New Mexico Administrative Code
Title 3 - TAXATION
Chapter 2 - GROSS RECEIPTS TAXES
Part 10 - IMPOSITION AND RATE OF TAX - DENOMINATION AS "COMPENSATING TAX"
Section 3.2.10.23 - COMPENSATING TAX ON SERVICES PERFORMED OUTSIDE THE STATE
Universal Citation: 3 NM Admin Code 3.2.10.23
Current through Register Vol. 35, No. 18, September 24, 2024
A. For periods after July 1, 2021, if a purchaser acquires services performed outside the state in a transaction that was not subject to the gross receipts tax and subsequently makes taxable use of that service in New Mexico, the service is subject to the gross receipts tax. For services that were performed outside the state, the taxable use in New Mexico is not subject to compensating tax unless that use is the initial use of the service, as that term is defined under Subsection E of Section 7-9-3 NMSA 1978 and applicable regulations.
B. Examples:
(1) X acquires financial advisory services
from Y. Y performs the services entirely outside New Mexico resulting in
recommendations for investing in certain assets. Y delivers the recommendations
to X in New Mexico and has no reason to believe that X will not make initial
use of the recommendations in New Mexico. X does not owe compensating tax on
the service. Instead, Y owes the gross receipts tax on that service because it
was initially used in New Mexico.
(2) Same facts as Paragraph (1) of Subsection
B of 3.2.10.23 NMAC except that Y relies in good faith on X's representation
that X will make initial use of the recommendations outside New Mexico. X owes
the compensating tax if initial use of the recommendations is made in New
Mexico.
(3) Same facts as Paragraph
(2) of Subsection B of 3.2.10.23 NMAC except that X makes initial use of the
recommendations outside of New Mexico. Subsequently, X makes use of the
recommendations in New Mexico. Because that subsequent use is not the initial
use, X does not owe compensating tax.
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