Current through Register Vol. 35, No. 18, September 24, 2024
A.
Insurance proceeds:
(1) Receipts of an insured derived from
payments made by an insurer pursuant to an insurance policy are not subject to
the gross receipts tax. Such receipts are not receipts derived from the sale of
property in New Mexico, the leasing of property employed in New Mexico, or the
performance of a service.
(2)
Example: ABC is an auto dealer in the business of selling new and used cars. In
addition to selling cars, ABC also maintains a service garage with a large
inventory of automobile parts. As part of its regular sales practice, ABC
allows potential purchasers to test drive the cars. ABC carries automobile
insurance which is applicable in the situation where the potential purchaser is
test driving the car. When an accident occurs, even though some or all the
parts used to repair the automobile are taken from ABC's inventory of parts and
ABC does the actual repair work, payment received from the insurance company
for the damaged automobile is not gross receipts. Such a payment is not
received as consideration for selling property in New Mexico, leasing property
employed in New Mexico, or for performing services. ABC is not liable for
compensating tax on the value of the parts used or the labor.
B.
Receipts from sale of
automotive service contracts:
(1)
"Automotive service contract" means an undertaking, promise or obligation of
the promisor, for a consideration separate from the sale price of a motor
vehicle, to furnish or to pay for parts and labor to repair specified parts of
the covered motor vehicle only if breakdowns (failures) of those specified
parts occur within certain time or mileage limits. The promisor's obligation is
conditioned upon regular maintenance of the motor vehicle by the purchaser of
the automotive service contract at the purchaser's expense. The automotive
service contract may also obligate the promisor to reimburse the purchaser for
certain breakdown related rental and towing charges. The automotive service
contract may require the payment of a specified "deductible" or "co-payment" by
the purchaser in connection with each repair.
(2) The receipts of a person from selling an
automotive service contract are not gross receipts. The undertaking, promise or
obligation of the promisor under the automotive service contract to pay for or
to furnish parts and service if an uncertain future event (breakdown) occurs is
not within the definition of property under Subsection J of Section
7-9-3
NMSA 1978. Since the receipts from selling an automotive service contract do
not arise "from selling property in New Mexico, from leasing property employed
in New Mexico or from performing services in New Mexico", the receipts are not
gross receipts as defined in Section
7-9-3.5
NMSA 1978 and are not subject to the tax imposed by Section
7-9-4
NMSA 1978.
(3) The furnishing by
the promisor of parts or labor or both to fulfill the promisor's obligation
when a breakdown occurs is a taxable event.
C.
Receipts from insurance company
under an automotive service contract program: The receipts of a New
Mexico automotive dealer from an insurance company are not taxable gross
receipts if the payments by the insurance company are to reimburse the dealer,
who is promisor under an automotive service contract as that term is defined in
Subsection C of 3.2.1.16 NMAC, for all parts and labor furnished by the dealer
under the contract or for parts and labor furnished by the dealer under the
contract in an amount in excess of a specified reserve established by the
dealer under an agreement with the insurance company. The receipt of the
payments from the insurance company are not receipts from the sale of parts and
labor but are payments to indemnify the dealer for the dealer's expense in
fulfilling the dealer's obligation. The value of parts and labor furnished to
make the repairs was subject to the gross receipts tax when the parts and labor
were furnished to discharge the dealer's obligation as the promisor under the
automotive service contracts.
D.
Gift certificates:
(1) Receipts
from the sale of gift certificates are receipts from the sale of intangible
personal property of a type not included in the definition of "property" and,
therefore, are not gross receipts.
(2) When a gift certificate is redeemed for
merchandise, services or leasing, the person accepting the gift certificate in
payment receives consideration, which is gross receipts subject to the gross
receipts tax unless an exemption or deduction applies. The value of the
consideration is the face value of the gift certificate.
(3) When a gift certificate is purchased
during the time period set out in Laws 2005, Chapter 104, Section 25 subsequent
redemption of the gift certificate for the purchase of qualified tangible
personal property after that period is not deductible under Laws 2005, Chapter
104, Section 25.
(4) When a gift
certificate is redeemed during the time period set out in Laws 2005, Chapter
104, Section 25 for the purchase of qualified tangible personal property, the
receipts from the sale are deductible under Laws 2005, Chapter 104, Section
25.
E.
Merchant
discount and interchange rate fee receipts: Bank receipts derived from
credit and debit card merchant discounts and bank interchange rate fees are not
gross receipts within the meaning of the Gross Receipts and Compensating Tax
Act and therefore are not taxable.
F.
Prepaid telephone cards - "calling
cards":
(1) Receipts from the sale of
an unexpired prepaid telephone card, sometimes known as a "calling card", are
receipts from the sale of a license to use the telecommunications system and,
therefore, are gross receipts and are not interstate telecommunications gross
receipts. Receipts from selling an expired prepaid telephone card are receipts
from the sale of tangible personal property and are gross receipts and are not
interstate telecommunications gross receipts.
(2) Receipts from recharging a rechargeable
prepaid telephone card are receipts from the sale of a license to use the
telecommunications system and are gross receipts and are not interstate
telecommunications gross receipts.
(3) Subsection F of 3.2.1.16 NMAC is
retroactively applicable to transactions and receipts on or after September 1,
1998.
