2019 New Mexico Statutes
Chapter 7 - Taxation
Article 9 - Gross Receipts and Compensating Tax
Section 7-9-3.5 - Definition; gross receipts.

A. As used in the Gross Receipts and Compensating Tax Act:

(1) "gross receipts" means the total amount of money or the value of other consideration received from selling property in New Mexico, from leasing or licensing property employed in New Mexico, from granting a right to use a franchise employed in New Mexico, from selling services performed outside New Mexico, the product of which is initially used in New Mexico, or from performing services in New Mexico. In an exchange in which the money or other consideration received does not represent the value of the property or service exchanged, "gross receipts" means the reasonable value of the property or service exchanged;

(2) "gross receipts" includes:

(a) any receipts from sales of tangible personal property handled on consignment;

(b) the total commissions or fees derived from the business of buying, selling or promoting the purchase, sale or lease, as an agent or broker on a commission or fee basis, of any property, service, stock, bond or security;

(c) amounts paid by members of any cooperative association or similar organization for sales or leases of personal property or performance of services by such organization;

(d) amounts received from transmitting messages or conversations by persons providing telephone or telegraph services;

(e) amounts received by a New Mexico florist from the sale of flowers, plants or other products that are customarily sold by florists where the sale is made pursuant to orders placed with the New Mexico florist that are filled and delivered outside New Mexico by an out-of-state florist;

(f) the receipts of a home service provider from providing mobile telecommunications services to customers whose place of primary use is in New Mexico if: 1) the mobile telecommunications services originate and terminate in the same state, regardless of where the services originate, terminate or pass through; and 2) the charges for mobile telecommunications services are billed by or for a customer's home service provider and are deemed provided by the home service provider. For the purposes of this section, "home service provider", "mobile telecommunications services", "customer" and "place of primary use" have the meanings given in the federal Mobile Telecommunications Sourcing Act; and

(g) receipts collected by a marketplace provider engaging in business in the state from sales, leases and licenses of tangible personal property, sales of licenses and sales of services or licenses for use of real property that are sourced to this state and are facilitated by the marketplace provider on behalf of marketplace sellers, regardless of whether the marketplace sellers are engaging in business in the state; and

(3) "gross receipts" excludes:

(a) cash discounts allowed and taken;

(b) New Mexico gross receipts tax, governmental gross receipts tax and leased vehicle gross receipts tax payable on transactions for the reporting period;

(c) taxes imposed pursuant to the provisions of any local option gross receipts tax that is payable on transactions for the reporting period;

(d) any gross receipts or sales taxes imposed by an Indian nation, tribe or pueblo; provided that the tax is approved, if approval is required by federal law or regulation, by the secretary of the interior of the United States; and provided further that the gross receipts or sales tax imposed by the Indian nation, tribe or pueblo provides a reciprocal exclusion for gross receipts, sales or gross receipts-based excise taxes imposed by the state or its political subdivisions;

(e) any type of time-price differential;

(f) amounts received solely on behalf of another in a disclosed agency capacity; and

(g) amounts received by a New Mexico florist from the sale of flowers, plants or other products that are customarily sold by florists where the sale is made pursuant to orders placed with an out-of-state florist for filling and delivery in New Mexico by a New Mexico florist.

B. When the sale of property or service is made under any type of charge, conditional or time-sales contract or the leasing of property is made under a leasing contract, the seller or lessor may elect to treat all receipts, excluding any type of time-price differential, under such contracts as gross receipts as and when the payments are actually received. If the seller or lessor transfers the seller's or lessor's interest in any such contract to a third person, the seller or lessor shall pay the gross receipts tax upon the full sale or leasing contract amount, excluding any type of time-price differential.

History: 1978 Comp., § 7-9-3.5, enacted by Laws 2003, ch. 272, § 3; 2006, ch. 39, § 2; 2007, ch. 339, § 2; 2019, ch. 270, § 26.

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

Compiler's notes. — Laws 2003, ch. 272, § 3 originally enacted this section as 7-9-3.1 NMSA 1978. The section was renumbered by the compiler as 7-9-3.5 NMSA 1978.

The 2019 amendment, effective July 1, 2019, revised the definition of "gross receipts" as used in the Gross Receipts and Compensating Tax Act; and in Subsection A, added Subparagraph A(2)(g).

The 2007 amendment, effective June 15, 2007, defined "gross receipts" to mean receipts from granting a right to use a franchise employed in New Mexico.

The 2006 amendment, effective July 1, 2006, provided in Paragraph (1) of Subsection A that gross receipts includes consideration received from licensing property employed in New Mexico.

I. IN GENERAL.

"Gross receipts" means the total amount of money or the value of other considerations received from selling property or from performing services. N.M. Enters., Inc. v. Bureau of Revenue, 1974-NMCA-125, 86 N.M. 799, 528 P.2d 212.

Selling property in New Mexico. — The gross receipts tax only applies when the selling of property takes place within the borders of New Mexico. Kmart Corp. v. Taxation & Revenue Dep't., 2006-NMSC-006, 139 N.M. 172, 131 P.3d 22.

Royalties received from trademark licenses granted as part of a franchise are subject to gross receipts tax. — Where petitioner entered into a number of franchise agreements with New Mexico businesses which contained a provision to grant to franchisees a limited license to use specific trademarks, and where the New Mexico taxation and revenue department (department) determined that the royalty fees for the limited trademark licenses were subject to gross receipts tax, the district court did not err in granting the department's motion for summary judgment, because the definition of "gross receipts" includes the total amount of money or the value of other consideration received from granting a right to use a franchise employed in New Mexico, and the trademark licensing provision at issue was central to the overall franchise and should be treated as part of the franchise for purposes of gross receipts, regardless of whether it was separately stated and itemized in the franchise agreement. A&W Rests. v. N.M. Taxation & Revenue Dep't, 2018-NMCA-069, cert. denied.

Salaries and overhead of federal contractors not tax immune. — As long as federal contractors are separate entities solely responsible for their own employees and internal management, salaries and overhead of those contractors are not obligations of the government, for purposes of tax immunity. 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).

Collection agencies gross receipts. — A collection agency does not include the creditor's portion of the proceeds, nor the taxes it collects on behalf of the creditor, in calculating its commission proceeds, i.e., its gross receipts. Rather, a collection agency pays gross receipts tax only on the commission portion of the debt. The total tax imposed on the debt and charged to the debtor is simply the sum of the creditor's tax and the agency's tax. Martinez v. Albuquerque Collection Servs., Inc., 867 F. Supp. 1495 (D.N.M. 1994).

Temporary staffing agencies' gross receipts. — Temporary employee company was not excluded from paying tax on its gross receipts from clients to which it provided temporary staffing services; the receipts were taxable as reimbursements of payroll-related expenditure. MPC Ltd. v. N.M. Taxation & Revenue Dep't, 2003-NMCA-021, 133 N.M. 217, 62 P.3d 308.

II. OUT-OF-STATE.

Only activities within state taxable. — The validity of the application of the gross receipts tax to general and administrative expense reimbursements depended on whether the tax was laid upon gross receipts derived from the contractors' activities within the borders of the state. 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).

Work performed outside the state. — If when they received reimbursements for general and administrative expenses contractors were being reimbursed for work (whether called "services" or by any other name) performed outside the state, New Mexico taxing authorities lack authority to tax those transactions. 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).

Income accrues on an out-of-state transaction. — Income which arises from a contract performed within the state but accrues upon a separable out-of-state transaction should be excluded from taxation as not being income arising from contracting within the state. 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).

Mere accounting device will not avoid tax. — Since all receipts resulted solely from the contractor's activities in the state and the general and administrative expense category appeared merely to be a cost accounting device, the entire amount of the receipts may be taxed by the state. 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).

Apportionment between in-state and out-of-state activity does not arise if the tax is levied only upon receipts resulting from the taxpayer's activities in New Mexico. 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.

Tax on foreign corporation's local business does not offend commerce clause. — Gross receipts tax imposed on foreign corporation was conditioned on the local business of renting equipment located in the state. Therefore, the tax does not constitute an undue burden on interstate commerce but, on the contrary, was a tax on the taxpayers' local and intrastate business of leasing machinery. Besser Co. v. Bureau of Revenue, 1964-NMSC-169, 74 N.M. 377, 394 P.2d 141 (decided under prior gross receipts law).

Taxing out-of-state sales impermissible. — Tax levied on gross receipts from out-of-state sales of tangible personal property, in the nature of reproducible educational material, is an impermissible burden on commerce. Evco v. Jones, 409 U.S. 91, 93 S. Ct. 349, 34 L. Ed. 2d 325 (1972).

Entire revenue from nonresident's display of signs in state taxable. — Colorado corporation which displayed billboards made in Colorado by Colorado employees and whose only contact with New Mexico was the displaying of signs and using 10% of its cost in maintenance was held subject to this section for its entire revenue and not just its 10% cost of maintenance. 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.

Only value of property entering state taxed. — Where tuition paid by New Mexico residents to a correspondence school based in Illinois covered materials valued at an average cost of $50 per student, and the remainder of the tuition covered the costs of grading, counseling and other services connected with the educational programs, virtually all of which services were performed in Illinois, it was held that only the value of the property entering New Mexico could be taxed as gross receipts of the school. Advance Schs., Inc. v. Bureau of Revenue, 1976-NMSC-007, 89 N.M. 79, 547 P.2d 562.

Affirmative evidence needed to support use within state. — When the corporation contracted with an out-of-state buyer provided for the corporation to destroy munitions, it was entitled to the gross receipts deduction, and the hearing officer could not properly determine that use or delivery took place within the state without some affirmative evidence in the record to support that conclusion. TPL, Inc. v. N.M. Taxation & Revenue Dep't, 2003-NMSC-007, 133 N.M. 447, 64 P.3d 474.

Tax applicable to foreign franchisor. — Although franchisor has no payroll, real property, personnel or offices located in this state, it does furnish signs which must be leased or purchased by its dealers, and its sales of tangible property and its granting of exclusive franchises constitute engaging in intrastate business in this state and the franchise fees received therefrom are subject to the gross receipts tax. 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. (Superceded by statute, Sonic Indus., Inc. v. State, 2000-NMCA-087, 129 N.M. 657, 11 P.3d 1219.)

Application of tax to franchise fees. — The imposition of gross receipts tax on franchise fees received from this state's dealers does not violate the due process clause or commerce clause and is proper where the franchisor is in the business of selling franchises, developing and marketing parts, receiving its primary source of income from the sale of franchises, collecting a percentage of franchisee's gross receipts as a lease payment for use of the trademark and trade name and where its leased trademarks and trade names and their businesses are protected by the laws of this state; thus, franchisor is engaged in business in this state. 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. (Superceded by statute, Sonic Indus., Inc. v. State, 2000-NMCA-087, 129 N.M. 657, 11 P.3d 1219.)

The 1991 amendment of Subsection J reclassifying licensing as selling did not alter whatever economic nexus existing between a foreign corporation and commercial activity carried on within New Mexico by its franchisees; therefore, fees paid to the corporation by New Mexico franchisees for the right to operate its restaurants located in New Mexico constituted receipts from selling property in New Mexico and were gross receipts within the meaning of Subsection F. Sonic Indus., Inc. v. State, 2000-NMCA-087, 129 N.M. 657, 11 P.3d 1219, rev'd, 2006-NMSC-038, 140 N.M. 212, 141 P.3d 1266.

Tax applicable to foreign corporation. — Although the taxpayer, a Delaware corporation, has no employees or offices located in this state, the taxpayer's most valuable assets, its trade name, trademark and related intangibles, are used in this state, taxpayer's secret formulas and techniques are utilized in this state and its method of business exploits the New Mexico market for taxpayer's benefit, taxpayer is engaged in business in New Mexico for purposes of gross receipts tax. Baskin-Robbins Ice Cream Co. v. Revenue Div., 1979-NMCA-098, 93 N.M. 301, 599 P.2d 1098 (decided under prior law).

III. LEASES.

Receipt of money from leasing of property is the incident which gave rise to the imposition of the gross receipts and sales tax. Rust Tractor Co. v. Bureau of Revenue, 1970-NMCA-107, 82 N.M. 82, 475 P.2d 779, cert. denied, 82 N.M. 81, 475 P.2d 778.

Property lease royalties are "gross receipts." — When a taxpayer is leasing property in this state for which it receives royalties, the royalties are "gross receipts." Baskin-Robbins Ice Cream Co. v. Revenue Div., 1979-NMCA-098, 93 N.M. 301, 599 P.2d 1098 (decided under prior law).

Gross receipts tax levied upon lessor of equipment, not user. Co-Con, Inc. v. Bureau of Revenue, 1974-NMCA-134, 87 N.M. 118, 529 P.2d 1239, cert. denied, 87 N.M. 111, 529 P.2d 1232.

Treating transactions as rentals for federal tax implies leasing arrangements. — When a parent corporation and its 100%-owned subsidiary utilized certain items of equipment without regard to which held the legal title thereto, made accounting entries showing the machinery as either "receivable" or "liability," as appropriate, and treated the transactions as gross rentals for federal corporate income tax purposes, the intent of the taxpayers was to treat the arrangements as rentals or leases which were subject to gross receipts taxes. Co-Con, Inc. v. Bureau of Revenue, 1974-NMCA-134, 87 N.M. 118, 529 P.2d 1239, cert. denied, 87 N.M. 111, 529 P.2d 1232.

Effect of Bingo and Raffle Act [repealed] on lease. — An arrangement between the owner of several properties used as bingo halls and the non-profit organizations who operated the bingo games was a lease and not a license where the organizations were required to pay rent, they were granted exclusive possession of certain facilities on the premises and the use of the facilities at certain times, and the owner could not revoke the agreement at will; although the arrangement was not a typical lease, restrictions in the Bingo and Raffle Act [repealed] accounted for the type of arrangement created and to deny that this was a lease would have made it impossible for bingo operators to enter arrangements that would qualify as leases. Quantum Corp. v. State Taxation & Revenue Dep't, 1998-NMCA-050, 125 N.M. 49, 956 P.2d 848 (decided under Bingo and Raffle Act, since repealed).

Laundry transactions are leasings. — Since the taxpayer's coin-operated laundry business is used for a consideration by persons other than the owner, the transactions are "leasings" as defined in Subsection J and the taxpayer is entitled to a deduction from compensating tax liability for the value of the washers and dryers. Strebeck Props., Inc. v. N.M. Bureau of Revenue, 1979-NMCA-035, 93 N.M. 262, 599 P.2d 1059.

Franchisor's arrangements with its licensees fall within definition of "leasing." American Dairy Queen Corp. v. Taxation & Revenue Dep't, 1979-NMCA-160, 93 N.M. 743, 605 P.2d 251 (decided under prior law).

Granting of license. — The 1991 amendments to this section clearly mandate a departure from treating the granting of a license as a lease to treating the granting of a license as a sale of a license. Kmart Corp. v. Taxation & Revenue Dep't., 2006-NMSC-006, 139 N.M. 172, 131 P.3d 22.

Shelf-display contract receipts. — Taxpayer's appeal of the hearing officer's decision and order upholding the department's assessments of a gross receipts tax and penalty was improper where she failed to overcome the statutory presumption that all receipts were taxable; the buy-down contract payments were reimbursements to the taxpayer for her sales loss incurred as a result of engaging in the discount promotions and the shelf-display contract receipts were taxable because those contracts bore a much greater resemblance to a license than to the creation and conveyance of an interest in real property that would have constituted a lease. Grogan v. N.M. Taxation & Revenue Dep't, 2003-NMCA-033, 133 N.M. 354, 62 P.3d 1236, cert. denied, 133 N.M. 413, 63 P.3d 516.

IV. TIME-PRICE DIFFERENTIAL.

To be taxable must be bargained for before work finished. — In order to be taxable as a "time-price differential sale," the money in question must have been bargained for before the contract work was rendered and the final invoice delivered, and when taxpayer accepted a promissory note secured by a mortgage after it had completed its work, the additional money paid on the note was in the nature of interest and could not be characterized as "time-price" for the purposes of this section and therefore the tax as imposed by the bureau was inapplicable. Co-Con, Inc. v. Bureau of Revenue, 1974-NMCA-134, 87 N.M. 118, 529 P.2d 1239, cert. denied, 87 N.M. 111, 529 P.2d 1232 (decided under prior law).

Time-price differential sale not taxed if no part of which was gross receipt. — Taxpayer was not liable for state and municipal gross receipts taxes on time-price differential of installment sales contract sold to financial institution since no part of time-price differential was a "gross receipt" under the statute chargeable to taxpayer. Davis v. Comm'r of Revenue, 1971-NMCA-129, 83 N.M. 152, 489 P.2d 660, cert. denied, 83 N.M. 151, 489 P.2d 659 (decided prior to the 1972 amendment which changed Subsection F's treatment of time-price differential arrangements).

Fees taxable even if not approved by court. — Taxpayer was liable for the gross receipts tax assessed against fees actually received and used by the taxpayer, although the fees had not been approved by the bankruptcy court. Lopez v. N.M. Dep't of Taxation & Revenue, 1997-NMCA-115, 124 N.M. 270, 949 P.2d 284, cert. denied, 124 N.M. 311, 950 P.2d 284.

V. AGENTS.

"Dealer concessions" retained from mutual fund transactions fall within the terms "commissions or fees" as used in this section. Rauscher, Pierce, Refsnes, Inc. v. Taxation & Revenue Dep't, 2002-NMSC-013, 132 N.M. 226, 46 P.3d 687.

No agency when purchases for others merely incidental to work. — Carpenter was not liable for assessment of gross receipts tax on purchases of materials since he did not receive any commissions or fees, but acted merely as an agent for his customers, and the purchases were merely incidental to his work as a carpenter. 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).

No agency when purchaser consultant to client-buyers. — When taxpayer, engaged in the business of management consultation, supervision and administration for motels, bought large quantities of tangible personal property at wholesale and sold them to its clients without additional cost or profit, the taxpayer was not a factor, agent or broker for its motel clients and was taxable for the total amount of money received from its sale to the motel clients of the tangible personal property under the Gross Receipts and Compensating Tax Act. N.M. Enters., Inc. v. Bureau of Revenue, 1974-NMCA-125, 86 N.M. 799, 528 P.2d 212.

Term "broker" as used in this section includes a person selling securities on behalf of others. Rauscher, Pierce, Refsnes, Inc. v. Taxation & Revenue Dep't, 2002-NMSC-013, 132 N.M. 226, 46 P.3d 687.