A. Receipts from selling tangible personal property may be deducted from gross receipts or from governmental gross receipts if the sale is made to a person engaged in the business of manufacturing who delivers a nontaxable transaction certificate to the seller or provides alternative evidence pursuant to Section 7-9-43 NMSA 1978. The buyer must incorporate the tangible personal property as an ingredient or component part of the product that the buyer is in the business of manufacturing.
B. Receipts from selling tangible personal property that is a consumable and used in such a way that it is consumed in the manufacturing process of a product, provided that the tangible personal property is not a tool or equipment used to create the manufactured product, to a person engaged in the business of manufacturing that product and who delivers a nontaxable transaction certificate or provides alternative evidence pursuant to Section 7-9-43 NMSA 1978 to the seller may be deducted from gross receipts or from governmental gross receipts.
C. Regarding the deduction allowed pursuant to Subsection B of this section, a nontaxable transaction certificate is required if the seller is a seller of electricity or fuel and is a party to an agreement with the department pursuant to Section 7-1-21.1 NMSA 1978.
D. The purpose of the deductions provided in this section is to encourage manufacturing businesses to locate in New Mexico and to reduce the tax burden, including reducing pyramiding, on the tangible personal property that is consumed in the manufacturing process and that is purchased by manufacturing businesses in New Mexico.
E. The department shall annually report to the revenue stabilization and tax policy committee the aggregate amount of deductions taken pursuant to this section, the number of taxpayers claiming each of the deductions and any other information that is necessary to determine that the deductions are performing the purposes for which they are enacted.
F. A taxpayer deducting gross receipts pursuant to this section shall report the amount deducted separately for each deduction provided in this section and attribute the amount of the deduction to the appropriate authorization provided in this section in a manner required by the department that facilitates the evaluation by the legislature of the benefit to the state of these deductions.
G. As used in Subsection B of this section, "consumable" means tangible personal property that is incorporated into, destroyed, depleted or transformed in the process of manufacturing a product:
(1) including electricity, fuels, water, manufacturing aids and supplies, chemicals, gases, repair parts, spares and other tangibles used to manufacture a product; but
(2) excluding tangible personal property used in:
(a) the generation of power;
(b) the processing of natural resources, including hydrocarbons; and
(c) the preparation of meals for immediate consumption on- or off-premises.
History: 1953 Comp., § 72-16A-14.1, enacted by Laws 1969, ch. 144, § 36; 1992, ch. 100, § 4; 2012, ch. 5, § 4; 2013, ch. 160, § 9; 2021, ch. 65, § 13; 2021, ch. 66, § 2.
2021 Multiple Amendments. — Laws 2021, ch. 65, § 13, effective July 1, 2021, and Laws 2021, ch. 66, § 2, effective January 1, 2022, enacted different amendments to this section that cannot be reconciled. Laws 2021, ch. 65, § 13, effective July 1, 2021, is set out above. The provisions of Laws 2021, ch. 66, § 2, become effective January 1, 2022. See section that follows.
Laws 2021, ch. 65, § 13 [set out above], effective July 1, 2021, provided that a taxpayer may provide the taxation and revenue department alternative evidence to claim a gross receipts tax deduction in lieu of providing a non-taxable transaction certificate, and provided that a nontaxable transaction certificate is required if the seller is a seller of electricity or fuel and is a party to an agreement with the department pursuant to a certain section of law; in Subsection A, after "certificate to the seller", added "or provides alternative evidence pursuant to Section 7-9-43 NMSA 1978", and after "The buyer", deleted "delivering the nontaxable transaction certificate"; in Subsection B, in the introductory paragraph, after "certificate", added "or provides alternative evidence pursuant to Section 7-9-43 NMSA 1978", and after "deducted", deleted "in the following percentages", and deleted former Paragraphs B(1) through B(5); and added a new Subsection C and redesignated former Subsections C through F as Subsections D through G, respectively.
The 2013 amendment, effective July 1, 2013, provided a definition of "consumable" for purposes of the deduction of receipts from sales to manufacturers; in Subsection B, in the introductory sentence, after "tangible personal property that is", added "a consumable and"; and added Subsection F.
Applicability. — Laws 2013, ch. 160, § 14 provided that Laws 2013, ch. 160, § 9 applies to gross receipts received on or after July 1, 2013.
The 2012 amendment, effective January 1, 2013, provided a deduction for receipts from selling tangible personal property that is consumed in the manufacturing process of a product and added Paragraphs B, C, D and E.
The 1992 amendment, effective July 1, 1992, inserted "governmental gross receipts" in the section heading; inserted "or from governmental gross receipts" in the first sentence; and substituted "that" for "which" in the second sentence.
Entitlement to manufacturing deduction not found. — A biotechnology company whose expertise was in the diagnosis of genetic disorders that could be detected through the appearance of chromosomes, and who produced tangible objects that were provided to its customers, such as a written report of its experts' diagnosis and a laminated karyotype, which consisted of photographs of chromosomes that were numbered and pasted onto a piece of laminated cardboard, did not establish its entitlement to a manufacturing deduction, since the company could not identify any out-of-state purchases that would be subject to the compensating tax of products incorporated into its reports or laminated karyotypes. The department, whose assessment is assumed correct, had identified as subject to the compensating tax such items as microscopes, sinks, and furniture, which undoubtedly were not incorporated into the documents or laminated karyotypes. Vivigen, Inc. v. Minzner, 1994-NMCA-027, 117 N.M. 224, 870 P.2d 1382.
Am. Jur. 2d, A.L.R. and C.J.S. references. — Sales or use tax upon containers or packaging materials purchased by manufacturer or processor for use with goods he distributes, 4 A.L.R.4th 581.
Items or materials exempt from use tax as becoming component part or ingredient of manufactured or processed article, 89 A.L.R.5th 493.
Structure 2021 New Mexico Statutes
Article 9 - Gross Receipts and Compensating Tax
Section 7-9-3 - Definitions. (Effective January 1, 2022.)
Section 7-9-3.2 - Additional definition.
Section 7-9-3.3 - Definition; engaging in business.
Section 7-9-3.5 - Definition; gross receipts.
Section 7-9-4 - Imposition and rate of tax; denomination as "gross receipts tax".
Section 7-9-4.3 - Imposition and rate of tax; denomination as "governmental gross receipts tax".
Section 7-9-5 - Presumption of taxability.
Section 7-9-6 - Separately stating the gross receipts tax.
Section 7-9-7 - Imposition and rate of tax; denomination as "compensating tax".
Section 7-9-7.2 - Authority to establish standards for certified service providers.
Section 7-9-8 - Presumption of taxability and value.
Section 7-9-9 - Liability of user for payment of compensating tax.
Section 7-9-10 - Agents for collection of compensating tax; duties.
Section 7-9-11 - Date payment due.
Section 7-9-13 - Exemption; gross receipts tax; governmental agencies.
Section 7-9-13.1 - Exemption; gross receipts tax; certain services.
Section 7-9-14 - Exemption; compensating tax; governmental agencies; Indians.
Section 7-9-15 - Exemption; compensating tax; certain organizations.
Section 7-9-16 - Exemption; gross receipts tax; certain nonprofit facilities.
Section 7-9-17 - Exemption; gross receipts tax; wages.
Section 7-9-18.1 - Exemption; gross receipts tax; food stamps.
Section 7-9-19 - Exemption; gross receipts tax; livestock feeding.
Section 7-9-20 - Exemption; gross receipts tax; certain receipts of homeowners associations.
Section 7-9-22 - Exemption; gross receipts tax; vehicles.
Section 7-9-22.1 - Exemption; gross receipts tax; boats.
Section 7-9-23 - Exemption; compensating tax; vehicles.
Section 7-9-23.1 - Exemption; compensating tax; boats.
Section 7-9-24 - Exemption; gross receipts tax; insurance companies.
Section 7-9-25 - Exemption; gross receipts tax; dividends and interest.
Section 7-9-26 - Exemption; gross receipts and compensating tax; fuel.
Section 7-9-26.1 - Exemption; gross receipts tax and compensating tax; fuel for space vehicles.
Section 7-9-27 - Exemption; compensating tax; personal effects.
Section 7-9-28 - Exemption; gross receipts tax; occasional sale of property or services.
Section 7-9-29 - Exemption; gross receipts tax; certain organizations; exceptions.
Section 7-9-30 - Exemption; compensating tax; railroad equipment, aircraft and space vehicles.
Section 7-9-32 - Exemption; gross receipts tax; oil and gas or mineral interests.
Section 7-9-38.1 - Exemption; gross receipts tax; interstate telecommunications services.
Section 7-9-38.2 - Exemption; gross receipts tax; sale of certain telecommunications services.
Section 7-9-39 - Exemption; gross receipts tax; fees from social organizations.
Section 7-9-41 - Exemption; gross receipts tax; religious activities.
Section 7-9-41.3 - Exemption; receipts from sales by disabled street vendors.
Section 7-9-41.5 - Exemption; nonprofit hospitals from local option gross receipts taxes.
Section 7-9-43.1 - Nontaxable transaction certificates not required by liquor wholesalers.
Section 7-9-46 - Deduction; gross receipts tax; governmental gross receipts; sales to manufacturers.
Section 7-9-50 - Deduction; gross receipts tax; lease for subsequent lease.
Section 7-9-54.4 - Deduction; compensating tax; space-related test articles.
Section 7-9-54.5 - Deduction; compensating tax; test articles.
Section 7-9-56.1 - Deduction; gross receipts tax; internet services.
Section 7-9-56.2 - Deduction; gross receipts tax; hosting world wide web sites.
Section 7-9-56.3 - Deduction; gross receipts; trade-support company in a border zone.
Section 7-9-57 - Deduction; gross receipts tax; sale of certain services to an out-of-state buyer.
Section 7-9-57.2 - Deduction; gross receipts tax; sale of software development services.
Section 7-9-58 - Deduction; gross receipts tax; feed; fertilizers.
Section 7-9-61.1 - Deduction; gross receipts tax; certain receipts.
Section 7-9-61.2 - Deduction; receipts from sales to state-chartered credit unions.
Section 7-9-63 - Deduction; gross receipts tax; publication sales.
Section 7-9-64 - Deduction; gross receipts tax; newspaper sales.
Section 7-9-65 - Deduction; gross receipts tax; chemicals and reagents.
Section 7-9-66 - Deduction; gross receipts tax; commissions.
Section 7-9-66.1 - Deduction; gross receipts tax; certain real estate transactions.
Section 7-9-68 - Deduction; gross receipts tax; warranty obligations.
Section 7-9-69 - Deduction; gross receipts tax; administrative and accounting services.
Section 7-9-71 - Deduction; gross receipts tax; trade-in allowance.
Section 7-9-73.1 - Deduction; gross receipts; governmental gross receipts; hospitals.
Section 7-9-74 - Deduction; gross receipts tax; sale of property used in the manufacture of jewelry.
Section 7-9-76 - Deduction; gross receipts tax; travel agents' commissions paid by certain entities.
Section 7-9-76.1 - Deduction; gross receipts tax; certain manufactured homes.
Section 7-9-76.2 - Deduction; gross receipts tax; films and tapes.
Section 7-9-77 - Deductions; compensating tax.
Section 7-9-77.1 - Deduction; gross receipts tax; certain medical and health care services.
Section 7-9-78 - Deductions; compensating tax; use of tangible personal property for leasing.
Section 7-9-78.1 - Deduction; compensating tax; uranium enrichment plant equipment.
Section 7-9-79 - Credit; compensating tax.
Section 7-9-79.1 - Credit; gross receipts tax; services.
Section 7-9-79.2 - Gross receipts tax; compensating tax; biodiesel blending facility tax credit.
Section 7-9-83 - Deduction; gross receipts tax; jet fuel.
Section 7-9-84 - Deduction; compensating tax; jet fuel.
Section 7-9-85 - Deduction; gross receipts tax; certain organization fundraisers.
Section 7-9-86 - Deduction; gross receipts tax; sales to qualified film production company.
Section 7-9-87 - Deduction; gross receipts tax; lottery retailer receipts.
Section 7-9-88.1 - Credit; gross receipts tax; tax paid to certain tribes.
Section 7-9-92 - Deduction; gross receipts; sale of food at retail food store.
Section 7-9-94 - Deduction; gross receipts; military transformational acquisition programs.
Section 7-9-96.2 - Credit; gross receipts tax; unpaid charges for services provided in a hospital.
Section 7-9-98 - Deduction; compensating tax; biomass-related equipment; biomass materials.
Section 7-9-103.1 - Deduction; gross receipts tax; converting electricity.
Section 7-9-103.2 - Deduction; gross receipts; electricity exchange.
Section 7-9-105 - Credit for penalty pursuant to Section 7-1-71.2 NMSA 1978 [repealed].
Section 7-9-106 - Deduction; construction services and equipment.
Section 7-9-107 - Deduction; gross receipts tax; production or staging of professional contests.
Section 7-9-110.1 - Deduction; gross receipts tax; locomotive engine fuel.
Section 7-9-110.2 - Deduction; compensating tax; locomotive engine fuel.
Section 7-9-110.3 - Purpose and requirements of locomotive fuel deduction.
Section 7-9-111 - Deduction; gross receipts; hearing aids and vision aids and related services.
Section 7-9-112 - Deduction; gross receipts; solar energy systems.
Section 7-9-114 - Advanced energy deduction; gross receipts and compensating taxes.
Section 7-9-116 - Deduction; gross receipts tax; retail sales by certain businesses.
Section 7-9-117 - Deduction; gross receipts; governmental gross receipts; marketplace seller.
Section 7-9-118 - Deduction; gross receipts; food or beverage establishments.
Section 7-9-119 - Deduction; sales made by dispenser's license holder.