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SPONSOR: |
Cravens |
DATE TYPED: |
|
HB |
|
||
SHORT TITLE: |
Direct Seller Gross Receipts Deduct |
SB |
156 |
||||
|
ANALYST: |
Gilbert |
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REVENUE
Estimated Revenue |
Subsequent Years Impact |
Recurring or
Non-Rec |
Fund Affected |
|
FY03 |
FY04 |
|
|
|
|
$(1,155.0) |
$(1,260.0) |
Recurring |
General
Fund |
|
$(770.0) |
$(840.0) |
Recurring |
Local
Government Funds |
(Parenthesis ( ) Indicate Revenue Decreases)
LFC Files
Taxation
and Revenue Department (TRD)
SUMMARY
Synopsis
of Bill
Senate Bill 156 amends NMSA
1978, § 7-9-66 to provide a gross receipts tax deduction on commissions earned
by “direct sellers” as defined in Section 3508 of the Internal Revenue
Code. The effective date for this
deduction would be
Significant
Issues
“Direct sellers” as defined in federal code, are
independent contractors engaged in selling consumer products in the home or
otherwise than in a permanent retail establishment.
Examples of the taxpayers affected by this bill
include: multi-level sales organizations, cosmetics and gifts salespersons and
other independent sellers of consumer products. The proposed deduction appears
not to apply to real estate commissions since qualified real estate agent
is defined separately from direct seller in Section 3508 of the Internal
Revenue Code.
FISCAL
IMPLICATIONS
According
to the New Mexico Taxation and Revenue Department (TRD), the fiscal impact of
this bill was derived using data from the 1997 Census of Trade in New Mexico. In 1997, there were 208 “Direct Selling
Establishments”—a subset of the category “Non-store Retailers”. Total receipts
and payroll for this category were $202.0 million and $25.0 million, respectively. Using payroll as a proxy for commission
sales and assuming an average annual growth rate of 5%, the FY 2004 base is estimated
to be approximately $35.0 million. An
effective state and local tax rate of 6.06% yields the fiscal impact listed in
the revenue table.
ADMINISTRATIVE
IMPLICATIONS
According to TRD, their tax compliance
specialists in the Audit and Compliance Division will require training. TRD
will also need to revise the CRS-1 filers kit.
OTHER SUBSTANTIVE ISSUES
NMSA
1978, §
RLG/yr