A. Except as provided in Subsection B of this section, a person may establish entitlement to a deduction from gross receipts allowed pursuant to the Gross Receipts and Compensating Tax Act by obtaining a properly executed nontaxable transaction certificate from the purchaser. Nontaxable transaction certificates shall contain the information and be in a form prescribed by the department. The department by regulation may deem to be nontaxable transaction certificates documents issued by other states or the multistate tax commission to taxpayers not required to be registered in New Mexico. Only buyers or lessees who have a registration number or have applied for a registration number and have not been refused one under Subsection C of Section 7-1-12 NMSA 1978 shall execute nontaxable transaction certificates issued by the department. If the seller or lessor has been given an identification number for tax purposes by the department, the seller or lessor shall disclose that identification number to the buyer or lessee prior to or upon acceptance of a nontaxable transaction certificate.

B. Except as provided in Subsection C of this section, a person who does not comply with Subsection A of this section may establish entitlement to a deduction from gross receipts by presenting alternative evidence that demonstrates the facts necessary to support entitlement to the deduction, but the burden of proof is on that person. Alternative evidence includes:

(1) invoices or contracts that identify the nature of the transaction;

(2) documentation as to the purchaser's use or disposition of the property or service;

(3) a statement from the purchaser indicating that the purchaser sold or intends to resell the property or service purchased from the seller, either by itself or in combination with other property or services, in the ordinary course of business. The statement from the purchaser shall include:

(a) the seller's name;

(b) the date of the invoice or date of the transaction;

(c) the invoice number or a copy of the invoice;

(d) a copy of the purchase order, if available;

(e) the amount of purchase; and

(f) a description of the property or service purchased or leased; or

(4) any other evidence that demonstrates the facts necessary to establish entitlement to the deduction.

C. Subsection B of this section does not apply to sellers of electricity or fuels that are parties to an agreement with the department pursuant to Section 7-1-21.1 NMSA 1978 regarding the deduction pursuant to Subsection B of Section 7-9-46 NMSA 1978.

D. When a person accepts in good faith a properly executed nontaxable transaction certificate from the purchaser, the properly executed nontaxable transaction certificate shall be conclusive evidence that the proceeds from the transaction are deductible from the person's gross receipts.

E. To exercise the privilege of executing appropriate nontaxable transaction certificates, a buyer or lessee shall apply to the department for permission to execute nontaxable transaction certificates, except with respect to documents issued by other states or the multistate tax commission that the department has deemed to be nontaxable transaction certificates.

F. If a person has accepted in good faith a properly executed nontaxable transaction certificate, but the purchaser has not employed the property or service purchased in the nontaxable manner or has provided materially false or inaccurate information on the nontaxable transaction certificate, the purchaser shall be liable for an amount equal to any tax, penalty and interest that the seller would have been required to pay if the seller had not complied with Subsection A of this section.

G. Any person who knowingly or willfully provides false or inaccurate information on a nontaxable transaction certificate or as alternative evidence provided in support of a claim for a deduction may be subject to prosecution under Sections 7-1-72 and 7-1-73 NMSA 1978.

History: 1953 Comp., § 72-16A-13, enacted by Laws 1966, ch. 47, § 13; 1969, ch. 144, § 33; 1973, ch. 219, § 1; 1983, ch. 220, § 7; 1990, ch. 41, § 6; 1991, ch. 9, § 29; 1992, ch. 39, § 3; 1993, ch. 31, § 9; 1994, ch. 94, § 1; 1994, ch. 98, § 1; 1997, ch. 72, § 1; 1998, ch. 89, § 3; 2001, ch. 332, § 1; 2003, ch. 330, § 1; 2005, ch. 12, § 1; 2011, ch. 148, § 1; 2018, ch. 56, § 1.

The 2018 amendment, effective March 2, 2018, provided for alternative evidence other than a nontaxable transaction certificate to entitle persons to a deduction from gross receipts tax, which may include invoices or contracts that identify the nature of the transaction, documentation as to the purchaser's use or disposition of the property or service, a statement from the purchaser indicating that the purchaser sold or intends to resell the property or service purchased from the seller, either by itself or in combination with other property or services, in the ordinary course of business, or other evidence that demonstrates the facts necessary to establish entitlement to the deduction; in Subsection A, deleted "All nontaxable transaction certificates of the appropriate series executed by buyers or lessees should be in the possession of the seller or lessor for nontaxable transactions at the time the return is due for receipts from the transaction. If the seller or lessor is not in possession of the required nontaxable transaction certificates within sixty days from the date that the notice requiring possession of these nontaxable transaction certificates is given the seller or lessor by the department, deductions claimed by the seller or lessor that require delivery of these nontaxable transaction certificates shall be disallowed except as provided in Subsection E of this section. The" and added "Except as provided in Subsection B of this section, a person may establish entitlement to a deduction from gross receipts allowed pursuant to the Gross Receipts and Compensating Tax Act by obtaining a properly executed nontaxable transaction certificate from the purchaser"; added new Subsections B and C; added new subsection designation "D"; in Subsection D, after "When", deleted "the seller or lessor" and added "a person", after "accepts", added "in good faith", after "a", added "properly executed", after the first occurrence of "nontaxable transaction certificate", deleted "within the required time and in good faith that the buyer or lessee will employ the property or service transferred in a nontaxable manner" and added "from the purchaser", and after "deductible from the", deleted "seller's or lessor's" and added "person's"; deleted former Subsections B and C and redesignated former Subsection D as Subsection E; in Subsection E, after "nontaxable transaction certificates.", deleted the remainder of the subsection; and deleted former Subsection E and added Subsections F and G.

The 2011 amendment, effective April 7, 2011, added Subsection E to permit the secretary to accept evidence other than a nontaxable transaction certificate to support a deduction from gross receipts for the sale of tangible personal property or licenses.

The 2005 amendment, effective March 15, 2005, deleted Subsection D, eliminating the requirement that a new series of nontaxable transaction certificates be issued for twelve-year periods. Former Subsection E is now Subsection D.

The 2003 amendment, effective June 20, 2003, in Subsection D substituted "January 1, 2005" for "January 1, 1992" three times, substituted "December 31, 2004" for "December 31, 1991" following "transactions after" at the end of the first sentence, substituted "2005" for "1992" following "calendar year" at the end of the second sentence, and inserted "except the nontaxable transaction certificates issued by the department for the period January 1, 1992 to December 31, 2001 may be executed by buyers or lessees for transactions occurring prior to December 31, 2004" following "that twelve-year period" at the end of the third sentence; in Subsection E, inserted "or to have a non-filed period" following "delinquent taxpayer" near the beginning of the second sentence, inserted "has filed returns for all non-filed periods and" following "until the person" near the middle of the second sentence, inserted "or to have a non-filed period" following "delinquent taxpayer" near the middle of the third sentence, inserted "has filed returns for all non-filed periods and" following "until the person" near the end of the third sentence, deleted "annually" following "report to the department" near the middle of the fifth sentence, and deleted "annually" following "report to the department" near the middle of the sixth sentence.

The 2001 amendment, effective July 1, 2001, in Subsection D, converted the former "ten-year period" to a "twelve-year period" throughout the subsection.

The 1991 amendment, effective June 14, 1991, in the section heading, deleted "farmers' and ranchers' statements" following "certificates" and added "Fee - Renewal" at the end; added "Subject to the provisions of Subsection D of this section" at the beginning of Subsection A; and added Subsection D.

Execution of certificate. — This section makes clear that only the buyer, who has or had applied for a registration number, may execute a nontaxable transaction certificate. House of Carpets, Inc., v. Bureau of Revenue, 1973-NMCA-034, 84 N.M. 747, 507 P.2d 1078.

Liability for payment of tax. — Where a nontaxable transaction certificate has been properly delivered to a seller of service for resale, only the reseller of the service is liable for payment of the gross receipts tax. House of Carpets, Inc., v. Bureau of Revenue, 1973-NMCA-034, 84 N.M. 747, 507 P.2d 1078.

Taxable transaction not transformed by "nontaxable transaction certificate". — Issuance of a "nontaxable transaction certificate" does not operate to transform an otherwise taxable transaction into a nontaxable transaction. Gas Co. v. O'Cheskey, 1980-NMCA-085, 94 N.M. 630, 614 P.2d 547.

Commissioner (now department) has authority to issue regulations interpreting and exemplifying statutes concerning the possession of nontaxable transaction certificates and he also has such authority as may be fairly implied from the statutory authorization. Rainbo Baking Co. v. Commissioner of Revenue, 1972-NMCA-139, 84 N.M. 303, 502 P.2d 406.

Words "properly executed" are used in this section in the sense of completing - filling out and signing - the nontaxable transaction certificates. Leaco Rural Tel. Coop., Inc. v. Bureau of Revenue, 1974-NMCA-076, 86 N.M. 629, 526 P.2d 426.

Taxpayer not liable if certificates incorrectly issued. — Although receipts from transactions involving telephone service to schools, churches, police departments, fire departments and the like were not properly deductible in the first instance because the transactions were not sales of tangible personal property, nevertheless, when the telephone company accepted the nontaxable transaction certificates in compliance with this section, the deductions authorized thereby applied and protected the company from tax liability on receipts from those transactions, regardless of the propriety or impropriety of the certificates' issuance. Leaco Rural Tel. Coop., Inc. v. Bureau of Revenue, 1974-NMCA-076, 86 N.M. 629, 526 P.2d 426.

Reliance on certificates improper following change in law. — This section protects a taxpayer when the purchaser who provided the nontaxable transaction certificates (NTTC) has failed to live up to the promise that the actual transaction was nontaxable. However, it does not protect taxpayers from changes in the law that render formerly nontaxable transactions taxable. Indeed, a taxpayer has an affirmative duty to keep informed about changes in the tax law affecting liability and cannot escape tax liability for transactions based on NTTCs issued before a change in the law rendered the NTTCs invalid for those transactions. Arco Materials, Inc. v. State Taxation & Revenue Dep't, 1994-NMCA-062, 118 N.M. 12, 878 P.2d 330, rev'd on other grounds sub nom. Blaze Constr. Co. v. Taxation & Revenue Dep't, 1994-NMSC-110, 118 N.M. 647, 884 P.2d 803, cert. denied, 514 U.S. 1016, 115 S. Ct. 1359, 131 L. Ed. 2d 216 (1995).

Certificate inapplicable to in-state ambulance receipts. — A nontaxable transaction certificate accepted by a taxpayer who will make initial use of the product or service outside of this state does not apply to receipts from the taxpayer's in-state ambulance service. McKinley Ambulance Serv. v. Bureau of Revenue, 1979-NMCA-026, 92 N.M. 599, 592 P.2d 515.