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 Papen

ORIGINAL DATE

LAST UPDATED

2/21/07

HB

SHORT TITLE Advertising Sales Gross Receipts

SB 788

ANALYST Schardin

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

FY09

($3,660.0)

Recurring General Fund

($2,440.0)

Recurring

Local

Governments

(Parenthesis ( ) Indicate Revenue Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Taxation and Revenue Department (TRD)

SUMMARY

Synopsis of Bill

Senate Bill 788 expands current gross receipts tax deductions for advertising and advertising

commissions.

Under current law, receipts of selling newspapers may be deducted, except for receipts from

selling advertising. The bill would make all newspaper receipts, including advertising receipts,

deductible.

Under current law, receipts of radio and radio advertising may be deducted from gross receipts if

the advertisement is for a national or regional seller not having its principal place of business in

New Mexico. Currently, commissions of advertising agencies may not be deducted. The bill

would allow deductions for print, radio and television advertising receipts as well as advertising

agent commissions for print, radio and television.

The effective date of these provisions will be July 1, 2007.

Senate Bill 788 – Page

2

FISCAL IMPLICATIONS

Based on information from the, “Report 80: Analysis of Gross Receipts by Industry

Classification," TRD assumes gross receipts tax payments will be reduced by $1 million for

advertisers, $800 thousand for newspapers and other print media, $3.1 million for radio and

television broadcasters, and $1.2 million for the cable television industry. These reductions total

$6.1 million. About 60 percent of that revenue loss will accrue to the general fund and the

remaining 40 percent will accrue to 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.

ADMINISTRATIVE IMPLICATIONS

The bill will have a small administrative impact on TRD.

TECHNICAL ISSUES

TRD suggests amending the bill to delete the words, “except from selling advertising space,"

from Section 7-9-63 NMSA 1978.

SS/mt