New Mexico Administrative Code
Title 3 - TAXATION
Chapter 13 - BUSINESS TAX CREDITS
Part 9 - FILM PRODUCTION TAX CREDIT
Section 3.13.9.10 - QUALIFICATION OF DIRECT PRODUCTION EXPENDITURES

A. A payment to a personal service business for the services of a performing artist qualifies as a direct production expenditure if the personal services business:

B. Example 1: S, a super loan-out company, receives payments for the services of a performing artist (personal services business) from a film production company. S pays gross receipts tax on the payments they receive and deducts and remits withheld income tax on the payments to the performing artist. The payment from the production company to S qualifies as a direct production expenditure for purposes of the film production tax credit.

C. Example 2: G, a super loan-out company, receives payments for the services of a performing artist from a film production company and pays gross receipts tax on the payments received. G contracts with P, a payroll service company, to provide payroll services. The film production company by agreement with P causes P to deduct and remit withheld income tax on the payments to the performing artist. The payment from the production company to G qualifies as a direct production expenditure for purposes of the film production tax credit.

D. Example 3: H, a super loan-out company, receives payments for the direct hires (performing artists who do not own their own company) from a film production company and pays gross receipts tax on the payments received. No tax is deducted and remitted on the payments for the direct hires pursuant to Subsection I of Section 7-3A-3 NMSA 1978 because the direct hires are employees of the super loan-out company and wages are excluded from this requirement to withhold. The payment from the production company to S for the services of the direct hires qualifies as a direct production expenditure for purposes of the film production tax credit.

E. Example 4: A, an actor loan-out company, receives payments for the services of a performing artist from S, a super loan out company. S executes a nontaxable transaction certificate to A and pays gross receipts tax on the payments they receive from the production company for the services of the performing artist. S, or the payroll company by agreement with the production company, deducts and remits withheld income tax on the payments to the performing artist. The payment from the production company to S for the services of the performing artist qualifies as a direct production expenditure for purposes of the film production tax credit.

F. Example 5: Y, an actor loan-out company (owned by the performing artist), receives payments for the services of a performing artist who is a resident of New Mexico. Y pays gross receipts tax on the payments they receive. No withheld income tax is deducted or remitted on the payments that are due to the performing artist from Y (personal services business) because the obligation to deduct and withhold does not apply to payments made to an individual who is a resident of New Mexico (Subsection C of Section 7-3A-3 NMSA 1978). The payments from the production company to Y for the services of a performing artist qualify as direct production expenditures for purposes of the film production tax credit.