agency, department or instrumentality thereof, after receiving written assurances from the buyer's representative that the property sold is not construction material, the department shall not assert in a later assessment or audit of the seller that the receipts are not deductible pursuant to Paragraph (3) of Subsection A of this section.
History:
1953 Comp., § 72-16A-14.9, enacted by Laws 1969, ch. 144, § 44; 1976, ch. 25, § 2; 1985, ch. 225, § 4; 1989, ch. 115, § 5; 1992, ch. 100, § 7; 1993, ch. 31, § 11; 1995, ch. 50, § 3; 2000, ch. 84, § 5; 2000, ch. 98, § 3; 2001, ch. 343, § 5; 2003, ch. 272, § 6; 2003, ch. 330, § 2; 2018, ch. 58, § 1; 2023, ch. 85, § 15.
ANNOTATIONS
The 2023 amendment,
effective July 1, 2023, added to a deduction for gross receipts tax for licenses to use digital goods sold to a governmental entity when subsequently loaning those digital goods to the public; in Subsection A, in the introductory paragraph, after "tangible personal property", added "or from selling licenses to use digital goods for the purpose of loaning those digital goods to the public"; in Subsection B, after "tangible personal property", added "or from selling licenses to use digital goods for the purpose of loaning those digital goods to the public"; and in Subsection C, after "tangible personal property", added "or licenses to use digital goods for the purpose of loaning those digital goods to the public".
The 2018 amendment,
effective March 2, 2018, clarified the meaning of construction material as used in the Gross Receipts and Compensating Tax Act; and in Paragraph A(3), after "construction material," added the remainder of the paragraph.
2003 Amendments.
— Laws 2003, ch. 330, § 2, effective June 20, 2003, deleted "as defined in Subsection K of Section 7-9-3 NMSA 1978" near the middle of Paragraph A(4); in Subsection C substituted "shall not assert" for "is precluded from asserting" following "material, the department" near the middle and inserted "of the seller" following "assessment or audit" near the end.
Laws 2003, ch. 272, § 6, effective July 1, 2003, in Subsection A, deleted "or" preceding "subdivision, agency"; and in Paragraph A(4), substituted "Subsection M" for "Subsection K".
The 2001 amendment,
effective July 1, 2001, substituted "construction material" for "tangible personal property that will become an ingredient or component part of a construction project" in Paragraph A(3); and added Subsection C.
The 2000 amendment,
effective March 7, 2000, inserted "for any purpose" following "personal property" in Subsection B.
The 1995 amendment,
effective July 1, 1995, inserted "tax" following "governmental gross receipts" in the section heading, deleted "nonfissionable" preceding "metalliferous" in Paragraph C(1), and made a minor stylistic change.
The 1993 amendment,
effective July 1, 1993, deleted "or any agency or instrumentality thereof" following "United States" and substituted "any governmental unit or subdivision, agency, department or instumentality" for "any political subdivision" in Subsection A, and deleted "the governing body of" following "personal property to" and substituted "nation or pueblo or any governmental subdivision, agency, department or instrumentality thereof" for "or Indian pueblo" in Subsection B.
The 1992 amendment,
effective July 1, 1992, inserted "governmental gross receipts" in the section heading; added "or from governmental gross receipts" at the end of Subsections A and B; substituted "that" for "which" in Subsection C(2); and substituted "that" for "which" in Subsection C(4), while deleting "is not deductible" at the end of that subsection.
The 1989 amendment,
effective July 1, 1989, designated the formerly undesignated first sentence as Subsection A, while substituting therein "as provided otherwise in Subsection C of this section" for "for receipts from selling nonfissionable metalliferous mineral ore and except for receipts from selling tangible personal property which is or will be incorporated into a metropolitan redevelopment project created under the Metropolitan Redevelopment Code; designated the formerly undesignated second sentence as Subsection B, while substituting all of the language thereof preceding "to" for "Receipts from selling tangible personal property other than nonfissionable metalliferous mineral ore"; added the introductory paragraph of Subsection C and Subsections C(1) through C(3); and designated the formerly undesignated third sentence as Subsection C(4).
Effect on government's contract costs does not invalidate tax.
— That the gross receipts tax may increase cost on a contract to the government does not validate the tax on the grounds that a state may not directly tax the federal government where its legal incidence falls elsewhere.
United States v. New Mexico
, 581 F.2d 803 (10th Cir. 1978),
aff'd
, 455 U.S. 720, 102 S. Ct. 1373, 71 L. Ed. 2d 580 (1982).
Suppliers of personal property for federal agents entitled to deduction.
— If contractors are procurement agents for the federal government, their suppliers of tangible personal property would be entitled to a tax deduction.
United States v. New Mexico
, 624 F.2d 111 (10th Cir. 1980),
aff'd
, 455 U.S. 720, 102 S. Ct. 1373, 71 L. Ed. 2d 580 (1982).
Tax proper unless purchasing contractors agents of United States.
— Since contracts do not authorize the contractors to act as agents of the United States in purchasing supplies and materials, an application of the gross receipts tax to the contractual transactions for materials and supplies is not unconstitutional.
United States v. New Mexico
, 581 F.2d 803 (10th Cir. 1978),
aff'd
, 455 U.S. 720, 102 S. Ct. 1373, 71 L. Ed. 2d 580 (1982).
Construction project includes wide variety of activities.
— This section was intended to make sales of construction materials to governmental entities taxable when the materials were to be incorporated into construction projects. Contrary to taxpayer's argument that Regulation GR 51:16 (now 3.2.1.11 NMAC) establishes a definite test for determining whether an endeavor is a "construction project," this regulation merely states nonexclusive guidelines for determining whether materials constitute a component part of a construction project. Thus, construction projects include the wide variety of activities listed in 7-9-3C NMSA 1978.
Arco Materials, Inc. v. Taxation & Revenue Dep't
, 1994-NMCA-062, 118 N.M. 12, 878 P.2d 330,
rev'd on other grounds sub nom.
Blaze Constr. Co. v. Taxation & Revenue Dep't
, 1994-NMSC-110, 118 N.M. 647, 884 P.2d 803, cert. denied, 514 U.S. 1016, 115 S. Ct. 1359, 131 L. Ed. 2d 216 (1995).
Direct passage of title to government insufficient to establish agency.
— That title to tangible personal property passes directly from the vendor to the federal government is insufficient in itself to establish an agency relationship.
United States v. New Mexico
, 455 F. Supp. 993 (D.N.M. 1978),
aff'd in part, rev'd in part on other grounds
, 624 F.2d 111 (10th Cir. 1980),
aff'd
, 455 U.S. 720, 102 S. Ct. 1373, 71 L. Ed. 2d 580 (1982).
Contract and circumstances establish agency relationship.
— In determining whether contractors are procurement agents of the federal government, the surrounding facts and contract provisions must be analyzed, and specific words naming the contractors as agents are not required so long as it is clear from the contracts and the factual circumstances that the relationship is one of agency.
United States v. New Mexico
, 455 F. Supp. 993 (D.N.M. 1978),
aff'd in part, rev'd in part on other grounds
, 624 F.2d 111 (10th Cir. 1980),
aff'd
, 455 U.S. 720, 102 S. Ct. 1373, 71 L. Ed. 2d 580 (1982).
Determining whether contractor was a federal agent.
— Facts that contracts were management contracts, in existence for nearly 30 years and conducted in government-owned facilities with government-owned funds for the purpose of carrying out significant energy research and development administration statutory responsibilities, were important in determining whether contractor was an agent of the federal government.
United States v. New Mexico
, 455 F. Supp. 993 (D.N.M. 1978),
aff'd in part, rev'd in part on other grounds
, 624 F.2d 111 (10th Cir. 1980),
aff'd
, 455 U.S. 720, 102 S. Ct. 1373, 71 L. Ed. 2d 580 (1982).
Tax may not be imposed on non-Indian for purchase price of materials for tribal housing project.
— The state, through its bureau of revenue (now taxation and revenue department) and the commissioner of revenue (now secretary of the taxation and revenue department), may not impose upon a non-Indian construction company its gross receipts tax for the purchase price of materials used in connection with a tribal housing project on the Mescalero Apache reservation.
Mescalero Apache Tribe v. O'Cheskey
, 439 F. Supp. 1063 (D.N.M. 1977),
aff'd
, 625 F.2d 967 (10th Cir. 1980), cert. denied, 450 U.S. 959, 101 S. Ct. 1417, 67 L. Ed. 2d 383 (1981), reh'g denied, 455 U.S. 929, 102 S. Ct. 1296, 71 L. Ed. 2d 474 (1982).
Telephone service.
— Decision that a telephone company was not entitled to a deduction under this section for receipts collected for intrastate toll charges and local phone calls from certain government organizations and organizations which had been granted federal income tax exemptions would be held, since there was a reasonable basis for differentiating between electricity (declared to be tangible personalty at 7-9-3J NMSA 1978) and telephone communications where the evidence showed that more was involved in the telephone business than the selling of electricity.
Leaco Rural Tel. Coop., Inc. v. Bureau of Revenue
, 1974-NMCA-076, 86 N.M. 629, 526 P.2d 426.