A. For the privilege of engaging in business, an excise tax equal to five and one-eighth percent of gross receipts is imposed on any person engaging in business in New Mexico.

B. The tax imposed by this section shall be referred to as the "gross receipts tax".

History: 1953 Comp., § 72-16A-4, enacted by Laws 1966, ch. 47, § 4; 1969, ch. 144, § 2; 1978, ch. 151, § 2; 1981, ch. 37, § 9; 1983, ch. 213, § 15; 1986, ch. 20, § 63; 1990 (1st S.S.), ch. 1, § 2; 2010 (2nd S.S.), ch. 7, § 9.

Cross references. — For exemptions from the gross receipts tax, see 7-9-12 NMSA 1978.

For deductions from the gross receipts tax, see 7-9-45 NMSA 1978.

The 2010 (2nd S.S.) amendment, effective July 1, 2010, in Subsection A, after "excise tax equal to five", added "and one-eighth".

The 1990 amendment, effective July 1, 1990, substituted "five percent" for "four and three-fourths percent" in Subsection A.

I. GENERAL CONSIDERATION.

Reasonable tax classifications not unconstitutional. — It is for the legislature to adopt classifications for the imposition of excise taxes as it may deem proper and any reasonable classification cannot be held to deny equal protection or due process. Edmunds v. Bureau of Revenue, 1958-NMSC-112, 64 N.M. 454, 330 P.2d 131.

Legislature's method of imposing gross receipts and compensating tax reasonable. — The legislature's selection of the vendor for imposition of the school tax (gross receipts tax since repealed) and of the purchaser for imposition of the former compensating tax was reasonable in view of the impossibility of subjecting a nonresident vendor - one who was out of the territorial jurisdiction of the legislature - to the school tax. Edmunds v. Bureau of Revenue, 1958-NMSC-112, 64 N.M. 454, 330 P.2d 131.

Legislative failure to protect resident-vendor not unconstitutional. — The failure of the legislature to protect resident-vendor against the unfair competition of importations into New Mexico, without the payment of a sales tax, of chemical reagents did not offend the constitutions of either the United States or of New Mexico so as to invalidate the school tax against him. Edmunds v. Bureau of Revenue, 1958-NMSC-112, 64 N.M. 454, 330 P.2d 131 (decided under former law).

Standard of review on appeal. — Department's gross receipts tax assessment can only be reversed by the court of appeals if arbitrary or capricious, or there is an abuse of discretion, such that the assessment is not supported by substantial evidence or it is otherwise not in accordance with law. ITT Educ. Serv. v. Taxation & Revenue Dep't, 1998-NMCA-078, 125 N.M. 244, 959 P.2d 969.

II. APPLICABILITY.

Legal incidence of gross receipts tax on seller. — The statutory language of 7-9-3F NMSA 1978 and this section places the legal incidence of the gross receipts tax on the seller. United States v. New Mexico, 581 F.2d 803 (10th Cir. 1978), aff'd, 455 U.S. 720, 102 S. Ct. 1373, 71 L. Ed. 2d 580 (1982).

Incidence of tax on contractors selling services to United States. — The legal incidence of the gross receipts tax was on contractors as sellers of services to the United States, not on the federal government. United States v. New Mexico, 581 F.2d 803 (10th Cir. 1978), aff'd, 455 U.S. 720, 102 S. Ct. 1373, 71 L. Ed. 2d 580 (1982).

Tax valid since contractors not agents of United States. — Since contracts did not authorize contractors to act as agents of the United States in purchasing supplies and materials, application of the gross receipts tax to the contractual transactions for materials and supplies was not unconstitutional. United States v. New Mexico, 581 F.2d 803 (10th Cir. 1978), aff'd, 455 U.S. 720, 102 S. Ct. 1373, 71 L. Ed. 2d 580 (1982).

Tax valid even though increases government's contract costs. — That the gross receipts tax may increase cost on a contract to the government does not invalidate the tax on the grounds that a state may not directly tax the federal government since its legal incidence falls elsewhere. United States v. New Mexico, 581 F.2d 803 (10th Cir. 1978), aff'd, 455 U.S. 720, 102 S. Ct. 1373, 71 L. Ed. 2d 580 (1982).

Agency exemption. — Money received by the taxpayer, a property management company, from the property owner as reimbursement for on-site employee expenses was not taxable as gross receipts, because the taxpayer was an agent for the property owner for the purpose of employing and paying the on-site employees employed at the owners property. Carlsberg Mgt. Co. v. State Taxation & Revenue Dep't, 1993-NMCA-121, 116 N.M. 247, 861 P.2d 288, but see 7-9-3.5 NMSA 1978, which now excludes from tax receipts received solely on behalf of another in a disclosed agency capacity.

If bank can pass tax on, it is not real taxpayer. — Since services of maintaining and processing other banks' accounts were not reasonably necessary or incidental to business or functions of national banking association, New Mexico was not prevented by federal law from levying gross receipts tax on association's receipts collected for said services and association could pass tax on to banks for which it performed services and was therefore not the real taxpayer. First Nat'l Bank v. Commissioner of Revenue, 1969-NMCA-090, 80 N.M. 699, 460 P.2d 64, cert. denied, 80 N.M. 707, 460 P.2d 72, appeal dismissed, 397 U.S. 661, 90 S. Ct. 1407, 25 L. Ed. 2d 643 (1970).

Gross receipts tax may be constitutionally imposed on contractor doing work on Indian reservation in the state if there is no imposition on the sovereignty of the United States or infringement of the Indian tribe's right to self-government. Tiffany Constr. Co. v. Bureau of Revenue, 1981-NMSC-057, 96 N.M. 296, 629 P.2d 1225.

Gross receipts tax upon non-Indians working on reservations valid. — When the gross receipts tax levied upon non-Indians working on state reservations is nondiscriminatory and does not preclude a possible similar tax by a tribe on activities conducted on its reservation, the Indian right to self-government is not impaired and the tax is valid. Mescalero Apache Tribe v. O'Cheskey, 625 F.2d 967 (10th Cir. 1980), cert. denied, 450 U.S. 959, 101 S. Ct. 1417, 67 L. Ed. 2d 383 (1981), reh'g denied, 455 U.S. 929, 102 S. Ct. 1296, 71 L. Ed. 2d 474; 459 U.S. 1025, 103 S. Ct. 393, 74 L. Ed. 2d 522 (1982).

If tax ultimately falls on tribal organization. — If the economic burden of the gross receipts tax ultimately falls on a tribal organization, even though the legal incidence of the tax falls on the non-Indian contractor with whom the organization contracted to build an Indian school, the imposition of the tax impermissibly impedes the clearly expressed federal interest in promoting the quality and quantity of educational opportunities for Indians by depleting the funds available for the construction of Indian schools. Ramah Navajo Sch. Bd., Inc. v. Bureau of Revenue, 458 U.S. 832, 102 S. Ct. 3394, 73 L. Ed. 2d 1174 (1982).

Federal regulatory scheme and policy. — The comprehensive federal regulatory scheme and the express federal policy of encouraging tribal self-sufficiency in the area of education preclude the imposition of the state gross receipts tax on the construction of school facilities on tribal lands pursuant to a contract between a tribal organization and a non-Indian contracting firm. Ramah Navajo Sch. Bd., Inc. v. Bureau of Revenue, 458 U.S. 832, 102 S. Ct. 3394, 73 L. Ed. 2d 1174 (1982).

Sale of cigarettes to non-Indians on Indian reservation. — Non-Indian did not have a valid agency relationship with an Indian, so as to bar the imposition of gross receipts taxes on the sale of cigarettes to non-Indians on an Indian reservation, since the Indian made no financial contribution to the commencement or operation of the business and all decision-making was in the hands of the taxpayer. Bien Mur Indian Mkt. Ctr., Inc. v. Taxation & Revenue Dep't, 1988-NMCA-104, 108 N.M. 355, 772 P.2d 885, rev'd on other grounds, 108 N.M. 228, 770 P.2d 873 (1989).

Federal preemption for services rendered Indians. — District court properly ordered state tax agency to refund gross receipts taxes paid by a private contractor on services performed on an Indian reservation for a corporation owned by an Indian tribe, in light of the fact that the Indian trader statutes, 25 U.S.C. §§ 261-264 preempted the agency's authority to impose such a tax since the federal trader statutes included services under the scope of "trade". Laguna Indus., Inc. v. N.M. Taxation & Revenue Dep't, 1992-NMCA-109, 114 N.M. 644, 845 P.2d 167, aff'd sum nom. N.M. Taxation & Revenue Dep't v. Laguna Indus., Inc., 1993-NMSC-025, 115 N.M. 553, 855 P.2d 127.

Receipts from horse races not exempt. — The legislature, in enacting the Gross Receipts Tax Act, did not intend to exempt receipts from horse races. There is neither ambiguity nor doubt that the language used in the Gross Receipts Tax Act applies to the receipts of a horse owner paid to him for a winning purse and the receipts of a horse trainer paid to him as his percentage of a winning purse. Till v. Jones, 1972-NMCA-046, 83 N.M. 743, 497 P.2d 745, cert. denied, 83 N.M. 740, 497 P.2d 742. See Section 7-9-40 NMSA 1978 which now exempts receipts from horse race purses.

Construction work incidental to "severing" not subject to receipts tax. — The exemption provided by 7-9-35 NMSA 1978 applied since "severing" was taking place as the development work was performed and none of taxpayer's work was preliminary to or preparatory for "severing"; therefore, receipts from development work, which includes construction, were exempted from the gross receipts tax and taxable under the service tax (resources excise tax) when such construction work was incidental to the "severing." Patten v. Bureau of Revenue, 1974-NMCA-051, 86 N.M. 355, 524 P.2d 527.

Pawnbroker's receipts from sales of pawned chattel were not exempt or deductible from gross receipts tax as the recoupment of principal, interest, and handling charges attendant to the initial loan transaction. Wing Pawn Shop v. Taxation & Revenue Dep't, 1991-NMCA-024, 111 N.M. 735, 809 P.2d 649 (decided on facts existing prior to enactment of Pawnbrokers Act, 56-12-1 NMSA 1978 et seq.)

Collection agencies gross receipts. — A collection agency does not include the creditor's portion of the proceeds, nor the taxes it collects on behalf of the creditor, in calculating its commission proceeds, i.e., its gross receipts. Rather, a collection agency pays gross receipts tax only on the commission portion of the debt. The total tax imposed on the debt and charged to the debtor is simply the sum of the creditor's tax and the agency's tax. Martinez v. Albuquerque Collection Servs., Inc., 867 F. Supp. 1495 (D.N.M. 1994).

Nationwide school operating location in state. — Nationwide technical-vocational school operating a location in New Mexico is subject to the gross receipts tax; the taxable base includes tuition receipts from students in New Mexico for curriculum development, financial aid services, and job placement services. ITT Educ. Serv. v. Taxation & Revenue Dep't, 1998-NMCA-078, 125 N.M. 244, 959 P.2d 969.

Fees of management service company. — Fees paid to a hospital management services company as reimbursement for salaries and expenses of management personnel provided by the company were subject to the gross receipts tax. Brim Healthcare, Inc. v. State Taxation & Revenue Dep't, 1995-NMCA-055, 119 N.M. 818, 896 P.2d 498 (decided under prior law).

III. OUT-OF-STATE.

A substantial nexus was created through activities of a sister corporation. — Where taxpayer had no physical presence in New Mexico other than through stores in New Mexico owned by a sister corporation; and the sister corporation promoted taxpayer through sales of gift cards that were redeemable at taxpayer and that displayed taxpayer's web address, shared customer's email addresses with taxpayer, sold memberships in a shared loyalty program that gave customers a discount on purchases from taxpayer, accepted returns from taxpayer's customers in exchange for store credit which policy taxpayer advertised to its customers, and used the parent corporation's trademark which taxpayer also used, the sister corporation's activities in New Mexico on behalf of taxpayer were significantly associated with taxpayer's ability to establish and maintain a market for its sales in New Mexico and were sufficient to create a substantial nexus between taxpayer and New Mexico which permitted New Mexico to impose the gross receipts tax on taxpayer's sales to customers in New Mexico without offending the federal Commerce Clause. N.M. Taxation & Revenue Dep't v. Barnesandnoble.com, L.L.C., 2013-NMSC-023, aff'g 2012-NMCA-063, 283 P.3d 298.

Use of a trademark to establish a market in New Mexico creates a substantial nexus. — Where taxpayer was engaged in the business of selling books online; taxpayer did not own or lease property in New Mexico and did not have retail stores or sales agents or employees in New Mexico; taxpayer's parent corporation had three bookstores in New Mexico that used the parent corporation's trademark; taxpayer used the trademark on its website; and the stores sold gift cards that could be redeemed at the stores or through the taxpayer's website and loyalty program memberships that entitled customers to discounts at the stores or through taxpayer's website, taxpayer's use of shared marketing, name recognition and trademarks established a market for taxpayer in New Mexico which created a substantial nexus between taxpayer and New Mexico sufficient to support the imposition of the gross receipts tax on taxpayer. N.M. Taxation & Revenue Dep't v. Barnesandnoble.com, LLC, 2012-NMCA-063, 283 P.3d 298, cert. granted, 2012-NMCERT-006.

Destination principle. — The destination principle, which taxes the sale or use of goods that cross state lines at their destination, applies to determine whether an interstate transaction is a taxable sale under the New Mexico gross receipts tax laws. Dell Catalog Sales, L.P. v. Taxation and Revenue Dept., 2009-NMCA-001, 145 N.M. 419, 199 P.3d 863, cert. denied, 2008-NMCERT-007, cert. denied, 129 S. Ct. 1616, 173 L.Ed.2d 1030.

Where the taxpayer sold computers by mail, telephone and internet orders from its facilities in Texas to New Mexico customers; the taxpayer did not own or lease property in New Mexico; the taxpayer did not have retail stores, sales agents or employees in New Mexico; title to the computers transferred from the taxpayer to the customer upon shipment from the taxpayer's facility in Texas; and the taxpayer retained the risk of loss until delivery; and the computers were shipped by common carrier selected by the taxpayer, the taxpayer's activities constituted taxable sales in New Mexico because the actual consumption and use of the computers occurred in New Mexico. Dell Catalog Sales, L.P. v. Taxation and Revenue Dept., 2009-NMCA-001, 145 N.M. 419, 199 P.3d 863, cert. denied, 2008-NMCERT-007, cert. denied, 129 S. Ct. 1616, 173 L.Ed.2d 1030.

Substantial nexus. — Where the taxpayer sold computers by mail, telephone, and internet orders from its facilities in Texas to New Mexico customers; the taxpayer did not own or lease property in New Mexico; the taxpayer did not have retail stores, sales agents or employees in New Mexico; the taxpayer contracted with a third party to provide in-home service repairs on the computers in New Mexico; and the non-sales activities of the third party in New Mexico were an important factor in establishing and maintaining a market for the taxpayer's computers, the taxpayer had a substantial nexus with New Mexico and the imposition of gross receipts tax on the taxpayer did not violate the Commerce Clause. Dell Catalog Sales, L.P. v. Taxation and Revenue Dept., 2009-NMCA-001, 145 N.M. 419, 199 P.3d 863, cert. denied, 2008-NMCERT-007, cert. denied, 129 S. Ct. 1616, 173 L.Ed.2d 1030.

Mere contracts are not commerce at all, neither intrastate nor interstate. Baskin-Robbins Ice Cream Co. v. Revenue Div., 1979-NMCA-098, 93 N.M. 301, 599 P.2d 1098.

Tax on items in interstate commerce to be fair and nondiscriminatory. — To be sustained against a claim that a state-imposed tax runs afoul of the commerce clause of the federal constitution, a tax upon items connected with interstate commerce must: (1) be applied to an activity with a substantial nexus with the taxing state; (2) be fairly apportioned; (3) not discriminate against interstate commerce; and (4) be fairly related to the services provided by the state. Pittsburgh & Midway Coal Mining Co. v. Revenue Div., 1983-NMCA-019, 99 N.M. 545, 660 P.2d 1027, appeal dismissed, 464 U.S. 923, 104 S. Ct. 323, 78 L. Ed. 2d 296 (1983).

New Mexico may not tax income and gross receipts of Indians residing on a reservation when the income and gross receipts involved are derived solely from activities within the reservation. Hunt v. O'Cheskey, 1973-NMSC-068, 85 N.M. 388, 512 P.2d 961.

Tax on gross receipts from sales in other states unconstitutional. — Tax levied on the gross receipts from the sales of tangible personal property in another state is an impermissible burden on commerce. Evco v. Jones, 409 U.S. 91, 93 S. Ct. 349, 34 L. Ed. 2d 325 (1972).

Place services rendered. — To determine whether receipts from services are subject to gross receipts tax, the focus must be on what services the customers are contracting for and where those services are taking place. Simply because activity necessary to complete the services takes place out-of-state does not mean that the services provided are immune from New Mexico's gross receipts tax. Rauscher, Pierce, Refsnes, Inc. v. Taxation & Revenue Dep't, 2000-NMCA-065, 129 N.M. 404, 9 P.3d 648, aff'd 2002-NMSC-013, 132 N.M. 226, 46 P.3d 687.

Tax incurred at point of retail sale. — Where utilities retail their electrical energy through interstate lines only to consumers in Arizona, for that reason they incur no liability to New Mexico for its gross receipts tax, which is incurred at the point of retail sale. Arizona v. New Mexico, 425 U.S. 794, 96 S. Ct. 1845, 48 L. Ed. 2d 376 (1976).

Discrimination between broadcast and outdoor advertising held rational. — When regulations exempted broadcasting advertisement displayers in New Mexico from the tax imposed upon taxpayer (operator of a billboard service), there was discrimination in the treatment of these different media forms, but the burden was upon the taxpayer to negative every conceivable basis which might support the discriminatory classification, because of the implied rational basis underlying every tax statute, i.e., that the state has the right, power and duty to raise the necessary funds for its public purposes, and it was held that there was a rational basis for the state to discriminate between the broadcast industry and the outdoor advertising industry in the taxation of displays of national messages. Markham Adver. Co. v. Bureau of Revenue, 1975-NMCA-071, 88 N.M. 176, 538 P.2d 1198, cert. denied, 88 N.M. 318, 540 P.2d 248.

Since broadcasters generally engage in interstate transmission of their messages, and even if broadcasts by smaller stations might not always cross interstate lines, yet the potential exists for radio and television waves to deliver transitory, interstate communications, for this reason, national advertising by local broadcasting stations has long been held exempt from state taxation. Markham Adver. Co. v. Bureau of Revenue, 1975-NMCA-071, 88 N.M. 176, 538 P.2d 1198, cert. denied, 88 N.M. 318, 540 P.2d 248.

While billboard advertising takes place only in state. — Taxpayer's service of posting messages for national companies on billboards located in New Mexico was being taxed for displaying an activity taking place only in this state and not for advertising; thus it was intrastate in character, and the gross receipts tax imposed on it did not constitute an undue burden on interstate commerce in violation of the federal constitution. Markham Adver. Co. v. Bureau of Revenue, 1975-NMCA-071, 88 N.M. 176, 538 P.2d 1198, cert. denied, 88 N.M. 318, 540 P.2d 248.

If multiple taxation shown, tax would likely be unconstitutional. — The activities of taxpayer, situated and performing services (posting billboards) in New Mexico, were not within the taxing authority of any other state, and therefore no multiple taxation was possible; the instant tax could be declared invalid upon a showing by the taxpayer that multiple taxation would be likely to result and would be likely to unduly burden interstate commerce, but neither showing was made, and therefore, no basis was demonstrated upon which a claim of potential multiple taxation as to this taxpayer could be found. Markham Adver. Co. v. Bureau of Revenue, 1975-NMCA-071, 88 N.M. 176, 538 P.2d 1198, cert. denied, 88 N.M. 318, 540 P.2d 248.

Traffic between states absent in franchise agreement. — If none of the "activities" of the franchise agreement are serviced by mail, telephone correspondence or by any employees of taxpayer, no intercourse or traffic between this state and another is found. Baskin-Robbins Ice Cream Co. v. Revenue Div., 1979-NMCA-098, 93 N.M. 301, 599 P.2d 1098.

Tax constitutional on coal sales to out-of-state buyers. — The imposition of gross receipt taxes on proceeds from the sales of coal to out-of-state buyers does not impermissibly interfere with the commerce clause of the federal constitution. Pittsburgh & Midway Coal Mining Co. v. Revenue Div., 1983-NMCA-019, 99 N.M. 545, 660 P.2d 1027, appeal dismissed, 464 U.S. 923, 104 S. Ct. 323, 78 L. Ed. 2d 296.

Tax applicable to foreign franchisor. — Because franchisor has no payroll, real property, personnel or offices located in this state, but it does furnish signs which must be leased or purchased by its dealers, its sales of tangible property and its granting of exclusive franchises constitute engaging in intrastate business in this state, and the franchise fees received therefrom are subject to the gross receipts tax. AAMCO Transmissions v. Taxation & Revenue Dep't, 1979-NMCA-092, 93 N.M. 389, 600 P.2d 841, cert. denied, 93 N.M. 205, 598 P.2d 1165 (superceded by statute, Sonic Indus., Inc. v. State, 2000-NMCA-087, 129 N.M. 657, 11 P.3d 1219).

Tax applicable to franchise fees. — The imposition of gross receipts tax on franchise fees received from this state's dealers does not violate the due process clause or commerce clause and is proper since the franchisor is in the business of selling franchises, developing and marketing parts, receiving its primary source of income from the sale of franchises, collecting a percentage of franchisee's gross receipts as a lease payment for use of the trademark and trade name and where its leased trademarks and trade names and their businesses are protected by the laws of this state; thus, franchisor is engaged in business in this state. AAMCO Transmissions v. Taxation & Revenue Dep't, 1979-NMCA-092, 93 N.M. 389, 600 P.2d 841, cert. denied, 93 N.M. 205, 598 P.2d 1165 (superceded by statute, Sonic Indus., Inc. v. State, 2000-NMCA-087, 129 N.M. 657, 11 P.3d 1219).

Foreign corporation's opinions sent to foreign clients not taxable. — Opinions by an Oklahoma corporation concerning subsurface geological formations of the earth's crust beneath New Mexico delivered to clients in Oklahoma and other states were not in intrastate commerce in New Mexico and the income from such opinions was not taxable in New Mexico. Seismograph Serv. Corp. v. Bureau of Revenue, 1956-NMSC-028, 61 N.M. 16, 293 P.2d 977.

Law reviews. — For comment, "Taxation of National Banks: A Novel Approach in the New Mexico Courts," see 10 Nat. Resources J. 615 (1970).

For article, "The Deductibility for Federal Income Tax Purposes of the New Mexico Gross Receipts Tax Paid on the Purchase of a Newly Constructed Home," see 13 N.M.L. Rev. 625 (1983).