Current through Register Vol. 35, No. 18, September 24, 2024
A.
Engaging in business :
(1) Generally: For
periods beginning July 1, 2020, "engaging in business" conforms to the
constitutional requirement for substantial nexus under South Dakota v.
Wayfair, 585 U.S. ___(2018). A person that has physical presence in
the state and is also conducting activity with the purpose of direct or
indirect benefit is engaging in business and subject to the imposition of gross
receipts tax. A person that does not have physical presence in the state is
nevertheless engaging in business and has substantial nexus in New Mexico if,
in the preceding calendar year, that person has 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).
(2) A person who is required to register with
the department for the purposes of the gross receipts tax may close its gross
receipts tax account following any calendar year in which it no longer meets
the requirements for engaging in business set out in Section
7-9-3.3 NMSA 1978. For example, a
person who does not currently have physical presence in New Mexico and who did
not have 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
$100,000, may close its gross receipts tax account for the 20XX calendar year.
In order to close its registration and its future filing obligations, such
person must submit its request to close its registration and specify the
closure date on a form prescribed by the department. The person's duty to
register will resume in any calendar year in which it meets the requirements of
Section 7-9-3.3 NMSA 1978.
(3) A person who has not registered or been
otherwise identified is nonetheless a "taxpayer" subject to the provisions of
the Tax Administration Act,
3.1.1.13 NMAC.
B. Affiliated corporations:
(1) When a corporation is carrying on or
causing to be carried on, with a wholly owned subsidiary, any activity with the
purpose of direct or indirect benefit, both the corporation and the subsidiary
are "engaging in business".
(2)
Example: B corporation, which operates a hotel supply house, sells supplies
only to C Hotel Corporation, which owns all the stock in B Corporation. B
claims that since it sells only to C, its parent corporation, it is not
engaging in business. B and C are each engaging in business because the purpose
of their activities is to benefit either or both corporations.
C. Corporation not for profit:
When a corporation not for profit is carrying on or is causing to be carried on
any activity with the purpose of direct or indirect benefit it is "engaging in
business".
D. Leasing property:
(1) Persons leasing property employed in New
Mexico are engaging in business within the state for the purpose of direct or
indirect benefit.
(2) Example: X,
an out of state business, leases construction machinery to Y who employs the
leased property in New Mexico. X asks if X is engaged in business in New Mexico
for purpose of registration, reporting and paying the gross receipts tax. X is
engaged in business in New Mexico.
E. Hotels and motels providing interstate
telecommunications service to guests:
(1)
Hotels, motels and similar establishments offering interstate
telecommunications service to guests in conjunction with the rental of rooms or
other facilities are not "engaging in interstate telecommunications business"
for purposes of the Interstate Telecommunications Gross Receipts Tax
Act.
(2) A hotel, motel or similar
establishment is primarily engaged in the business of renting rooms and meeting
facilities to the general public. Providing interstate telephone service or
other interstate telecommunications services to guests is incidental to the
primary business of the hotel, motel or similar establishment. Receipts from
providing such service are additional receipts from engaging in the primary
business and are subject to the provisions of the Gross Receipts and
Compensating Tax Act.
(3)
Subsection D of
3.2.1.12 NMAC is retroactively
applicable to transactions occurring on or after July 1, 1992.
F. Persons not engaging in
business - foster parents: Individuals who enter into an agreement with the
state of New Mexico to provide foster family care for children placed with them
by the state are not thereby engaging in business. Receipts of the individuals
from providing foster care pursuant to such an agreement are not receipts from
engaging in business.
G. Persons
not engaging in business - certain caretakers: Individuals who enter into an
agreement with the state of New Mexico to provide non-medical personal care and
housekeeping assistance to low income disabled adults pursuant to the critical
in home care program are not thereby engaging in business. Receipts of the
individuals from such caretaking activities are not receipts from engaging in
business.
H. Persons not engaging
in business - home care for developmentally disabled family members: Any
individual who enters into an agreement with the state of New Mexico to provide
home based support services for developmentally disabled individuals in the
home of the developmentally disabled individuals or the home of the support
provider and receives payments which under
26 USCA
131 are "qualified foster care payments" is
not thereby engaging in business. Receipts of the individuals which are
"qualified foster care payments" from providing such home based support
services pursuant to such an agreement are not receipts from engaging in
business.
I. Owner engaged in
business when selling to an owned entity:
(1)
Except as provided in Paragraph (2) of this Subsection, when an owner of an
entity sells property in New Mexico to, leases property employed in New Mexico
to, or performs services in New Mexico for the entity or other owners of the
entity, the owner is engaging in business in New Mexico except when the
transaction may be characterized for federal income tax purposes as a
contribution of capital.
(2) When a
partner or interest holder in an entity taxed as a partnership is allocated
profits or receives a guaranteed payment or other distributions for activities
undertaken as a partner on behalf of the partnership such as administrative
services done solely for the benefit of the partnership or for activities for
third -parties transacting business with the partnership, the partner is not
engaging in business separately from the partnership and the allocations,
payments, or distributions are not gross receipts. A partner may, however
engage in business separately from the partnership and any transactions between
that partner and the partnership, where the partner is not acting as a partner
on behalf of the partnership, constitute gross receipts from engaging in
business. Indicia that a partner is not acting as a partner on behalf of the
partnership may include:
(a) that the partner
engages in similar transactions with third parties other than the partnership;
or
(b) that the allocation,
payment, or distribution made by the partnership is not made under the
partnership agreement; or
(c) that
the partner's transaction(s) with the partnership involve the sale or lease of
goods or the sale of services not provided by the partnership to third
parties.
(3) For the
purposes of Subsection H of
3.2.1.12 NMAC, an "entity" means
any business organization or association other than a sole
proprietorship.
J.
Persons not engaging in business - sale or exchange of renewable-fueled
electricity generated from a system installed in a personal residence. Any
individual who sells or transfers electricity to an entity engaged in the
business of selling electricity, for which the individual receives monetary
compensation or credit against a future month's electricity use, is not engaged
in business if the electricity is generated from a renewable-fueled system
installed in a personal residence.
