New Mexico Administrative Code
Title 3 - TAXATION
Chapter 2 - GROSS RECEIPTS TAXES
Part 205 - DEDUCTION - GROSS RECEIPTS TAX - SALE OF TANGIBLE PERSONAL PROPERTY FOR RESALE
Section 3.2.205.18 - PARTS AND SUPPLIES SOLD UNDER SERVICE CONTRACTS

A. Receipts from sale of parts to fulfill promisor's obligation under automotive service contract not deductible: The receipts of a repair facility from the promisor under an automotive service contract, as that term is defined in Subsection C of Section 3.2.1.16 NMAC, for furnishing parts to fulfill the promisor's obligation under the contract are taxable gross receipts of the repair facility. The receipts are not deductible by the repair facility even though the promisor may have furnished the repair facility with a Type 2 (property for resale) nontaxable transaction certificate since the parts were sold by the repair facility to the purchaser of the automotive service contract for a consideration to be received from the promisor who makes the payment to the repair facility to discharge the promisor's obligation to the purchaser to pay for the parts

B. Supplies billed by automotive dealer on repair orders subject to compensating tax: New Mexico automotive dealers who issue Type 2 (resale of tangibles) nontaxable transaction certificates to suppliers of shop supplies purchased for use in the dealers' service departments and body shops are liable for compensating tax on those supplies. Dealers are using and are not reselling (i.e., transferring) the shop supplies as required by Section 7-9-47 NMSA 1978 and are, therefore, liable for the compensating tax imposed by Paragraph (3) of Subsection A of Section 7-9-7 NMSA 1978. Separately stating a charge on the customer's billing for shop supplies used by a dealer does not constitute the resale of such supplies.