AN ACT
RELATING TO TAXATION; REORGANIZING
DEFINITION SECTIONS OF THE GROSS RECEIPTS AND COMPENSATING TAX ACT; AMENDING,
REPEALING AND ENACTING SECTIONS OF THE NMSA 1978.
BE IT ENACTED BY THE LEGISLATURE OF
THE STATE OF NEW MEXICO:
Section 1. Section 7-1-55 NMSA 1978 (being Laws 1975,
Chapter 251, Section 3, as amended) is amended to read:
"7-1-55. CONTRACTOR'S BOND FOR GROSS
RECEIPTS--TAX--PENALTY.--
A. A person engaged in the construction business
who does not have a principal place of business in New Mexico and who enters
into a prime construction contract to be performed in this state shall, at the
time such contract is entered into, furnish the secretary or the secretary's
delegate with a surety bond, or other acceptable security, in a sum equivalent
to the gross receipts to be paid under the contract multiplied by the sum of
the applicable rate of the gross receipts tax imposed by Section 7-9-4 NMSA
1978 plus the applicable rate or rates of tax imposed pursuant to local option
gross receipts taxes to secure payment of the tax imposed on the gross receipts
from the contract and shall obtain a certificate from the secretary or the
secretary's delegate that the requirements of this subsection have been met.
B. If the total sum to be paid under the
contract is changed by ten percent or more subsequent to the date the surety
bond or other acceptable security is furnished to the secretary or the
secretary's delegate, such person shall increase or decrease, as the case may
be, the amount of the bond or security within fourteen days after the change.
C. If a person fails to comply with Subsection A
or B of this section, the secretary or the secretary's delegate:
(1) may demand of the person by certified mail or
in person that the person comply. Upon
the failure of the person to comply within ten days of the date of the mailing
of such demand, the secretary may institute a proceeding to enjoin the person
from doing business as provided in Section 7-1-53 NMSA 1978; or
(2) may, when a serious and immediate risk exists
that an amount of tax due or reasonably expected to become due from the person
on gross receipts from a prime construction contract will not be paid, request
the person to comply with Subsections A and B of this section, and, upon
failure immediately to comply, the secretary may, without further notice of any
kind, apply to any district court of the state for an injunction as provided in
Section 7-1-53 NMSA 1978.
D. Subsections A, B and C of this section shall
not apply if the total gross receipts to be paid under the construction
contract, including any change in such amount, are less than fifty thousand
dollars ($50,000).
E. As used in this section, "construction"
shall have the meaning set forth in Section 7-9-3.4 NMSA 1978 and
"engaging in business" shall have the meaning set forth in Section
7-9-3.3 NMSA 1978.
F. A municipality or other political subdivision
of the state or any agency of the state shall not issue a building or other
construction permit to any person subject to the requirements of Subsection A
of this section without first having been furnished by the construction
contractor with the certificate from the secretary or the secretary's delegate
specified in Subsection A of this section.
Any person who issues any such permit before receiving the certificate
shall be deemed guilty of a misdemeanor and, upon conviction, be fined not less
than fifty dollars ($50.00) nor more than one hundred dollars ($100) for each
offense."
Section 2. Section 7-9-3 NMSA 1978 (being Laws 1978,
Chapter 46, Section 1, as amended by Laws 2002, Chapter 28, Section 1 and by
Laws 2002, Chapter 45, Section 1 and also by Laws 2002, Chapter 49, Section 1)
is amended to read:
"7-9-3. DEFINITIONS.--As used in the Gross Receipts
and Compensating Tax Act:
A. "buying" or "selling"
means a transfer of property for consideration or the performance of service
for consideration;
B. "department" means the taxation and
revenue department, the secretary of taxation and revenue or an employee of the
department exercising authority lawfully delegated to that employee by the
secretary;
C. "financial corporation" means any
savings and loan association or any incorporated savings and loan company,
trust company, mortgage banking company, consumer finance company or other
financial corporation;
D. "initial use" or "initially
used" means the first employment for the intended purpose and does not
include the following activities:
(1) observation of tests conducted by the
performer of services;
(2) participation in progress reviews, briefings,
consultations and conferences conducted by the performer of services;
(3) review of preliminary drafts, drawings and
other materials prepared by the performer of the services;
(4) inspection of preliminary prototypes
developed by the performer of services; or
(5) similar activities;
E. "leasing" means an arrangement
whereby, for a consideration, property is employed for or by any person other
than the owner of the property, except that the granting of a license to use
property is the sale of a license and not a lease;
F. "local option gross receipts tax"
means a tax authorized to be imposed by a county or municipality upon the
taxpayer's gross receipts and required to be collected by the department at the
same time and in the same manner as the gross receipts tax; "local option
gross receipts tax" includes the taxes imposed pursuant to the Municipal
Local Option Gross Receipts Taxes Act, Supplemental Municipal Gross Receipts
Tax Act, County Local Option Gross Receipts Taxes Act, Local Hospital Gross
Receipts Tax Act, County Correctional Facility Gross Receipts Tax Act and such
other acts as may be enacted authorizing counties or municipalities to impose
taxes on gross receipts, which taxes are to be collected by the department;
G. "manufactured home" means a movable
or portable housing structure for human occupancy that exceeds either a width
of eight feet or a length of forty feet constructed to be towed on its own
chassis and designed to be installed with or without a permanent foundation;
H. "manufacturing" means combining or
processing components or materials to increase their value for sale in the
ordinary course of business, but does not include construction;
I. "person" means:
(1) an individual, estate, trust, receiver,
cooperative association, club, corporation, company, firm, partnership, limited
liability company, limited liability partnership, joint venture, syndicate or
other entity, including any gas, water or electric utility owned or operated by
a county, municipality or other political subdivision of the state; or
(2) a national, federal, state, Indian or other
governmental unit or subdivision, or an agency, department or instrumentality
of any of the foregoing;
J. "property" means real property,
tangible personal property, licenses, franchises, patents, trademarks and
copyrights. Tangible personal property
includes electricity and manufactured homes;
K. "research and development services"
means an activity engaged in for other persons for consideration, for one or
more of the following purposes:
(1) advancing basic knowledge in a recognized
field of natural science;
(2) advancing technology in a field of technical
endeavor;
(3) developing a new or improved product, process
or system with new or improved function, performance, reliability or quality,
whether or not the new or improved product, process or system is offered for
sale, lease or other transfer;
(4) developing new uses or applications for an
existing product, process or system, whether or not the new use or application
is offered as the rationale for purchase, lease or other transfer of the
product, process or system;
(5) developing analytical or survey activities
incorporating technology review, application, trade-off study, modeling,
simulation, conceptual design or similar activities, whether or not offered for
sale, lease or other transfer; or
(6) designing and developing prototypes or
integrating systems incorporating the advances, developments or improvements
included in Paragraphs (1) through (5) of this subsection;
L. "secretary" means the secretary of
taxation and revenue or the secretary's delegate;
M. "service" means all activities
engaged in for other persons for a consideration, which activities involve
predominantly the performance of a service as distinguished from selling or
leasing property. "Service"
includes activities performed by a person for its members or shareholders. In determining what is a service, the
intended use, principal objective or ultimate objective of the contracting
parties shall not be controlling. "Service"
includes construction activities and all tangible personal property that will
become an ingredient or component part of a construction project. Such tangible personal property retains its
character as tangible personal property until it is installed as an ingredient
or component part of a construction project in New Mexico. However, sales of tangible personal property
that will become an ingredient or component part of a construction project to
persons engaged in the construction business are sales of tangible personal
property; and
N. "use" or "using" includes
use, consumption or storage other than storage for subsequent sale in the
ordinary course of business or for use solely outside this state."
Section 3. A new section of the Gross Receipts and
Compensating Tax Act, Section 7-9-3.1 NMSA 1978, is enacted to read:
"7-9-3.1. DEFINITION--GROSS RECEIPTS.--
A. As used in the Gross Receipts and
Compensating Tax Act:
(1) "gross receipts" means the total
amount of money or the value of other consideration received from selling
property in New Mexico, from leasing property employed in New Mexico, from
selling services performed outside New Mexico, the product of which is
initially used in New Mexico, or from performing services in New Mexico. In an exchange in which the money or other
consideration received does not represent the value of the property or service
exchanged, "gross receipts" means the reasonable value of the
property or service exchanged;
(2) "gross receipts" includes:
(a) any receipts from sales of tangible personal
property handled on consignment;
(b) the total commissions or fees derived from
the business of buying, selling or promoting the purchase, sale or lease, as an
agent or broker on a commission or fee basis, of any property, service, stock,
bond or security;
(c) amounts paid by members of any cooperative
association or similar organization for sales or leases of personal property or
performance of services by such organization;
(d) amounts received from transmitting messages
or conversations by persons providing telephone or telegraph services;
(e) amounts received by a New Mexico florist from
the sale of flowers, plants or other products that are customarily sold by
florists where the sale is made pursuant to orders placed with the New Mexico
florist that are filled and delivered outside New Mexico by an out-of-state
florist; and
(f) the receipts of a home service provider from
providing mobile telecommunications services to customers whose place of
primary use is in New Mexico if: 1) the mobile telecommunications services
originate and terminate in the same state, regardless of where the services
originate, terminate or pass through; and 2) the charges for mobile
telecommunications services are billed by or for a customer's home service
provider and are deemed provided by the home service provider. For the purposes of this section, "home
service provider", "mobile telecommunications services",
"customer" and "place of primary use" have the meanings
given in the federal Mobile Telecommunications Sourcing Act; and
(3) "gross receipts" excludes:
(a) cash discounts allowed and taken;
(b) New Mexico gross receipts tax, governmental
gross receipts tax and leased vehicle gross receipts tax payable on
transactions for the reporting period;
(c) taxes imposed pursuant to the provisions of
any local option gross receipts tax that is payable on transactions for the
reporting period;
(d) any gross receipts or sales taxes imposed by
an Indian nation, tribe or pueblo; provided that the tax is approved, if
approval is required by federal law or regulation, by the secretary of the
interior of the United States; and provided further that the gross receipts or
sales tax imposed by the Indian nation, tribe or pueblo provides a reciprocal
exclusion for gross receipts, sales or gross receipts-based excise taxes
imposed by the state or its political subdivisions;
(e) any type of time-price differential;
(f) amounts received solely on behalf of another
in a disclosed agency capacity; and
(g) amounts received by a New Mexico florist from
the sale of flowers, plants or other products that are customarily sold by
florists where the sale is made pursuant to orders placed with an out-of-state
florist for filling and delivery in New Mexico by a New Mexico florist.
B. When the sale of property or service is made
under any type of charge, conditional or time-sales contract or the leasing of
property is made under a leasing contract, the seller or lessor may elect to
treat all receipts, excluding any type of time-price differential, under such
contracts as gross receipts as and when the payments are actually
received. If the seller or lessor
transfers his interest in any such contract to a third person, the seller or
lessor shall pay the gross receipts tax upon the full sale or leasing contract
amount, excluding any type of time-price differential."
Section 4. Section 7-9-3.3 NMSA 1978 (being Laws 2002,
Chapter 18, Section 1) is repealed and a new Section 7-9-3.3 NMSA 1978 is
enacted to read:
"7-9-3.3. DEFINITION--ENGAGING IN BUSINESS.--As used in
the Gross Receipts and Compensating Tax Act, "engaging in business"
means carrying on or causing to be carried on any activity with the purpose of
direct or indirect benefit, except that:
A. "engaging in business" does not
include having a worldwide web site as a third-party content provider on a
computer physically located in New Mexico but owned by another nonaffiliated
person; and
B. "engaging in business" does not
include using a nonaffiliated third-party call center to accept and process
telephone or electronic orders of tangible personal property or licenses primarily
from non-New Mexico buyers, which orders are forwarded to a location outside
New Mexico for filling, or to provide services primarily to non-New Mexico
customers."
Section 5. A new section of the Gross Receipts and
Compensating Tax Act, Section 7-9-3.4 NMSA 1978, is enacted to read:
"7-9-3.4. DEFINITIONS--CONSTRUCTION AND CONSTRUCTION
MATERIALS.--As used in the Gross Receipts and Compensating Tax Act:
A. "construction" means:
(1) the building, altering, repairing or
demolishing in the ordinary course of business any:
(a) road, highway, bridge, parking area or
related project;
(b) building, stadium or other structure;
(c) airport, subway or similar facility;
(d) park, trail, athletic field, golf course or
similar facility;
(e) dam, reservoir, canal, ditch or similar
facility;
(f) sewerage or water treatment facility, power
generating plant, pump station, natural gas compressing station, gas processing
plant, coal gasification plant, refinery, distillery or similar facility;
(g) sewerage, water, gas or other pipeline;
(h) transmission line;
(i) radio, television or other tower;
(j) water, oil or other storage tank;
(k) shaft, tunnel or other mining appurtenance;
(l) microwave station or similar facility;
(m) retaining wall, wall, fence, gate or similar
structure; or
(n) similar work;
(2) the leveling or clearing of land;
(3) the excavating of earth;
(4) the drilling of wells of any type, including
seismograph shot holes or core drilling; or
(5) similar work; and
B. "construction material" means
tangible personal property that becomes or is intended to become an ingredient
or component part of a construction project, but "construction
material" does not include a replacement fixture when the replacement is
not construction or a replacement part for a fixture."
Section 6. Section 7-9-54 NMSA 1978 (being Laws 1969,
Chapter 144, Section 44, as amended) is amended to read:
"7-9-54. DEDUCTION--GROSS RECEIPTS TAX--GOVERNMENTAL
GROSS RECEIPTS TAX--SALES TO GOVERNMENTAL AGENCIES.--
A. Receipts from selling tangible personal
property to the United States or New Mexico or a governmental unit,
subdivision, agency, department or instrumentality thereof may be deducted from
gross receipts or from governmental gross receipts. Unless contrary to federal law, the deduction
provided by this subsection does not apply to:
(1) receipts from selling metalliferous mineral
ore;
(2) receipts from selling tangible personal
property that is or will be incorporated into a metropolitan redevelopment
project created under the Metropolitan Redevelopment Code;
(3) receipts from selling construction material;
or
(4) that portion of the receipts from performing
a "service", as defined in Subsection M of
Section 7-9-3 NMSA 1978, that reflects
the value of tangible personal property utilized or produced in performance of
such service.
B. Receipts from selling tangible personal
property for any purpose to an Indian tribe, nation or pueblo or a governmental
unit, subdivision, agency, department or instrumentality thereof for use on
Indian reservations or pueblo grants may be deducted from gross receipts or
from governmental gross receipts.
C. When a seller, in good faith, deducts
receipts for tangible personal property sold to the state or a governmental
unit, subdivision, agency, department or instrumentality thereof, after
receiving written assurances from the buyer's representative that the property
sold is not construction material, the department is precluded from asserting
in a later assessment or audit that the receipts are not deductible pursuant to
Paragraph (3) of Subsection A of this section."
Section 7. Section 7-9-73.2 NMSA 1978 (being Laws 1998,
Chapter 95, Section 2 and Laws 1998, Chapter 99, Section 4) is amended to read:
"7-9-73.2. DEDUCTION--GROSS RECEIPTS TAX AND
GOVERNMENTAL GROSS RECEIPTS TAX--PRESCRIPTION DRUGS.--
A. Receipts from the sale of prescription drugs
may be deducted from gross receipts and governmental gross receipts.
B. For the purposes of this section,
"prescription drugs" means insulin and substances that are:
(1) dispensed by or under the supervision of a
licensed pharmacist or by a physician or other person authorized under state
law to do so;
(2) prescribed for a specified person by a person
authorized under state law to prescribe the substance; and
(3) subject to the restrictions on sale contained
in Subparagraph 1 of Subsection (b) of 21 USCA 353." Section 8.
EFFECTIVE DATE.--The effective date of the provisions of this act is
July 1, 2003.
HB 126
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