Fiscal impact
reports (FIRs) are prepared by the Legislative Finance Committee (LFC) for
standing finance committees of the NM Legislature. The LFC does not assume
responsibility for the accuracy of these reports if they are used for other
purposes.
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Previously issued FIRs and attachments may also be obtained from the LFC
in
|
SPONSOR |
Snyder |
DATE TYPED |
|
HB |
|
||
|
SHORT
TITLE |
Business Service Tax Credit |
SB |
425 |
||||
|
|
ANALYST |
|
|||||
REVENUE
|
Estimated Revenue |
Subsequent Years Impact |
Recurring or
Non-Rec |
Fund Affected |
|
|
FY04 |
FY05 |
|||
|
|
(60,000.0) |
(63,000.0) |
Recurring |
General
Fund |
(Parenthesis ( ) Indicate Revenue Decreases)
LFC Files
SUMMARY
Senate Bill 425 provides a tax credit which is
denominated as the “business services tax credit”. The credit is equal to one percent of
qualified business services expenditures, or, in the case of licensed hospitals
claiming the 50 percent gross receipts tax deduction provided in Section
7-9-73.1 NMSA 1978, one-half percent of qualified business service expenditures.
The business service tax credit may be claimed
against the state gross receipts tax, compensating tax or withholding for which
the taxpayer is liable, but may not exceed tax liability. Excess credits may be carried forward for
three years.
Qualified business expenditures are defined as an
amount paid for services performed in the state that are
subject to the gross receipts tax and not eligible for a deduction or
exemption. It excludes expenditures for
entertainment or recreational services, janitorial services, repair and
maintenance services, services for which the taxpayer has received any other
tax credit and gross receipts taxes.
FISCAL IMPLICATIONS
TRD estimates that qualifying
business-to-business transactions total more than $6 billion in FY05. Applying the one percent tax credit against
the $6 billion base implies a $60 million loss to the general fund.
ADMINISTRATIVE IMPLICATIONS
TRD reports that the administrative implications
of the bill are modest and can be managed with existing resources.
OTHER SUBSTANTIVE ISSUES
TRD provided the following substantive issue:
This proposal provides
a credit to the purchaser of the service rather than the seller on which the
legal incidence of the gross receipts tax actually falls. The rationale is to at least partially reimburse
taxpayers for passed-on gross receipts taxes paid on inter-business
services. However, it may be
questionable tax policy to allow a taxpayer to claim credit for a tax liability
that, in part, another taxpayer is ultimately liable.
This proposal provides
partial relief for the “pyramiding” of the gross receipts tax on services, i.e.
the imposition of tax on tax. Pyramiding
is considered by most tax professionals to be an inefficient and undesirable
feature of a tax system. Among other
things, it increases the overhead costs of businesses operating in
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