New Mexico Administrative Code › Title 3 - TAXATION › Chapter 2 - GROSS RECEIPTS TAXES › Part 207 - DEDUCTION - GROSS RECEIPTS TAX - SALE OF TANGIBLE PERSONAL PROPERTY FOR LEASING › Section 3.2.207.8 - GENERAL QUALIFICATIONS - EXAMPLES

Current through Register Vol. 35, No. 13, July 16, 2024
A. To qualify to issue a nontaxable
				transaction certificate (nttc) under the provisions of Section
				7-9-49
				NMSA 1978, the business issuing the nttc must derive a substantial portion of
				its income from the sale or lease of the same type of property which is being
				purchased under the nttc. The property purchased under the nttc must
				subsequently be sold or leased in the ordinary course of business. If the
				seller accepts an nttc in good faith and if either of these requirements is not
				met the value of the tangible property purchased under such nttc will be
				subject to the compensating tax.
B.
				Example 1: X derives a substantial portion of its receipts from leasing or
				selling air compressors. When X buys air compressors from M, the manufacturer,
				X gives M an nttc. M's receipts from the sales are deductible.
C. Example 2: X, an office machine company,
				buys a typewriter from the manufacturer, M. X has given M an nttc. X leases the
				typewriter for six months after which X uses it in its office. M may deduct the
				receipts from the sale of the typewriter from its gross receipts. X must pay
				gross receipts tax on its receipts from leasing the typewriter. As a result of
				converting the typewriter to its own use, X must pay compensating tax on the
				market value of the typewriter at the time of its conversion to use under
				Section
				7-9-7
				NMSA 1978.
D. Example 3: A
				substantial portion of L's business is from leasing or selling lawnmowers. L
				has given an nttc to D, the dealer from whom L buys its lawnmowers. L buys five
				lawnmowers from D to lease to its customers. L sells one of the lawnmowers to Y
				and leases the others to X. D may deduct receipts from the sale of all five of
				the lawnmowers to L. L must pay the gross receipts tax on the receipts from
				leasing to X and the sale to Y.
E.
				Example 4: C, a flying service, sells new and used airplanes, rents airplanes,
				provides in-state charter service, and provides flying instruction. C purchases
				five airplanes from X, a New Mexico airplane manufacturer, for use in its
				charter service. "Chartering" is here defined as hiring a plane and a pilot to
				fly the customer, not freight. Receipts from in-state charter flights are not
				subject to gross receipts tax. A charter is not a lease. The receipts from
				leasing airplanes and flight instructions are subject to the gross receipts
				tax. X's receipts from the sale of planes to C are subject to the gross
				receipts tax. If C bought the planes under nttc it issued X, C would be liable
				for compensating tax on the value of the charter planes. Later, when C sells
				these planes, the receipts from the sales of the used planes also are taxable.
				Sale of used planes is in the normal course of C's business. If C converts a
				plane it purchased for leasing to charter flights, even if the conversion is
				for a single flight, compensating tax becomes due on the market value of the
				plane at the time of conversion.