0001|     
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0002|                            SENATE BILL 54
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0003|     43RD LEGISLATURE - STATE OF NEW MEXICO - SECOND SESSION, 1998
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0004|                            INTRODUCED BY
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0005|                           MANNY M. ARAGON
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0006|     
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0007|                                   
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0008|     
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0009|                                   
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0010|     
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0011|                                AN ACT
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0012|     RELATING TO TAXATION; PROVIDING A DEDUCTION FROM GROSS
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0013|     RECEIPTS AND GOVERNMENTAL GROSS RECEIPTS FOR RECEIPTS FROM THE
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0014|     SALE OF PRESCRIPTION DRUGS; ABOLISHING THE PRESCRIPTION DRUG
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0015|     TAX CREDIT; AMENDING, REPEALING AND ENACTING SECTIONS OF THE
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0016|     NMSA 1978.
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0017|     
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0018|     BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
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0019|          Section 1.  Section 7-9-3 NMSA 1978 (being Laws 1978,
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0020|     Chapter 46, Section 1, as amended) is amended to read:
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0021|          "7-9-3.  DEFINITIONS.--As used in the Gross Receipts and
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0022|     Compensating Tax Act:
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0023|               A.  "department" means the taxation and revenue
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0024|     department, the secretary of taxation and revenue or any
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0025|     employee of the department exercising authority lawfully
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0001|     delegated to that employee by the secretary;
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0002|               B.  "buying" or "selling" means any transfer of
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0003|     property for consideration or any performance of service for
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0004|     consideration;
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0005|               C.  "construction" means building, altering,
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0006|     repairing or demolishing in the ordinary course of business
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0007|     any:
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0008|                    (1)  road, highway, bridge, parking area or
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0009|     related project;
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0010|                    (2)  building, stadium or other structure;
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0011|                    (3)  airport, subway or similar facility;
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0012|                    (4)  park, trail, athletic field, golf course
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0013|     or similar facility;
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0014|                    (5)  dam, reservoir, canal, ditch or similar
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0015|     facility;
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0016|                    (6)  sewerage or water treatment facility,
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0017|     power generating plant, pump station, natural gas compressing
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0018|     station, gas processing plant, coal gasification plant,
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0019|     refinery, distillery or similar facility;
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0020|                    (7)  sewerage, water, gas or other pipeline;
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0021|                    (8)  transmission line;
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0022|                    (9)  radio, television or other tower;
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0023|                    (10)  water, oil or other storage tank;
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0024|                    (11)  shaft, tunnel or other mining
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0025|     appurtenance;
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0001|                    (12)  microwave station or similar facility;
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0002|     or
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0003|                    (13)  similar work;
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0004|     "construction" also means:
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0005|                    (14)  leveling or clearing land;
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0006|                    (15)  excavating earth;
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0007|                    (16)  drilling wells of any type, including
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0008|     seismograph shot holes or core drilling; or
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0009|                    (17)  similar work;
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0010|               D.  "financial corporation" means any savings and
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0011|     loan association or any incorporated savings and loan company,
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0012|     trust company, mortgage banking company, consumer finance
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0013|     company or other financial corporation;
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0014|               E.  "engaging in business" means carrying on or
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0015|     causing to be carried on any activity with the purpose of
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0016|     direct or indirect benefit;
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0017|               F.  "gross receipts" means the total amount of
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0018|     money or the value of other consideration received from
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0019|     selling property in New Mexico, from leasing property employed
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0020|     in New Mexico, from selling services performed outside New
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0021|     Mexico the product of which is initially used in New Mexico or
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0022|     from performing services in New Mexico.  In an exchange in
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0023|     which the money or other consideration received does not
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0024|     represent the value of the property or service exchanged,
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0025|     "gross receipts" means the reasonable value of the property or
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0001|     service exchanged.
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0002|                    (1)  "Gross receipts" includes:
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0003|                         (a)  any receipts from sales of tangible
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0004|     personal property handled on consignment;
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0005|                         (b)  the total commissions or fees
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0006|     derived from the business of buying, selling or promoting the
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0007|     purchase, sale or leasing, as an agent or broker on a
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0008|     commission or fee basis, of any property, service, stock, bond
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0009|     or security;
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0010|                         (c)  amounts paid by members of any
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0011|     cooperative association or similar organization for sales or
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0012|     leases of personal property or performance of services by such
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0013|     organization; and
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0014|                         (d)  amounts received from transmitting
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0015|     messages or conversations by persons providing telephone or
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0016|     telegraph services.
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0017|                    (2)  "Gross receipts" excludes:
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0018|                         (a)  cash discounts allowed and taken;
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0019|                         (b)  New Mexico gross receipts tax,
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0020|     governmental gross receipts tax and leased vehicle gross
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0021|     receipts tax payable on transactions for the reporting period;
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0022|                         (c)  taxes imposed pursuant to the
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0023|     provisions of any local option gross receipts tax that is
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0024|     payable on transactions for the reporting period;
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0025|                         (d)  any gross receipts or sales taxes
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0001|     imposed by an Indian nation, tribe or pueblo provided that the
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0002|     tax is approved, if approval is required by federal law or
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0003|     regulation, by the secretary of the interior of the United
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0004|     States and provided further that the gross receipts or sales
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0005|     tax imposed by the Indian nation, tribe or pueblo provides a
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0006|     reciprocal exclusion for gross receipts, sales or gross
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0007|     receipts-based excise taxes imposed by the state or its
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0008|     political subdivisions;
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0009|                         (e)  any type of time-price
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0010|     differential; and
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0011|                         (f)  amounts received solely on behalf
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0012|     of another in a disclosed agency capacity.
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0013|                    (3)  When the sale of property or service is
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0014|     made under any type of charge, conditional or time-sales
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0015|     contract or the leasing of property is made under a leasing
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0016|     contract, the seller or lessor may elect to treat all
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0017|     receipts, excluding any type of time-price differential, under
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0018|     such contracts as gross receipts as and when the payments are
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0019|     actually received.  If the seller or lessor transfers his
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0020|     interest in any such contract to a third person, the seller or
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0021|     lessor shall pay the gross receipts tax upon the full sale or
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0022|     leasing contract amount, excluding any type of time-price
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0023|     differential;
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0024|               G.  "manufacturing" means combining or processing
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0025|     components or materials to increase their value for sale in
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0001|     the ordinary course of business, but does not include
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0002|     construction;
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0003|               H.  "person" means:
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0004|                    (1)  any individual, estate, trust, receiver,
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0005|     cooperative association, club, corporation, company, firm,
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0006|     partnership, limited liability company, limited liability
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0007|     partnership, joint venture, syndicate or other entity,
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0008|     including any gas, water or electric utility owned or operated
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0009|     by a county, municipality or other political subdivision of
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0010|     the state; or
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0011|                    (2)  any national, federal, state, Indian or
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0012|     other governmental unit or subdivision, or any agency,
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0013|     department or instrumentality of any of the foregoing;
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0014|               I.  "property" means real property, tangible
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0015|     personal property, licenses, franchises, patents, trademarks
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0016|     and copyrights.  Tangible personal property includes
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0017|     electricity and manufactured homes;
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0018|               J.  "leasing" means any arrangement whereby, for a
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0019|     consideration, property is employed for or by any person other
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0020|     than the owner of the property, except that the granting of a
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0021|     license to use property is the sale of a license and not a
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0022|     lease;
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0023|               K.  "service" means all activities engaged in for
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0024|     other persons for a consideration, which activities involve
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0025|     predominantly the performance of a service as distinguished
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0001|     from selling or leasing property.  "Service" includes
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0002|     activities performed by a person for its members or
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0003|     shareholders.  In determining what is a service, the intended
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0004|     use, principal objective or ultimate objective of the
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0005|     contracting parties shall not be controlling.  "Service"
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0006|     includes construction activities and all tangible personal
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0007|     property that will become an ingredient or component part of a
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0008|     construction project.  Such tangible personal property retains
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0009|     its character as tangible personal property until it is
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0010|     installed as an ingredient or component part of a construction
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0011|     project in New Mexico.  However, sales of tangible personal
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0012|     property that will become an ingredient or component part of a
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0013|     construction project to persons engaged in the construction
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0014|     business are sales of tangible personal property;
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0015|               L.  "use" or "using" includes use, consumption or
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0016|     storage other than storage for subsequent sale in the ordinary
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0017|     course of business or for use solely outside this state;
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0018|               M.  "secretary" means the secretary of taxation and
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0019|     revenue or the secretary's delegate;
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0020|               N.  "manufactured home" means a moveable or
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0021|     portable housing structure for human occupancy that exceeds
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0022|     either a width of eight feet or a length of forty feet
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0023|     constructed to be towed on its own chassis and designed to be
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0024|     installed with or without a permanent foundation;
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0025|               O.  "initial use" or "initially used" means the
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0001|     first employment for the intended purpose and does not include
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0002|     the following activities:
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0003|                    (1)  observation of tests conducted by the
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0004|     performer of services;
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0005|                    (2)  participation in progress reviews,
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0006|     briefings, consultations and conferences conducted by the
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0007|     performer of services;
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0008|                    (3)  review of preliminary drafts, drawings
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0009|     and other materials prepared by the performer of the services;
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0010|                    (4)  inspection of preliminary prototypes
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0011|     developed by the performer of services; or
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0012|                    (5)  similar activities; 
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0013|               P.  "research and development services" means any
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0014|     activity engaged in for other persons for consideration, for
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0015|     one or more of the following purposes:
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0016|                    (1)  advancing basic knowledge in a recognized
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0017|     field of natural science;
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0018|                    (2)  advancing technology in a field of
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0019|     technical endeavor;
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0020|                    (3)  the development of a new or improved
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0021|     product, process or system with new or improved function,
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0022|     performance, reliability or quality, whether or not the new or
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0023|     improved product, process or system is offered for sale, lease
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0024|     or other transfer;
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0025|                    (4)  the development of new uses or
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0001|     applications for an existing product, process or system,
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0002|     whether or not the new use or application is offered as the
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0003|     rationale for purchase, lease or other transfer of the
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0004|     product, process or system;
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0005|                    (5)  analytical or survey activities
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0006|     incorporating technology review, application, trade-off study,
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0007|     modeling, simulation, conceptual design or similar activities,
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0008|     whether or not offered for sale, lease or other transfer; or
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0009|                    (6)  the design and development of prototypes
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0010|     or the integration of systems incorporating advances,
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0011|     developments or improvements included in Paragraphs (1)
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0012|     through (5) of this subsection; <s>[and]</s>
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0013|               Q.  "local option gross receipts tax" means a tax
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0014|     authorized to be imposed by a county or municipality upon the
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0015|     taxpayer's gross receipts and required to be collected by the
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0016|     department at the same time and in the same manner as the
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0017|     gross receipts tax; "local option gross receipts tax" includes
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0018|     the taxes imposed pursuant to the Municipal Local Option Gross
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0019|     Receipts Taxes Act, Supplemental Municipal Gross Receipts Tax
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0020|     Act, Special Municipal Gross Receipts Tax Act, County Local
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0021|     Option Gross Receipts Taxes Act, Local Hospital Gross Receipts
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0022|     Tax Act, County Correctional Facility Gross Receipts Tax Act
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0023|     and such other acts as may be enacted authorizing counties or
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0024|     municipalities to impose taxes on gross receipts, which taxes
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0025|     are to be collected by the department; <u>and</u>
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0001|               <u>R.  "prescription drugs" means insulin and
</u>    |
<u></u>0002| <u>    substances that are:
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<u></u>0003| <u>                   (1)  dispensed by or under the supervision of
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<u></u>0004| <u>    a licensed pharmacist or by a physician or other person
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<u></u>0005| <u>    authorized under state law to do so;
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<u></u>0006| <u>                   (2)  prescribed for a specified person by a
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<u></u>0007| <u>    person authorized under state law to prescribe the substance;
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<u></u>0008| <u>    and
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<u></u>0009| <u>                   (3)  subject to the restrictions on sale
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<u></u>0010| <u>    contained in Subparagraph 1 of Subsection (b) of 21 USCA
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<u></u>0011| <u>    353</u>."
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0012|          Section 2.  A new section of the Gross Receipts and
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0013|     Compensating Tax Act is enacted to read:
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0014|          "[<u>NEW MATERIAL</u>] DEDUCTION--GROSS RECEIPTS TAX AND
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0015|     GOVERNMENTAL GROSS RECEIPTS TAX--PRESCRIPTION DRUGS.--Receipts
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0016|     from the sale of prescription drugs may be deducted from gross
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0017|     receipts and governmental gross receipts."
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0018|          Section 3.  REPEAL.--Section 7-2-18.3 NMSA 1978 (being
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0019|     Laws 1994, Chapter 5, Section 17) is repealed.
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0020|          Section 4.  APPLICABILITY.--The provisions of Section 3
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0021|     of this act apply to taxable years beginning on or after
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0022|     January 1, 1999.
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0023|          Section 5.  EFFECTIVE DATE.--The effective date of the
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0024|     provisions of this act is January 1, 1999.
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0025|                              
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