HB 583

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AN ACT

RELATING TO TAXATION; CLARIFYING THE TREATMENT OF RECEIPTS

FROM THE SALE OR LICENSING OF PROPERTY IN THE DEFINITION OF

"GROSS RECEIPTS" PURSUANT TO THE GROSS RECEIPTS AND

COMPENSATING TAX ACT; ELIMINATING PATENTS, TRADEMARKS AND

COPYRIGHTS FROM THE DEFINITION OF "PROPERTY" PURSUANT TO THAT

ACT.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

Section 1. Section 7-9-3 NMSA 1978 (being Laws 1978,

Chapter 46, Section 1, as amended) 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 a savings and

loan association or an 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

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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 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

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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

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personal property, licenses and franchises. 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

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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. That 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. 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 2. Section 7-9-3.5 NMSA 1978 (being Laws 2003,

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Chapter 272, Section 3) is amended to read:

"7-9-3.5. 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 located in New Mexico, from leasing or

licensing 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

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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,

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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 the

seller's or lessor's 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 3. EFFECTIVE DATE.--The effective date of the

provisions of this act is July 1, 2006. HB 583

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