New Mexico Administrative Code › Title 3 - TAXATION › Chapter 2 - GROSS RECEIPTS TAXES › Part 205 - DEDUCTION - GROSS RECEIPTS TAX - SALE OF TANGIBLE PERSONAL PROPERTY FOR RESALE › Section 3.2.205.10 - TANGIBLES SOLD FOR USE IN PERFORMANCE OF A SERVICE VERSUS SIMULTANEOUS TRANSACTIONS - BILLING PRACTICES

Current through Register Vol. 35, No. 13, July 16, 2024
A. Use of tangible personal property in
				performing a service:
(1) When a taxpayer
				uses tangible personal property in the performance of a service, the tangible
				personal property is acquired for use and not for sale in the ordinary course
				of business. Therefore, a nontaxable transaction certificate may not be
				executed under Section
				7-9-47
				NMSA 1978 to acquire the tangible personal property.
(2) [Reserved.]
(3) [Reserved.]
(4) Example 1: X, a dry cleaner, mends
				clothing that is brought to X for cleaning. X uses thread, material and buttons
				to mend the clothing. X maintains that X is selling these products. X does not
				sell thread, buttons or material; rather X is engaged in performing a service
				and uses the materials in the performance of the service. Therefore, the sale
				of these products to X is not a sale for resale. If, in this situation, X
				delivered an nttc to its supplier for the purchase of thread and buttons and if
				the supplier did not pay the gross receipts tax on those receipts, X will be
				subject to the compensating tax.
(5) Example 2: A person giving tangible
				personal property as prizes for performing certain skills at carnivals,
				amusement parks, fairs or similar recreation facilities is using the tangible
				personal property in the performance of its entertainment service. If this
				tangible personal property is acquired within New Mexico, the person may not
				execute Type 2 nttcs to buy these items because the tangible personal property
				is not to be re-sold but used in the performance of an amusement or recreation
				service. If the tangible personal property were acquired from sources outside
				New Mexico, the person is subject to the compensating tax on the value of the
				tangible personal property.
(6)
				Example 3: An accountant purchases journal and ledger sheets, forms and
				supplies necessary to maintain books of account for clients. The accountant
				analyzes transactions and prepares journal entries and posts information to the
				ledgers. The accountant also prepares periodic financial statements and
				completes tax returns and other reports on behalf of the client. In billing for
				the services performed, the accountant separately states the value of the
				journal and ledger sheets, forms and other property used in the performance of
				the service. The accountant is using the tangible personal property in the
				performance of the service and may not execute a nontaxable transaction
				certificate under Section
				7-9-47
				NMSA 1978 to acquire these items. The fact that the accountant separately
				states the value of these tangibles is immaterial in this case.
(7) Example 4: O & G Service Company uses
				swabbing cups and other rubber goods in the course of its servicing an oil
				well. In fact, this tangible personal property loses its separate identity in
				the course of the service. As is customary in the industry, O & G Service
				Company separately states the value of the swabbing cups and other rubber goods
				in its billing to the person who contracted for the servicing of the well. O
				& G may not execute nontaxable transaction certificates under Section
				7-9-47
				NMSA 1978 to acquire the swabbing cups and other rubber goods because O & G
				is using those goods in the performance of its service. In this case, it is
				immaterial whether O & G Service Company separately states the value of
				such tangibles or whether it is the industry practice to do so.
(8) If a business regularly sells tangible
				personal property by itself as well as in connection with the performance of a
				service and if the property is not used by the business in the course of the
				performance of the service, a transaction in which tangible personal property
				is transferred to the buyer as the result of, or in connection with, the
				performance of a service contains as separate components both the performance
				of a service and the sale of tangible personal property. When it is the custom
				of both the industry and the business to separately state the value of the
				service and the value of the tangible personal property transferred to the
				buyer in the billing to the buyer, the tangible personal property is acquired
				for sale in the ordinary course of business. In this case, a nontaxable
				transaction certificate may be executed under Section
				7-9-47
				NMSA 1978 to acquire the tangible personal property.