New Mexico Administrative Code
Title 3 - TAXATION
Chapter 2 - GROSS RECEIPTS TAXES
Part 1 - GENERAL PROVISIONS
Section 3.2.1.14 - GROSS RECEIPTS - GENERAL
Universal Citation: 3 NM Admin Code 3.2.1.14
Current through Register Vol. 35, No. 18, September 24, 2024
A. Credit card sales: Gross receipts of the seller of property or services or the lessor of property include the full sale or lease contract amount of any property or service sold or of any property leased when payment is made through the use of a credit card which has been issued by a third party. The seller or lessor may not deduct from gross receipts the amount charged by the credit card company for converting the account into cash.
B. Consideration other than money:
(1) If the consideration
received by the seller or lessor for the item sold or leased or for the service
performed is in a form other than money, the fair market value of the
consideration received or the fair market value of the item sold or of the
lease or of the service performed must be included in gross receipts. The value
of the consideration received or the item sold or of the lease or of the
service performed is the fair market value at the time of the
transaction.
(2) Example 1: X has
Y, a garage owner, repair X's automobile. In exchange for the service performed
by Y, X gives Y a deer rifle. The fair market value of the rifle at the time of
the transaction is the measure of Y's gross receipts.
(3) Example 2: X, a New Mexico construction
company, contracts with Y Electric Co-op Association for the construction of
transmission lines. The contract requires X to furnish all materials and labor
for a fixed price; however, it permits a reduction of the contract price in the
amount of the value of materials furnished by Y. The gross receipts of X
include the value of any material supplied by the cooperative.
(4) Example 3: X is a firm engaged in the
construction business in New Mexico. The receipts of X from the sale of a
completed construction project include the value of construction services
performed by the buyer of the construction project pursuant to a "sweat labor
contract" if the performance of services are required to fulfill a contractual
obligation of X. A "sweat labor contract", as used in this example, is a
contract whereby the buyer of a completed construction project agrees to
perform certain construction services for the seller of the construction
project as partial payment of the sale price of the construction
project.
(5) Example 4: M agrees to
drill an oil well for the XYZ Oil Company. The contract provides that M will
drill the well for $7.50 per foot and a one-eighth interest in the minerals
which belong to XYZ. The well, when completed, produces forty barrels of oil
per day for a period which is expected to last for 10 years. M admits that the
$7.50 per foot that is received from drilling the well are gross receipts
subject to the gross receipts tax. M questions whether the value of the
one-eighth interest is gross receipts. The value of the mineral interest is
consideration and must be included in M's gross receipts. It will be valued at
its fair market value at the time the well is completed.
(6) Example 5: The A Oil Company hires the B
Drilling Company to drill a well on its property. A furnishes drill bits to B,
but A has the right to deduct the rental value of the bits from the total
footage or day rate price it agrees to pay B for the drilling. The use of the
drill bits is partial consideration, furnished by A, for the performance of the
drilling service by B and the reasonable value of their use must be included in
B's gross receipts. A also must include the rental value of the bits in its
gross receipts because it is leasing the drill bits to B. However, if A
furnishes drill bits to B and does not have the right to deduct the rental
value of the bits from the total footage or day rate price which it has agreed
to pay B for the drilling, then no amounts from the drill bit transaction are
includable in either A's or B's gross receipts. The same applies if B furnishes
the drill bits.
C. Consideration less than fair market value:
(1)
In a transaction where the actual consideration received does not represent the
fair market value of the property sold or leased or of the service sold, the
fair market value shall be included in the gross receipts of the seller or
lessor. Fair market value is the value which the property or service can
command in an arms length transaction between two independent parties in an
open market.
(2) The following
example illustrates the application of Section
7-9-3.5
NMSA 1978 with respect to consideration less than fair market value. Example:
X, a land and cattle company, is a corporation which is affiliated with Y, an
equipment company. Because of their affiliation, X leases a $30,000 tractor
from Y for $1.00 a month. Y reports that its gross receipts from this
transaction are $1.00. Y's gross receipts are the market value of a monthly
lease of a $30,000 tractor. Y must pay gross receipts tax on the adjusted
amount.
D. Sale of commercial paper:
(1) The full sale or
leasing contract amount of property or service sold, excluding any type of time
price differential, is included in the seller's gross receipts even though the
seller subsequently sells the contract and does not receive the total contract
price in money. No deduction is allowed for discounts suffered from the sale of
commercial paper arising from a sale or lease.
(2) Example: X sells a washing machine to Y
under a conditional sales contract in which the full sale contract amount,
excluding time price differential, is $120. The principal on the washing
machine is to be paid for over a twelve month period at $10 a month. X collects
$20 of principal under the contract and then assigns its rights to W for $90.
Depending upon the method regularly used for reporting gross receipts, X would
either pay tax on the full contract amount for the month in which the sale was
made (accrual basis) or pay tax measured by the receipts as they were received
(cash basis). If X had elected to pay tax measured by its receipts as they were
received, X would have reported $20 during the first two months from this
transaction. When X assigned the contract, X would have to include $100 in the
gross receipts for the third month since a deduction is not allowed for a
discount suffered upon the transfer of a conditional sales
contract.
E. Interdepartmental transfers:
(1) Receipts
derived from an interdepartmental transfer of services or property are not
subject to the gross receipts tax. To qualify as an interdepartmental transfer,
the transfer must be a transfer of services or property within the same
corporation or other taxable entity.
(2) Example: C, a company located in New
Mexico, operates both an electric utility and a water utility. C records on its
books the sale of the electricity to the water utility in order to comply with
the public service commission regulations but does not thereby incur gross
receipts as that term is used in the Gross Receipts and Compensating Tax Act.
Such book entries do not record receipts from selling property in New Mexico
but record interdepartmental transfers. However, the value of the electricity
at the time of its conversion to use by the water utility is subject to the
compensating tax.
F. Service charges computed on balances:
(1)
Service charges on accounts receivable balances or installment sales contracts
which are not computed at the time of sale, are time-price differential
charges, are not subject to the gross receipts tax and are not to be included
in the sales price of an item brought into New Mexico for the purpose of
computing the compensating tax.
(2)
Example: X corporation located outside New Mexico is engaged in the business of
publishing books. X has several nonemployee salesmen soliciting orders on a
commission basis in New Mexico. Every such order is forwarded to X's main
office where it is reviewed and then either accepted or rejected. Accepted
orders are shipped directly to the purchaser from X's binderies located outside
of New Mexico. Since X has salesmen in New Mexico, it is an agent for
collection of the compensating tax, pursuant to Section 7 9 10 NMSA 1978. The
purchaser may elect to pay for the books on an installment basis. If after 90
days from purchase, the balance has not been paid, a one percent per month
service charge is added to the balance. This charge is not precomputed and no
portion thereof is due unless the purchaser elects to pay on an installment
plan extending over 90 days. Such a charge is a time-price differential and is
not a part of the sales price of the item. Therefore, it should not be included
in the sales price when considering the amount of compensating tax that should
be paid over to the state of New Mexico.
G. Corporations and organizations not organized for profit - fund raising activities:
(1) Receipts of a corporation or organization
not organized for profit, other than an organization granted a 501(c)(3)
determination by the internal revenue service, derived from fund raising
activities which are in the nature of donations, gifts, and contributions are
not subject to the gross receipts tax.
(2) The department will presume that the
total receipts of such a nonprofit organization from a fund raising activity
are receipts derived from a taxable activity if the project involves the
performance of any service or the sale or lease of any property by the
organization. This presumption may be overcome by establishing the following:
(a) the purchaser or lessee of the property
or service intended by the purchase or lease to make a gift, donation, or
contribution to the organization; and
(b) the purchase or lease price clearly
exceeded the fair market value of the service or property or the fair rental
value of the property.
(3) If these conditions are satisfied, the
amount of consideration received by the organization in excess of the fair
market price or fair rental value is not subject to the gross receipts
tax.
H. Discount coupons: The gross receipts attributable to a sale in which a seller accepts discount coupons provided by buyers are measured by the cash received plus the value of the coupon. However, if the discount coupon is not redeemable by the seller, the acceptance of the coupon constitutes a cash discount allowed and taken and is excluded from gross receipts.
I. Gross receipts embezzled: Receipts that have been embezzled or lost through bookkeeping errors are not a cash discount allowed and taken; such receipts are not deductible under Section 7 9 67 NMSA 1978 because they are not a refund, allowance or uncollectible debt.
J. Vending machines:
(1) A vending machine is a
device that, when the appropriate payment has been inserted into it, whether
payment is made by coins, tokens, paper money, credit card, debit card or other
means, dispenses tangible personal property, performs a service (including
entertainment) or dispenses tickets, tokens or similar objects redeemable for
money, tangible personal property or services; but "vending machine" does not
include any device which is designed to primarily or solely to play a game of
chance, such as slot machines, video gaming machines and the like.
(2) Amounts received from allowing the
vending machine to be placed in a location as well as amounts received from use
of or sales from vending machines are gross receipts and are subject to the
gross receipts tax. The vending machine owner is responsible for reporting the
receipts and paying the gross receipts tax.
(3) Receipts derived from allowing vending
machines to be placed in a location not owned or rented by the vending machine
owner are gross receipts and are subject to the gross receipts tax. Except as
provided otherwise in Subsection K of Section 3.2.1.14 NMAC, the person
receiving the receipts is responsible for reporting the receipts and paying the
gross receipts tax with respect to such receipts.
(4) If the vending machine owner and a person
controlling the premises where the machine is located enter into a written
agreement similar to the one below, the department will presume that a joint
venture has been created, that the joint venture is registered with the
department and that the vending machine owner has agreed to pay all gross
receipts tax due with respect to the joint venture. In such a case, the person
owning the machine, on behalf of the joint venture, will report and pay the
gross receipts tax due on all the receipts derived from either allowing the
vending machine to be placed in a location or sales from the vending machine
for all parties in the joint venture and the person controlling the premises is
relieved of the duty to report or pay gross receipts tax on those same
receipts.
(5) Agreement: Total
amounts collected from the vending machine shall be allocated between the
vending machine owner and the person controlling the location. The vending
machine owner will receive a percentage of the amounts collected net of gross
receipts tax due, plus an amount equal to the gross receipts tax payable on the
entire proceeds from the vending machine. The person controlling the location
will receive a percentage of the amounts collected net of gross receipts tax
due. The vending machine owner will report and pay any gross receipts tax due
on all the receipts derived from either the use of or sales from the vending
machine.
(6) In the event that no
such agreement exists, the department will presume that no joint venture
exists. In such a case, the vending machine owner will be subject to gross
receipts tax on the entire amounts collected from the use of or sales from the
vending machine, and the person controlling the premises will be subject to
gross receipts tax on the amount that person receives from the vending machine
owner for allowing the placement of the machine on the premises.
(7) In the event the vending machines are
leased to the person who services them, the term "vending machine owner" means
the lessee of the vending machines.
K. "Gross receipts" excludes leased vehicle surcharge: For the purposes of Subparagraph (b) of Paragraph (3) of Subsection A of Section 7-9-3.5 NMSA 1978, the term "leased vehicle gross receipts tax" includes the leased vehicle surcharge. The amount of any leased vehicle surcharge may be excluded from gross receipts.
L. Receipts from furnishing parts or labor under automotive service contract:
(1) When an automobile dealer, who is the
promisor under an automotive service contract as that term is defined under
Subsection C of Section
3.2.1.16
NMAC, furnishes parts or labor or both to satisfy the promisor's obligation to
repair the breakdown involving a part specified in the contract, the dealer has
taxable gross receipts equal to the retail value of the parts and labor
furnished. A transfer of property or performance of service for a consideration
has occurred and therefore a receipt from selling property or performing
services has been realized by the dealer.
(2) The consideration received by the dealer
is the discharge of the dealer's obligation to make the repair which obligation
arose when the covered breakdown occurred.
(3) Receipts of a repair facility, including
an automobile dealer, from furnishing parts and labor to fulfill the obligation
of another person under an automotive service contract are gross receipts and
not deductible under Sections 7 9 47 and 7 9 48 NMSA 1978, even though the
seller has received NTTCs for other transactions.
M. Receipts from deductibles/co-payments under automotive service contracts: The receipts of a New Mexico automotive dealer or other repair facility, including the promisor under an automotive service contract, from the "deductible" or "co-payment" amount paid by a customer as required by automotive service contract as that term is defined in Subsection C of Section 3.2.1.16 NMAC in connection with the provision of repair services under contract are gross receipts.
N. Receipts of dealer from own reserve:
(1) The receipts of a
New Mexico auto dealer for repairs provided by the dealer under an automotive
service contract as that term is defined in Subsection C of Section
3.2.1.16
NMAC, on which the dealer is obligated as promisor are not gross receipts if:
(a) the receipts are paid from a reserve
account established by the dealer under an agreement with an auto service
contract administrator or an insurance company, or both, and
(b) the dealer is entitled to a return of any
amounts in the reserve account not used to pay for parts and labor or to pay
other charges against the dealer in connection with the auto service
contract.
(2) In this
situation, the dealer is being "paid" from the dealer's own funds and has no
receipts. However, the dealer as promisor is liable for gross receipts tax on
the retail value of the parts or labor or both furnished to discharge the
dealer's obligation.
O. Water conservation fee: Section 74-1-13 NMSA 1978 imposes the water conservation fee on the operator of a public water supply system. The fee is measured by the amount of water produced. The operator is not authorized to impose the water conservation fee on the operator's customers. If the operator of the system separately bills an amount characterized as a reimbursement of the water conservation fee to the operator's customers, the separately stated amount is simply an element of the price of the water sold and the "reimbursement" is included in gross receipts. The definition of "gross receipts" does not exclude the water conservation fee or amounts characterized as reimbursements of water conservation fee paid.
P. Sales of items subject to the federal manufacturer's excise tax:
(1) The
gross receipts from sales of items such as motor vehicle tires include the
total amount of money or the value of other consideration received even though
this amount includes the Federal Manufacturer's Excise Tax, 26 U.S.C.A. Section
4061 et seq., (1986) which is separately stated on the invoice. Gross receipts
do not include the amount of money attributable to the Federal Communications
Excise Tax,
26 U.S.C.A. Section
4251, et seq., (1986), and the Federal Air
Transportation Excise Tax,
26 U.S.C.A. Section
4261 et seq., (1986), which are user's
taxes.
(2) Example: A tire dealer
sells a tire in New Mexico to a retail customer for $40.00 and separately
states $1.00 for Federal Manufacturer's Excise Tax on the sales ticket. The
seller's gross receipts for this transaction are $41.00.
Q. Transactions among related persons are gross receipts
(1) Each person engaging in
business in New Mexico is subject to the provisions of the Gross Receipts and
Compensating Tax Act. Each person who is a member of any group of related or
affiliated persons and who engages in business in New Mexico is a taxpayer. The
provisions of the Gross Receipts and Compensating Tax Act apply to the
transactions between that taxpayer and all other persons, including the other
related or affiliated persons, even though consideration is not received in the
form of cash or other monetary remuneration.
(2) Example 1: A cooperative association and
X both engage in business in New Mexico. The cooperative sells services to X,
one of its members. The cooperative is a taxpayer and the receipts from this
transaction are subject to the provisions of the Gross Receipts and
Compensating Tax Act.
(3) Example
2: Both X and a cooperative association engage in business in New Mexico. X is
a member of the cooperative and sells services to it. X is a taxpayer and the
receipts from this transaction are subject to the provisions of the Gross
Receipts and Compensating Tax Act.
(4) Example 3: X engages in business in New
Mexico, specifically by selling office supplies. X is also a partner in a
partnership. Sales by X to the partnership are subject to the provisions of the
Gross Receipts and Compensating Tax Act.
(5) Example 4: C is a corporation engaging in
business in New Mexico. S, an individual who is the majority stockholder in C,
buys in New Mexico services and goods from C. C's receipts from these
transactions with S are subject to the provisions of the Gross Receipts and
Compensating Tax Act.
(6) Example
5: C and S are corporations engaging in business in New Mexico. S is a
wholly-owned subsidiary of C. C sells tangible personal property in New Mexico
to S. C's receipts from the transaction are subject to the provisions of the
Gross Receipts and Compensating Tax Act.
(7) Example 6: X and Y are both divisions of
corporation Z. X and Y are both parts of the same person, Z, and are not
"related persons". Receipts from transactions between these two divisions are
activities within Z and do not constitute gross receipts.
(8) Example 7: P, an individual, operates two
businesses as sole proprietorships. One of P's businesses transfers tangible
personal property to the other. Since both businesses and P are the same
person, they are not "related persons" and the transaction does not constitute
gross receipts.
R. Owner's receipts from transactions with owned entity are gross receipts
(1) Except as provided in Paragraph (2) of
this Subsection, when a person who owns all or part of an entity has receipts
from the sale of property in New Mexico to, the lease of property employed in
New Mexico to or the performance of services in New Mexico for the entity, the
person's receipts are gross receipts except when the transaction may be
characterized for federal income tax purposes as a contribution of capital. The
person's receipts include the actual amount of money received by the person
plus the value of any additional consideration. Additional consideration
includes forbearance of charges against the person's ownership interest. These
gross receipts are subject to the gross receipts tax unless an exemption or
deduction applies.
(2) When a
partner or interest holder in an entity 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, these receipts of the partner are
not gross receipts and are not subject to the gross receipts tax. When a
partner engages in business separately from the partnership any transactions of
that partner with the partnership, where the partner is not acting as a partner
on behalf of the partnership, are gross receipts. 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;
(b) that the allocation, payment, or
distribution made by the partnership is not made under the partnership
agreement;
(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
S of Section 3.2.1.14 NMAC, an "entity" means any business organization or
association other than a sole proprietorship.
(4) Example: C is a corporation and S is C's
wholly owned subsidiary corporation. C and S create L, a limited liability
company; C and S each own fifty percent of L. L purchases a twenty percent
interest in P, a limited partnership. C sells goods to P. P pays the amount
charged. C has gross receipts from this transaction equal to the amount
received for the goods.
Disclaimer: These regulations may not be the most recent version. New Mexico may have more current or accurate information. We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information contained on this site or the information linked to on the state site. Please check official sources.
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