2019 New Mexico Statutes
Chapter 7 - Taxation
Article 9 - Gross Receipts and Compensating Tax
Section 7-9-3.3 - Definition; engaging in business.

As used in the Gross Receipts and Compensating Tax Act, "engaging in business" means carrying on or causing to be carried on any activity with the purpose of direct or indirect benefit. For a person who lacks physical presence in this state, including a marketplace provider, "engaging in business" means having, in the previous calendar year, 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).

History: 1978 Comp., § 7-9-3.3, enacted by Laws 2003, ch. 272, § 4; 2019, ch. 270, § 25.

Repeals and reenactments. — Laws 2003, ch. 272, § 4 repealed former 7-9-3.3 NMSA 1978, as enacted by Laws 2002, ch. 18, § 1, and enacted a new section, effective July 1, 2003.

Cross references. — For the federal Mobile Telecommunications Sourcing Act, see 4 U.S.C.S. § 116 et seq.

The 2019 amendment, effective July 1, 2019, revised the definition of "engaging in business" as used in the Gross Receipts and Compensating Tax Act; in the introductory clause, after "indirect benefit", deleted "except that" and added "For a person who lacks physical presence in this state, including a marketplace provider"; deleted subsection designation "A"; after the next occurrence of "engaging in business", deleted "does not include: having a worldwide web site as a third-party content provider on a computer physical located in New Mexico but owned by another nonaffiliated person; and"; and deleted former Subsection B and added the remainder of the section.

I. BUSINESS.

Meaning of "business". — "Business" is that which occupies the time, attention and labor of a person for the purpose of livelihood, profit or improvement; that which is a person's concern or intent. It would be too narrow a view to hold that if appellant's intelligence, skill and labor is employed in New Mexico, he is not carrying on a business, trade or profession in this state. Sterling Title Co. v. Comm'r of Revenue, 1973-NMCA-086, 85 N.M. 279, 511 P.2d 765.

"Engaging in business" means carrying on or causing to be carried on any activity for the purpose of direct or indirect benefit to the taxpayer (American Automobile Association), not someone else (its members). AAA v. Bureau of Revenue, 1975-NMSC-012, 87 N.M. 330, 533 P.2d 103, rev'd on other grounds, 1975-NMSC-058, 88 N.M. 462, 541 P.2d 967.

"Engaging in business". — A taxpayer is "engaging in business" as defined by Subsection E (now Section 7-9-3.3 NMSA 1978) when it is doing what it was organized and authorized to do. Baskin-Robbins Ice Cream Co. v. Revenue Div., 1979-NMCA-098, 93 N.M. 301, 599 P.2d 1098.

To decide whether one's activity constitutes "engaging in business" in this state, the real question is whether the sale or lease is in line with the business for which the seller or lessor was organized and in which it engages. AAMCO Transmissions v. Taxation & Revenue Dep't, 1979-NMCA-092, 93 N.M. 389, 600 P.2d 841, cert. denied, 93 N.M. 205, 598 P.2d 1165.

To engage in business, taxpayer must engage in services "for other persons" with the purpose of direct or indirect benefit to itself, for which activity it receives money for the performance of its services. Twining Coop. Domestic Water & Sewer Ass'n v. Bureau of Revenue, 1976-NMCA-052, 89 N.M. 345, 552 P.2d 476, cert. denied, 90 N.M. 7, 558 P.2d 619.

Bookkeeping and management corporation engaged in business. — Corporation organized to centralize the bookkeeping and management functions for other corporations was engaged in business for purposes of this act. Westland Corp. v. Commissioner of Revenue, 1971-NMCA-083, 83 N.M. 29, 487 P.2d 1099, cert. denied, 83 N.M. 22, 487 P.2d 1092.

Independent contractor subject to gross receipts taxes. — Since carpenter did "fifty to one hundred and fifty" jobs for different people, on those jobs where the customer (employer) deducted F.I.C.A. taxes, carpenter was an employee and his compensation was exempt as wages, and where no deductions were made, the commissioner determined that he was an independent contractor and liable for payment of gross receipt taxes. Stohr v. N.M. Bureau of Revenue, 1976-NMCA-118, 90 N.M. 43, 559 P.2d 420, cert. denied, 90 N.M. 254, 561 P.2d 1347 (1977).

Foreign franchisor deemed "engaging in business". — A foreign corporation which enters into agreements as a franchisor with licensees in New Mexico for use of the franchisor's trade name and trademark is engaged in business in New Mexico. American Dairy Queen Corp. v. Taxation & Revenue Dep't, 1979-NMCA-160, 93 N.M. 743, 605 P.2d 251.

Incidence of tax on contractors selling services to United States. — The legal incidence of the gross receipts tax was on contractors as sellers of services to the United States, not on the federal government. United States v. New Mexico, 581 F.2d 803 (10th Cir. 1978).

II. PROPERTY.

Meaning of "license". — As "license" is not defined in the statutes, it is accordingly to be given its ordinary meaning unless a different intent is clearly indicated and as "license" is defined in terms of "to accord permission or consent," "allow," "authorize," and as "permission to act," the essential element in the creation of a license is the permission or consent of the licensor and this permission need not come from some government authority. N.M. Sheriffs & Police Ass'n v. Bureau of Revenue, 1973-NMCA-130, 85 N.M. 565, 514 P.2d 616.

Rental of space in department store held license. — Agreements entered into between the taxpayer and several other companies which provided for the use of space in the taxpayer's department stores for the purpose of retailing certain items were license agreements and receipts from these arrangements were taxable under this section. S.S. Kresge Co. v. Bureau of Revenue, 1975-NMCA-015, 87 N.M. 259, 531 P.2d 1232.

Franchises. — For purposes of the gross receipts tax act, a franchise is to be treated as a compound or "bundled" form of property, which typically includes a license to use the franchiser's trademark and a commitment by the franchiser to perform various services to assist the franchisee in the operation of the franchised business. Services that are required by the franchise agreement and any services provided by the franchiser to police, promote, maintain, or enhance the value of its franchise system, are part of the franchise, and this is so regardless of whether those services are performed in New Mexico or out-of-state. Sonic Indus., Inc. v. State, 2000-NMCA-087, 129 N.M. 657, 11 P.3d 1219, rev'd on other grounds, 2006-NMSC-038, 140 N.M. 212, 141 P.3d 1266.

Telephone communications not tangible personalty. — The decision of the commission that a telephone company which provided a private telephone line to a federal agency was not entitled to the deduction in Section 7-9-54 NMSA 1978 for the sale of tangible personal property was upheld by the appellate court which found a reasonable basis for differentiating between electricity (declared to be tangible personalty at Section 7-9-3J NMSA 1978) and telephone communications. Leaco Rural Tel. Coop., Inc. v. Bureau of Revenue, 1974-NMCA-076, 86 N.M. 629, 526 P.2d 426.

III. SERVICES.

Amendment to definition of service changed test from product's value to seller's activity. — The 1976 amendment to the definition of service changed the test for taxation from one focusing on the end product's value to the purchaser to one focusing on the nature of seller's activity; on the seller's relative investment of skills and materials. EG & G, Inc. v. Dir., Revenue Div. Taxation & Revenue Dep't, 1979-NMCA-139, 94 N.M. 143, 607 P.2d 1161, cert. denied, 94 N.M. 628, 614 P.2d 545.

Service to its members does not constitute "service to others" as stated in the definition of "service" in this section. Twining Coop. Domestic Water & Sewer Ass'n v. Bureau of Revenue, 1976-NMCA-052, 89 N.M. 345, 552 P.2d 476, cert. denied, 90 N.M. 7, 558 P.2d 619.

Meaning of "other persons" doubtful. — The words "other persons" have many meanings which make the words doubtful as to meaning. When this occurs, "all doubts as to the meaning and intent of a tax statute must be construed in favor of the taxpayer." Twining Coop. Domestic Water & Sewer Ass'n v. Bureau of Revenue, 1976-NMCA-052, 89 N.M. 345, 552 P.2d 476, cert. denied, 90 N.M. 7, 558 P.2d 619.

Intent of legislature to grant tax immunity to nonprofit corporation. — The intent of the legislature was to grant immunity from the Gross Receipts and Compensating Tax Act to a nonprofit corporation which rendered services solely to its members for an assessment or a charge. Twining Coop. Domestic Water & Sewer Ass'n v. Bureau of Revenue, 1976-NMCA-052, 89 N.M. 345, 552 P.2d 476, cert. denied, 90 N.M. 7, 558 P.2d 619.

Building contractor performs "service". — A contractor in the business of constructing buildings is not a seller of construction materials but performs a service as defined in Subsection K. Ramah Navajo Sch. Bd., Inc. v. Bureau of Revenue, 1980-NMCA-094, 95 N.M. 708, 625 P.2d 1225, cert. quashed, 96 N.M. 17, 627 P.2d 412 (1981), rev'd on other grounds, 458 U.S. 832, 102 S. Ct. 3394, 73 L. Ed. 2d 1174 (1982).

School board contracting to build school. — When an Indian school board contracts with a federal agency to construct a school on reservation property and, in turn, contracts with a general contractor for actual construction of the building, the school board is the owner of the building and not an entity engaged in the construction business within the meaning of Subsection K. Ramah Navajo Sch. Bd., Inc. v. Bureau of Revenue, 1980-NMCA-094, 95 N.M. 708, 625 P.2d 1225, cert. quashed, 96 N.M. 17, 627 P.2d 412 (1981), rev'd on other grounds, 458 U.S. 832, 102 S. Ct. 3394, 73 L. Ed. 2d 1174 (1982).

Horse trainer and owner performing for others are performing "service". — When both a horse trainer and a horse owner are engaged in activities for other persons for a consideration, receipts in question were receipts from performing a service within the meaning of the Gross Receipts and Compensating Tax Act. Till v. Jones, 1972-NMCA-046, 83 N.M. 743, 497 P.2d 745, cert. denied, 83 N.M. 740, 497 P.2d 742. See Section 7-9-40 NMSA 1978 which now exempts receipts from horse race purses.

That part of attorney's inheritance designated attorney fees taxable. — Since attorney who was sole heir to his father's estate listed part of the inheritance received as attorney fees, that portion so designated was taxable under the gross receipts tax. Mears v. Bureau of Revenue, 1975-NMCA-006, 87 N.M. 240, 531 P.2d 1213.

Director's fees for services to corporation. — A member of the board of directors of a corporation was performing a service for the corporation and his fees therefrom are taxable as gross receipts. Mears v. Bureau of Revenue, 1975-NMCA-006, 87 N.M. 240, 531 P.2d 1213.

Municipal franchise fee and telephone carriers. — The total amount of money received by a local carrier for selling its telephone services includes the amount identified on its bills as the customer's share of the municipal franchise fee, so a telephone carrier is subject to the gross receipts tax. GTE Sw. Inc. v. Taxation & Revenue Dep't, 1992-NMCA-024, 113 N.M. 610, 830 P.2d 162, cert. denied, 113 N.M. 605, 830 P.2d 157.

Billboard displays intrastate in character. — Taxpayer's service is simply to post messages on billboards located in this state. It is being taxed for displaying, not for advertising. This service is intrastate in character, and thus is subject to the gross receipts tax. Mountain States Adver., Inc. v. Bureau of Revenue, 1976-NMCA-058, 89 N.M. 331, 552 P.2d 233, cert. denied, 90 N.M. 8, 558 P.2d 620.