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.

Current FIRs (in HTML & Adobe PDF formats) are a vailable on the NM Legislative Website (legis.state.nm.us).

Adobe PDF versions include all attachments, whereas HTML versions may not. Previously issued FIRs and

attachments may be obtained from the LFC in Suite 101 of the State Capitol Building North.

F I S C A L I M P A C T R E P O R T

SPONSOR Moore

ORIGINAL DATE

LAST UPDATED

2/09/07

3/05/07 HB 1038/aHTRC

SHORT TITLE Veterinary Medical Supplies Gross Receipts

SB

ANALYST Schardin

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

FY09

($465.7)

Recurring General Fund

($310.5)

Recurring

Local

Governments

(Parenthesis ( ) Indicate Revenue Decreases)

Duplicates SB 249

SOURCES OF INFORMATION

LFC Files

Responses Received From

Board of Veterinary Medicine

Taxation and Revenue Department (TRD)

SUMMARY

Synopsis of HTRC Amendment

The House Taxation and Revenue Committee amendment to House Bill 1038 restricts the gross

receipts tax deduction created in the bill to receipts from the sale of veterinary medial services,

medicine or medical supplies used to treat cattle. The deduction will not apply to veterinary

treatment of any other animals.

Synopsis of Original Bill

House Bill 1038 creates a gross receipts tax deduction for receipts from the sale of veterinary

medical services, medicine or medical supplies used in the medical treatment of livestock used or

raised on New Mexico farms and ranches. Claiming the deduction will require the person

purchasing the veterinary services to state in writing that they regularly engage in ranching or

farming in New Mexico.

House Bill 1038/aHTRC – Page

2

The bill defines livestock eligible for this deduction to include horses, asses, mules, cattle, sheep,

goats, swine, bison, poultry, ostriches, emus, rheas, camelids (camels and llamas) and farmed

cervidae (deer), but not to include cats or dogs.

Because no effective date is provided in the bill, its provisions will become effective 90 days

after the 2007 legislative session adjourns on June 25, 2007.

FISCAL IMPLICATIONS

Based on LFC analysis of TRD’s “Report 80: Analysis of Gross Receipts by Industry,"

veterinary services receipts are expected to be about $29.4 million per year. Since that total

includes veterinary services for livestock as well as domestic pets, it is assumed that only half of

these receipts ($14.7 million) are provided for livestock. The 2002 Census of Agriculture

indicates that there were 1.6 million head of cattle in New Mexico in 2002 and less than 300

thousand head of other livestock. Assuming that treatment of cattle represents 80 percent of all

livestock veterinary services, the deduction’s tax base will be about $Taxed at the statewide

average tax rate of 6.6 percent, the new deduction will decrease revenue collections by about

$776.2 thousand. About 60 percent of this reduction will impact the general fund, and the

remaining 40 percent will impact local governments.

SIGNIFICANT ISSUES

LFC notes that while individual deductions from the gross receipts tax may have small fiscal

impacts, their cumulative effect significantly narrows the gross receipts tax base. Narrowing the

gross receipts tax base increases revenue volatility and requires a higher tax rate to generate the

same amount of revenue.

The bill will reduce local government gross receipts tax collections. Many of New Mexico’s

local governments are highly dependent on gross receipts tax revenue.

TECHNICAL ISSUES

TRD suggests amending the bill to become effective on July 1, 2007 to make administration

easier.

TRD suggests adding language similar to that found in Section 7-9-43 NMSA 1978 to indicate a

time limit on providing a written statement that a person is engaged in ranching or farming.

SS/mt