HOUSE BILL 4
53rd legislature - STATE OF NEW MEXICO - second session, 2018
INTRODUCED BY
Jim R. Trujillo and Roberto "Bobby" J. Gonzales and Brian Egolf
AN ACT
RELATING TO TAXATION; PROVIDING THAT THE PLACE OF BUSINESS OF A PERSON WITHOUT PHYSICAL PRESENCE IN THIS STATE IS WHERE THE PROPERTY OR SERVICE BEING SOLD IS DELIVERED; AMENDING THE PERSONAL INCOME TAX RATES AND BRACKETS; PROVIDING THAT CERTAIN THIRD-PARTY SELLERS ARE SUBJECT TO THE GROSS RECEIPTS AND COMPENSATING TAX ACT; BARRING THE TAXATION AND REVENUE DEPARTMENT FROM ENFORCING COLLECTION OF THE GROSS RECEIPTS TAX IN CERTAIN CIRCUMSTANCES; IMPOSING THE STATE GROSS RECEIPTS TAX ON A NONPROFIT HOSPITAL; IMPOSING THE GOVERNMENTAL GROSS RECEIPTS TAX ON A GOVERNMENT HOSPITAL; PROVIDING THAT THE NET GOVERNMENTAL GROSS RECEIPTS ATTRIBUTABLE TO GOVERNMENT HOSPITALS SHALL BE DISTRIBUTED TO THE GENERAL FUND; REPEALING THE CREDIT AGAINST THE GROSS RECEIPTS TAX FOR CERTAIN HOSPITALS AND A DISTRIBUTION RELATED TO THAT CREDIT; REPEALING AN OUTDATED VERSION OF SECTION 7-2-7 NMSA 1978 (BEING LAWS 2005 (1ST S.S.), CHAPTER 3, SECTION 2); MAKING AN APPROPRIATION.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
SECTION 1. Section 7-1-6.4 NMSA 1978 (being Laws 1983, Chapter 211, Section 9, as amended) is amended to read:
"7-1-6.4. DISTRIBUTION--MUNICIPALITY FROM GROSS RECEIPTS TAX.--
A. Except as provided in Subsection B of this section, a distribution pursuant to Section 7-1-6.1 NMSA 1978 shall be made to each municipality in an amount, subject to any increase or decrease made pursuant to Section 7-1-6.15 NMSA 1978, equal to the product of the quotient of one and two hundred twenty-five thousandths percent divided by the tax rate imposed by Section 7-9-4 NMSA 1978 multiplied by the net receipts, except net receipts attributable to a nonprofit hospital licensed by the department of health, for the month attributable to the gross receipts tax from business locations:
(1) within that municipality;
(2) on land owned by the state, commonly known as the "state fairgrounds", within the exterior boundaries of that municipality;
(3) outside the boundaries of any municipality on land owned by that municipality; and
(4) on an Indian reservation or pueblo grant in an area that is contiguous to that municipality and in which the municipality performs services pursuant to a contract between the municipality and the Indian tribe or Indian pueblo if:
(a) the contract describes an area in which the municipality is required to perform services and requires the municipality to perform services that are substantially the same as the services the municipality performs for itself; and
(b) the governing body of the municipality has submitted a copy of the contract to the secretary.
B. If the reduction made by Laws 1991, Chapter 9, Section 9 to the distribution under this section impairs the ability of a municipality to meet its principal or interest payment obligations for revenue bonds outstanding prior to July 1, 1991 that are secured by the pledge of all or part of the municipality's revenue from the distribution made under this section, then the amount distributed pursuant to this section to that municipality shall be increased by an amount sufficient to meet any required payment, provided that the distribution amount does not exceed the amount that would have been due that municipality under this section as it was in effect on June 30, 1992.
C. A distribution pursuant to this section may be adjusted for a distribution made to a tax increment development district with respect to a portion of a gross receipts tax increment dedicated by a municipality pursuant to the Tax Increment for Development Act."
SECTION 2. Section 7-1-6.38 NMSA 1978 (being Laws 1994, Chapter 145, Section 1, as amended) is amended to read:
"7-1-6.38. DISTRIBUTION--GOVERNMENTAL GROSS RECEIPTS TAX.--
A. A distribution pursuant to Section 7-1-6.1 NMSA 1978 shall be made in amounts equal to the following percentages of the net receipts attributable to the governmental gross receipts tax, less the net receipts attributable to a hospital licensed by the department of health:
(1) seventy-five percent to the public project revolving fund administered by the New Mexico finance authority; [in an amount equal to seventy-five percent of the net receipts attributable to the governmental gross receipts tax.
B. A distribution pursuant to Section 7-1-6.1 NMSA 1978 shall be made]
(2) twenty-four percent to the energy, minerals and natural resources department [in an amount equal to twenty-four percent of the net receipts attributable to the governmental gross receipts tax]; provided that forty-one and two-thirds percent of the distribution is appropriated to the energy, minerals and natural resources department to implement the provisions of the New Mexico Youth Conservation Corps Act and fifty-eight and one-third percent of the distribution is appropriated to the energy, minerals and natural resources department for state park and recreation area capital improvements, including the costs of planning, engineering, design, construction, renovation, repair, equipment and furnishings; and
[C. A distribution pursuant to Section 7-1-6.1 NMSA 1978 shall be made]
(3) one percent to the [office of] cultural affairs [in an amount equal to one percent of the net receipts attributable to the governmental gross receipts tax] department for capital improvements at state museums and monuments administered by the [office of] cultural affairs department.
[D.] B. The state pledges to and agrees with the holders of any bonds or notes issued by the New Mexico finance authority or by the energy, minerals and natural resources department and payable from the net receipts attributable to the governmental gross receipts tax distributed to the New Mexico finance authority or the energy, minerals and natural resources department pursuant to this section that the state will not limit, reduce or alter the distribution of the net receipts attributable to the governmental gross receipts tax to the New Mexico finance authority or the energy, minerals and natural resources department or limit, reduce or alter the rate of imposition of the governmental gross receipts tax until the bonds or notes together with the interest thereon are fully met and discharged. The New Mexico finance authority and the energy, minerals and natural resources department are authorized to include this pledge and agreement of the state in any agreement with the holders of the bonds or notes."
SECTION 3. Section 7-1-14 NMSA 1978 (being Laws 1969, Chapter 145, Section 1, as amended) is amended to read:
"7-1-14. SECRETARY MAY DETERMINE WHERE CERTAIN GROSS RECEIPTS ARE TO BE REPORTED--PLACE OF BUSINESS FOR CONSTRUCTION PROJECTS, [AND] CERTAIN REAL PROPERTY SALES AND SALES BY PERSONS WITHOUT PHYSICAL PRESENCE.--
A. By regulation, the secretary may require any person maintaining one or more places of business to report the person's taxable gross receipts and deductions for each municipality or county or area within an Indian reservation or pueblo grant in which the person maintains a place of business.
B. For persons engaged in the construction business, the place where the construction project is performed is a "place of business", and all receipts from that project are to be reported from that place of business.
C. The secretary may, by regulation, also require any person maintaining a business outside the boundaries of a municipality on land owned by that municipality to report the person's taxable gross receipts for that municipality.
D. For a person engaged in the business of selling real estate, the location of the real property sold is the "place of business", and all receipts from that sale are to be reported from that place of business.
E. For a person engaging in business but that is without physical presence in this state, "place of business" is the location where the property or the product of a service being sold by the person is delivered."
SECTION 4. Section 7-2-7 NMSA 1978 (being Laws 2005, Chapter 104, Section 4) is amended to read:
"7-2-7. INDIVIDUAL INCOME TAX RATES.--The tax imposed by Section 7-2-3 NMSA 1978 shall be at the following rates for any taxable year beginning on or after January 1, [2008] 2019:
[A. For married individuals filing separate returns:
If the taxable income is: The tax shall be:
Not over $4,000 1.7% of taxable income
Over $4,000 but not over $8,000 $68.00 plus 3.2% of excess over $4,000
Over $8,000 but not over $12,000 $196 plus 4.7% of excess over $8,000
Over $12,000 $384 plus 4.9% of excess over $12,000.
B. For heads of household, surviving spouses and married individuals filing joint returns:
If the taxable income is: The tax shall be:
Not over $8,000 1.7% of taxable income
Over $8,000 but not over $16,000 $136 plus 3.2% of excess over $8,000
Over $16,000 but not over $24,000 $392 plus 4.7% of excess over $16,000
Over $24,000 $768 plus 4.9% of excess over $24,000.
C. For single individuals and for estates and trusts:
If the taxable income is: The tax shall be:
Not over $5,500 1.7% of taxable income
Over $5,500 but not over $11,000 $93.50 plus 3.2% of excess over $5,500
Over $11,000 but not over $16,000 $269.50 plus 4.7% of excess over $11,000
Over $16,000 $504.50 plus 4.9% of excess over $16,000.]
A. For married individuals filing separate returns:
If the taxable income is: The tax shall be:
Not over $8,000 1.5% of taxable income
Over $8,000 but not over $16,000 $120 plus 3.0% of excess over $8,000
Over $16,000 but not over $24,000 $360 plus 4.5% of excess over $16,000
Over $24,000 but not over $75,000 $720 plus 5.2% of excess over $24,000
Over $75,000 $3,372 plus 5.9% of excess over $75,000.
B. For heads of household, surviving spouses and married individuals filing joint returns:
If the taxable income is: The tax shall be:
Not over $16,000 1.5% of taxable income
Over $16,000 but not over $32,000 $240 plus 3.0% of excessover $16,000
Over $32,000 but not over $64,000 $720 plus 4.5% of excessover $32,000
Over $64,000 but not over $150,000 $2,160 plus 5.2% of excess over $64,000
Over $150,000 $6,632 plus 5.9% of excess over $150,000.
C. For single individuals and for estates and trusts:
If the taxable income is: The tax shall be:
Not over $11,000 1.5% of taxable income
Over $11,000 but not over $22,000 $165 plus 3.0% of excess over $11,000
Over $22,000 but not over $32,000 $495 plus 4.5% of excess over $22,000
Over $32,000 but not over $100,000 $945 plus 5.2% of excess over $32,000
Over $100,000 $4,481 plus 5.9% of excess over $100,000.
D. The tax on the sum of any lump-sum amounts included in net income is an amount equal to five multiplied by the difference between:
(1) the amount of tax due on the taxpayer's taxable income; and
(2) the amount of tax that would be due on an amount equal to the taxpayer's taxable income and twenty percent of the taxpayer's lump-sum amounts included in net income."
SECTION 5. A new section of the Gross Receipts and Compensating Tax Act is enacted to read:
"[NEW MATERIAL] LIABILITY OF MARKETPLACE FACILITATORS AND REMOTE SELLERS.--
A. Remote sellers and marketplace facilitators are liable for the taxes imposed pursuant to the Gross Receipts and Compensating Tax Act if, during the current or immediately preceding calendar year:
(1) for a remote seller, the remote seller's gross receipts from sales sourced to this state pursuant to Section 7-1-14 NMSA 1978 are at least one hundred thousand dollars ($100,000); and
(2) for a marketplace facilitator, the marketplace facilitator's gross receipts from sales sourced to this state pursuant to Section 7-1-14 NMSA 1978, whether the sales are made in the marketplace facilitator's own name or by the marketplace facilitator as an agent of a marketplace seller, total at least one hundred thousand dollars ($100,000). The provisions of this section apply to marketplace facilitators only with respect to:
(a) receipts from sales through the marketplace facilitator's marketplace by or on behalf of marketplace sellers who do not have a physical presence in this state; and
(b) receipts from sales made by the marketplace facilitator, provided that the marketplace facilitator does not have a physical presence in this state.
B. For purposes of this section, a marketplace facilitator is deemed to be an agent of a marketplace seller that makes sales through the marketplace facilitator's physical or electronic marketplace.
C. The department may require a marketplace facilitator to provide to the department any information the department determines is reasonably necessary to enforce the provisions of this section. Such information may include documentation of sales made by marketplace sellers through the marketplace facilitator's physical or electronic marketplace. The department may prescribe by rule the form and manner for providing this information.
D. Subject to the limitations provided in Subsection E of this section, a marketplace facilitator is relieved of liability pursuant to this section for failure to remit the correct amount of tax to the extent that the marketplace facilitator can show to the department's satisfaction that the:
(1) failure was due to incorrect information given to the marketplace facilitator by the marketplace seller, unless the marketplace facilitator and the marketplace seller are affiliated persons. When the marketplace facilitator is relieved of liability pursuant to this subsection, the marketplace seller is solely liable for the amount of tax due;
(2) failure was not due to an error in sourcing the sale pursuant to Section 7-1-14 NMSA 1978; and
(3) sale was made:
(a) through the marketplace facilitator's marketplace; and
(b) with the marketplace facilitator acting as the agent of a marketplace seller and the marketplace facilitator and marketplace seller are not affiliated persons.
E. Liability relief for a marketplace facilitator pursuant to Subsection D of this section is limited as follows:
(1) for calendar year 2019, the liability relief may not exceed ten percent of the total tax due pursuant to this section on receipts from sales made by the marketplace facilitator as agent of a marketplace seller and sourced to this state during the same calendar year;
(2) for calendar years 2020, 2021, 2022 and 2023, the liability relief may not exceed five percent of the total tax due pursuant to this section on receipts from sales by the marketplace facilitator as agent of a marketplace seller and sourced to this state during the same calendar year; and
(3) beginning in calendar year 2024, the liability relief may not exceed three percent of the total tax due pursuant to this section on receipts from sales by the marketplace facilitator as agent of a marketplace seller and sourced to this state during the same calendar year.
F. If a marketplace facilitator is relieved of liability pursuant to Paragraphs (2) and (3) of Subsection D of this section, the marketplace seller is also relieved of liability for the amount of tax due, subject to the limitations in Subsection G of this section.
G. Except as otherwise provided in this section, a marketplace seller obligated to remit the taxes imposed pursuant to the Gross Receipts and Compensating Tax Act is not required to remit such taxes on receipts from sales made through a marketplace operated by a marketplace facilitator if the marketplace seller has obtained documentation from the marketplace facilitator indicating that the marketplace facilitator is registered with the department and will remit the taxes due on all receipts from sales made on behalf of the marketplace seller through the marketplace operated by the marketplace facilitator. The documentation shall be provided in a form and manner prescribed by the department. A marketplace seller is not relieved from liability for taxes due pursuant to this section due to a failure of a marketplace facilitator to remit the proper amount of tax due when the error was due to incorrect information given to the marketplace facilitator by the marketplace seller.
H. As used in this section:
(1) "affiliated person" means a person that, with respect to another person:
(a) has an ownership interest of more than five percent, whether direct or indirect, in the other person; or
(b) is related to the other person because a third person, or group of third persons who are affiliated persons with respect to each other, holds an ownership interest of more than five percent, whether direct or indirect, in the related persons;
(2) "marketplace facilitator" means a person that contracts with sellers to facilitate for consideration, including by a deduction of a fee from the transaction, the sale of the seller's products through a physical or electronic marketplace operated by the person and engages:
(a) directly or indirectly, through one or more affiliated persons, in any of the following: 1) transmitting or otherwise communicating the offer or acceptance between the buyer and seller; 2) owning or operating the infrastructure, electronic or physical, or technology that brings buyers and sellers together; 3) providing a virtual currency that buyers are allowed or required to use to purchase products from the seller; or 4) software development or research and development activities related to any of the activities described in Subparagraph (b) of this paragraph, if such activities are directly related to a physical or electronic marketplace operated by the person or an affiliated person; and
(b) in any of the following activities with respect to the seller's products: 1) payment processing services; 2) fulfillment or storage services; 3) listing products for sale; 4) setting prices; 5) branding sales as those of the marketplace facilitator; 6) order taking; 7) advertising or promotion; or 8) providing customer service or accepting or assisting with returns or exchanges;
(3) "marketplace seller" means a seller that makes sales through any physical or electronic marketplaces operated by a marketplace facilitator, regardless of whether the seller is required to be registered with the department;
(4) "purchaser" means any person who purchases or leases a product sourced to this state;
(5) "remote seller" means a seller, other than a marketplace facilitator, that does not have a physical presence in this state and that makes sales to purchasers; and
(6) "seller" means a person who engages in the act of selling and who:
(a) transfers property for consideration;
(b) performs a service for consideration; or
(c) is a marketplace facilitator, whether making sales in the marketplace facilitator's own right or on behalf of marketplace sellers."
SECTION 6. Section 7-9-4.3 NMSA 1978 (being Laws 1991, Chapter 8, Section 2, as amended by Laws 1993, Chapter 332, Section 1 and by Laws 1993, Chapter 352, Section 1) is amended to read:
"7-9-4.3. IMPOSITION AND RATE OF TAX--DENOMINATION AS "GOVERNMENTAL GROSS RECEIPTS TAX".--For the privilege of engaging in certain activities by governments, there is imposed on every agency, institution, instrumentality or political subdivision of the state, except any school district and [any] an entity licensed by the department of health, other than a hospital, that is principally engaged in providing health care services, an excise tax of five percent of governmental gross receipts. The tax imposed by this section shall be referred to as the "governmental gross receipts tax"."
SECTION 7. Section 7-9-7.1 NMSA 1978 (being Laws 1993, Chapter 45, Section 1, as amended) is amended to read:
"7-9-7.1. DEPARTMENT BARRED FROM TAKING COLLECTION ACTIONS WITH RESPECT TO CERTAIN COMPENSATING AND GROSS RECEIPTS TAX LIABILITIES.--
A. The department shall take no action to enforce collection of compensating tax due on purchases made by an individual if:
(1) the property is used only for nonbusiness purposes;
(2) the property is not a manufactured home; and
(3) the individual is not an agent for collection of compensating tax pursuant to Section 7-9-10 NMSA 1978.
B. The department shall take no action to enforce collection of gross receipts tax for a tax period prior to July 1, 2019 on persons engaging in business if, for those tax periods, those persons:
(1) lacked physical presence in the state; and
(2) did not report taxable gross receipts prior to July 1, 2019.
[B.] C. The prohibition in Subsection A of this section does not prevent the department from enforcing collection of compensating tax on purchases from persons who are not individuals, who are agents for collection pursuant to Section 7-9-10 NMSA 1978 or who use the property in the course of engaging in business in New Mexico or from enforcing collection of compensating tax due on purchase of manufactured homes."
SECTION 8. Section 7-9-29 NMSA 1978 (being Laws 1970, Chapter 12, Section 3, as amended) is amended to read:
"7-9-29. EXEMPTION--GROSS RECEIPTS TAX--CERTAIN ORGANIZATIONS--EXCEPTIONS.--
A. Exempted from the gross receipts tax are the receipts of organizations that demonstrate to the department that they have been granted exemption from the federal income tax by the United States commissioner of internal revenue as organizations described in Section 501(c)(3) of the United States Internal Revenue Code of [1954] 1986, as that section may be amended or renumbered, except as provided in Subsection B of this section.
B. Exempted from any local option gross receipts tax, but not the state gross receipts tax, are receipts of an organization that is a hospital licensed by the department of health that demonstrates to the department that it has been granted exemption from the federal income tax by the United States commissioner of internal revenue as an organization described in Section 501(c)(3) of the United States Internal Revenue Code of 1986, as that section may be amended or renumbered.
[B.] C. Exempted from the gross receipts tax are the receipts from carrying on chamber of commerce, visitor bureau and convention bureau functions of organizations that demonstrate to the department that they have been granted exemption from the federal income tax by the United States commissioner of internal revenue as organizations described in Section 501(c)(6) of the United States Internal Revenue Code of [1954] 1986, as that section may be amended or renumbered.
[C.] D. This section does not apply to receipts derived from an unrelated trade or business as defined in Section 513 of the United States Internal Revenue Code of [1954] 1986, as that section may be amended or renumbered."
SECTION 9. Section 7-9-73.1 NMSA 1978 (being Laws 1991, Chapter 8, Section 3, as amended) is amended to read:
"7-9-73.1. DEDUCTION--GROSS RECEIPTS--GOVERNMENTAL GROSS RECEIPTS--HOSPITALS.--
A. Fifty percent of the receipts of hospitals licensed by the department of health may be deducted from gross receipts; provided that this deduction may be applied only to the taxable gross receipts remaining after all other appropriate deductions have been taken.
B. Fifty percent of the receipts of a hospital licensed by the department of health may be deducted from governmental gross receipts; provided that this deduction may be applied only to the taxable governmental gross receipts remaining after all other appropriate deductions have been taken."
SECTION 10. REPEAL.--Sections 7-1-6.57 and 7-9-96.1 NMSA 1978 (being Laws 2007, Chapter 361, Sections 1 and 7) are repealed.
SECTION 11. ADDITIONAL REPEAL.--That version of Section 7-2-7 NMSA 1978 (being Laws 2005 (1st S.S.), Chapter 3, Section 2) is repealed.
SECTION 12. APPLICABILITY.--The provisions of Section 4 of this act apply to taxable years beginning on or after January 1, 2019.
SECTION 13. EFFECTIVE DATE.--
A. The effective date of the provisions of Sections 1, 2, 6 and 8 through 10 of this act is July 1, 2018.
B. The effective date of the provisions of Section 4 of this act is January 1, 2019.
C. The effective date of the provisions of Sections 3, 5 and 7 of this act is July 1, 2019.
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