SENATE BILL 367

45th legislature - STATE OF NEW MEXICO - first session, 2001

INTRODUCED BY

Manny M. Aragon







AN ACT

RELATING TO TAXATION; ELIMINATING THE GROSS RECEIPTS TAX ON FOOD SOLD AT RETAIL FOOD STORES; ENACTING THE LOCAL OPTION FOOD GROSS RECEIPTS TAX ACT; AMENDING AND ENACTING SECTIONS OF THE NMSA 1978.



BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

Section 1. A new section of the Gross Receipts and Compensating Tax Act is enacted to read:

"[NEW MATERIAL] DEDUCTION--GROSS RECEIPTS--SALES OF FOOD AT RETAIL FOOD STORES.--Receipts from the sale of food at a retail food store may be deducted from gross receipts."

Section 2. [NEW MATERIAL] SHORT TITLE.--Sections 2 through 11 of this act may be cited as the "Local Option Food Gross Receipts Tax Act".

Section 3. [NEW MATERIAL] DEFINITIONS.--As used in the Local Option Food Gross Receipts Tax Act:

A. "county" means a county, including an H class county;

B. "county area" means that portion of a county located outside the boundaries of any municipality, except that for H class counties, "county area" means the entire county;

C. "department" means the taxation and revenue department, the secretary of taxation and revenue or any employee of the department exercising authority lawfully delegated to that employee by the secretary;

D. "engaging in the retail food business" means selling food at a retail food store;

E. "food" means any food or food product for home consumption that meets the definition of food in 7 USCA 2012(g)(1) for purposes of the federal food stamp program;

F. "food gross receipts" means the total amount of money or the value of other consideration received from selling food at a retail food store in New Mexico; "food gross receipts" excludes cash discounts allowed and taken and the municipal food gross receipts tax and the county food gross receipts tax;

G. "governing body of a county" means the board of county commissioners of a county;

H. "governing body of a municipality" means the city council or city commission of a city, the board of trustees of a town or village or the county council or board of county commissioners of an H class county;

I. "municipality" means any incorporated city, town or village, whether incorporated under general act, special act or special charter, and an H class county;

J. "retail food store" means an establishment that sells food for home preparation and consumption that meets the definition of retail food store in 7 USCA 2012(k)(1) for purposes of the federal food stamp program, whether or not the establishment participates in the food stamp program; and

K. "state gross receipts tax" means the gross receipts tax imposed pursuant to the Gross Receipts and Compensating Tax Act.

Section 4. [NEW MATERIAL] IMPOSITION AND RATE OF TAX--DENOMINATION AS MUNICIPAL FOOD GROSS RECEIPTS TAX.--

A. The majority of the members of the governing body of a municipality may impose by ordinance an excise tax on the food gross receipts of a person engaging in the retail food business in the municipality for the privilege of engaging in the retail food business at a rate equal to or less than the aggregate of all local option gross receipts tax rates imposed by the municipality on the gross receipts of a person engaging in business in the municipality for the privilege of engaging in business in the municipality.

B. The tax imposed in Subsection A of this section may be referred to as the "municipal food gross receipts tax".

C. The governing body of the municipality, at the time of enacting an ordinance imposing the tax authorized in Subsection A of this section, may dedicate the revenue for any purpose for which any other municipal local option gross receipts tax has been or may be dedicated or any other specific or general municipal purpose.

D. If any reduction in revenue to a municipality resulting from the deduction from the state gross receipts tax of receipts from the sale of food at retail food stores impairs the ability of the municipality to meet its principal or interest payment obligations for revenue bonds outstanding prior to January 1, 2002 that are secured by the pledge of all or part of the municipality's revenue from any municipal local option gross receipts tax imposed by the municipality, then the municipality shall pledge an amount of revenue from the municipal food gross receipts tax sufficient to meet any such required payment obligations.

Section 5. [NEW MATERIAL] IMPOSITION AND RATE OF TAX--DENOMINATION AS THE COUNTY FOOD GROSS RECEIPTS TAX.--

A. The majority of the members of the governing body of a county may impose by ordinance an excise tax on the food gross receipts of a person engaging in the retail food business in the county area for the privilege of engaging in the retail food business at a rate equal to or less than the aggregate of all local option gross receipts tax rates imposed by the county only on the gross receipts of a person engaging in business in the county area for the privilege of engaging in business in the county area.

B. The majority of the members of the governing body of a county may impose by ordinance an excise tax on the food gross receipts of a person engaging in the retail food business in the county for the privilege of engaging in the retail food business at a rate equal to or less than the aggregate of all local option gross receipts tax rates imposed by the county on the gross receipts of a person engaging in business in the county for the privilege of engaging in business in the county, other than the imposed rates referred to in Subsection A of this section.

C. The taxes imposed in Subsections A and B of this section may be referred to as the "county food gross receipts tax".

D. The governing body of the county, at the time of enacting an ordinance imposing the tax authorized in Subsection A of this section, may dedicate the revenue for any purpose for which any other county local option gross receipts tax has been or may be dedicated or any other specific or general county purpose.

E. If any reduction in revenue to a county resulting from the deduction from the state gross receipts tax of receipts from the sale of food at retail food stores impairs the ability of the county to meet its principal or interest payment obligations for revenue bonds outstanding prior to January 1, 2002 that are secured by the pledge of all or part of the county's revenue from any county local option gross receipts tax imposed by the county, the county shall pledge an amount of revenue from the county food gross receipts tax sufficient to meet any such required payment obligations.

Section 6. [NEW MATERIAL] EFFECTIVE DATE OF ORDINANCE.--An ordinance imposing, amending or repealing a tax or an increment of tax authorized by the Local Option Food Gross Receipts Tax Act shall be effective on July 1 or January 1, whichever date occurs first after the expiration of at least three months from the date the adopted ordinance is mailed or delivered to the department. The ordinance shall include that effective date.

Section 7. [NEW MATERIAL] ORDINANCE SHALL CONFORM TO REQUIREMENTS OF THE DEPARTMENT.--

A. The governing body of any municipality or county imposing a tax pursuant to the Local Option Food Gross Receipts Tax Act shall impose the tax by adopting the model ordinance with respect to the tax furnished to the municipality or county by the department. An ordinance that does not conform substantially to the model ordinance of the department is not valid.

B. A certified copy of the ordinance imposing or repealing a tax authorized pursuant to the Local Option Food Gross Receipts Tax Act or changing the tax rate imposed shall be mailed or delivered to the department within five days after the later of the date the ordinance is adopted or the date the results of any election held with respect to the ordinance are certified to be in favor of the ordinance.

Section 8. [NEW MATERIAL] PRESUMPTION OF TAXABILITY.--To prevent evasion of the municipal or county food gross receipts tax and to aid in its administration, it is presumed that all food gross receipts of a person engaging in the retail food business are subject to the municipal food gross receipts tax or county food gross receipts tax, as applicable.

Section 9. [NEW MATERIAL] DATE PAYMENT DUE.--The municipal food gross receipts tax and the county food gross receipts tax are to be paid to the department on or before the twenty-fifth day of the month following the month in which the taxable event occurs.

Section 10. [NEW MATERIAL] COLLECTION BY DEPARTMENT--TRANSFER OF PROCEEDS.--

A. The department shall collect the tax imposed pursuant to the provisions of the Local Option Food Gross Receipts Tax Act in the same manner and at the same time it collects the state gross receipts tax.

B. The department shall transfer to each municipality and county for which it is collecting a tax pursuant to the provisions of the Local Option Food Gross Receipts Tax Act the amount of the tax collected for the municipality or county. The transfer to the municipality or county shall be made within the month following the month in which the tax is collected.

Section 11. [NEW MATERIAL] INTERPRETATION OF ACT--ADMINISTRATION AND ENFORCEMENT OF ACT.--

A. The department shall interpret the provisions of the Local Option Food Gross Receipts Tax Act.

B. The department shall administer and enforce the collection of the tax authorized pursuant to the provisions of the Local Option Food Gross Receipts Tax Act, and the Tax Administration Act applies to the administration and enforcement of each tax.

Section 12. 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 times the net receipts 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 fair grounds", 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. If any reduction to the distribution pursuant to this section resulting from the enactment of Section 1 of this 2001 act impairs the ability of a municipality to meet its principal or interest payment obligations for revenue bonds outstanding prior to January 1, 2002 that are secured by the pledge of all or part of the municipality's revenue from the distribution made pursuant to this section, the amount distributed pursuant to this section to that municipality shall be increased by an amount sufficient to meet any required payment; provided the revenue from the maximum rate of the municipal food gross receipts tax that the municipality is authorized to impose pursuant to the Local Option Food Gross Receipts Tax Act is not sufficient to meet the obligation and provided that the distribution amount does not exceed the amount that would have been due that municipality pursuant to this section as it was in effect on December 31, 2001."

Section 13. Section 7-9-3 NMSA 1978 (being Laws 1978, Chapter 46, Section 1, as amended by Laws 2000, Chapter 84, Section 1 and also by Laws 2000, Chapter 101, Section 1) is amended to read:

"7-9-3. DEFINITIONS.--As used in the Gross Receipts and Compensating Tax Act:

A. "department" means the taxation and revenue department, the secretary of taxation and revenue or any employee of the department exercising authority lawfully delegated to that employee by the secretary;

B. "buying" or "selling" means any transfer of property for consideration or any performance of service for consideration;

C. "construction" means building, altering, repairing or demolishing in the ordinary course of business any:

(1) road, highway, bridge, parking area or related project;

(2) building, stadium or other structure;

(3) airport, subway or similar facility;

(4) park, trail, athletic field, golf course or similar facility;

(5) dam, reservoir, canal, ditch or similar facility;

(6) sewerage or water treatment facility, power generating plant, pump station, natural gas compressing station, gas processing plant, coal gasification plant, refinery, distillery or similar facility;

(7) sewerage, water, gas or other pipeline;

(8) transmission line;

(9) radio, television or other tower;

(10) water, oil or other storage tank;

(11) shaft, tunnel or other mining appurtenance;

(12) microwave station or similar facility; [or]

(13) retaining wall, wall, fence gate or similar structure; or

[(13)] (14) similar work;

"construction" also means:

[(14)] (15) leveling or clearing land;

[(15)] (16) excavating earth;

[(16)] (17) drilling wells of any type, including seismograph shot holes or core drilling; or

[(17)] (18) similar work;

D. "financial corporation" means any savings and loan association or any incorporated savings and loan company, trust company, mortgage banking company, consumer finance company or other financial corporation;

E. "engaging in business" means carrying on or causing to be carried on any activity with the purpose of direct or indirect benefit, except that:

(1) "engaging in business" does not include having a world wide web site as a third-party content provider on a computer physically located in New Mexico but owned by another nonaffiliated person; and

(2) "engaging in business" does not include using a nonaffiliated third-party call center to accept and process telephone or electronic orders of tangible personal property or licenses primarily from non-New Mexico buyers, which orders are forwarded to a location outside New Mexico for filling;

F. "gross receipts" means the total amount of money or the value of other consideration received from selling property in New Mexico, from leasing property employed in New Mexico, from selling services performed outside New Mexico the product of which is initially used in New Mexico or from performing services in New Mexico. In an exchange in which the money or other consideration received does not represent the value of the property or service exchanged, "gross receipts" means the reasonable value of the property or service exchanged.

(1) "Gross receipts" includes:

(a) any receipts from sales of tangible personal property handled on consignment;

(b) the total commissions or fees derived from the business of buying, selling or promoting the purchase, sale or leasing, as an agent or broker on a commission or fee basis, of any property, service, stock, bond or security;

(c) amounts paid by members of any cooperative association or similar organization for sales or leases of personal property or performance of services by such organization; and

(d) amounts received from transmitting messages or conversations by persons providing telephone or telegraph services.

(2) "Gross receipts" excludes:

(a) cash discounts allowed and taken;

(b) New Mexico gross receipts tax, governmental gross receipts tax and leased vehicle gross receipts tax payable on transactions for the reporting period;

(c) taxes imposed pursuant to the provisions of any local option gross receipts tax that is payable on transactions for the reporting period;

(d) any gross receipts or sales taxes imposed by an Indian nation, tribe or pueblo; provided that the tax is approved, if approval is required by federal law or regulation, by the secretary of the interior of the United States; and provided further that the gross receipts or sales tax imposed by the Indian nation, tribe or pueblo provides a reciprocal exclusion for gross receipts, sales or gross receipts-based excise taxes imposed by the state or its political subdivisions;

(e) any type of time-price differential; and

(f) amounts received solely on behalf of another in a disclosed agency capacity.

(3) When the sale of property or service is made under any type of charge, conditional or time-sales contract or the leasing of property is made under a leasing contract, the seller or lessor may elect to treat all receipts, excluding any type of time-price differential, under such contracts as gross receipts as and when the payments are actually received. If the seller or lessor transfers his interest in any such contract to a third person, the seller or lessor shall pay the gross receipts tax upon the full sale or leasing contract amount, excluding any type of time-price differential;

G. "manufacturing" means combining or processing components or materials to increase their value for sale in the ordinary course of business, but does not include construction;

H. "person" means:

(1) an individual, estate, trust, receiver, cooperative association, club, corporation, company, firm, partnership, limited liability company, limited liability partnership, joint venture, syndicate or other entity, including any gas, water or electric utility owned or operated by a county, municipality or other political subdivision of the state; or

(2) a national, federal, state, Indian or other governmental unit or subdivision, or an agency, department or instrumentality of any of the foregoing;

I. "property" means real property, tangible personal property, licenses, franchises, patents, trademarks and copyrights. Tangible personal property includes electricity and manufactured homes;

J. "leasing" means an arrangement whereby, for a consideration, property is employed for or by any person other than the owner of the property, except that the granting of a license to use property is the sale of a license and not a lease;

K. "service" means all activities engaged in for other persons for a consideration, which activities involve predominantly the performance of a service as distinguished from selling or leasing property. "Service" includes activities performed by a person for its members or shareholders. In determining what is a service, the intended use, principal objective or ultimate objective of the contracting parties shall not be controlling. "Service" includes construction activities and all tangible personal property that will become an ingredient or component part of a construction project. Such tangible personal property retains its character as tangible personal property until it is installed as an ingredient or component part of a construction project in New Mexico. However, sales of tangible personal property that will become an ingredient or component part of a construction project to persons engaged in the construction business are sales of tangible personal property;

L. "use" or "using" includes use, consumption or storage other than storage for subsequent sale in the ordinary course of business or for use solely outside this state;

M. "secretary" means the secretary of taxation and revenue or the secretary's delegate;

N. "manufactured home" means a movable or portable housing structure for human occupancy that exceeds either a width of eight feet or a length of forty feet constructed to be towed on its own chassis and designed to be installed with or without a permanent foundation;

O. "initial use" or "initially used" means the first employment for the intended purpose and does not include the following activities:

(1) observation of tests conducted by the performer of services;

(2) participation in progress reviews, briefings, consultations and conferences conducted by the performer of services;

(3) review of preliminary drafts, drawings and other materials prepared by the performer of the services;

(4) inspection of preliminary prototypes developed by the performer of services; or

(5) similar activities;

P. "research and development services" means an activity engaged in for other persons for consideration, for one or more of the following purposes:

(1) advancing basic knowledge in a recognized field of natural science;

(2) advancing technology in a field of technical endeavor;

(3) the development of a new or improved product, process or system with new or improved function, performance, reliability or quality, whether or not the new or improved product, process or system is offered for sale, lease or other transfer;

(4) the development of new uses or applications for an existing product, process or system, whether or not the new use or application is offered as the rationale for purchase, lease or other transfer of the product, process or system;

(5) analytical or survey activities incorporating technology review, application, trade-off study, modeling, simulation, conceptual design or similar activities, whether or not offered for sale, lease or other transfer; or

(6) the design and development of prototypes or the integration of systems incorporating advances, developments or improvements included in Paragraphs (1) through (5) of this subsection;

Q. "local option gross receipts tax" means a tax authorized to be imposed by a county or municipality upon the taxpayer's gross receipts and required to be collected by the department at the same time and in the same manner as the gross receipts tax; "local option gross receipts tax" includes the taxes imposed pursuant to the Municipal Local Option Gross Receipts Taxes Act, Supplemental Municipal Gross Receipts Tax Act, County Local Option Gross Receipts Taxes Act, Local Hospital Gross Receipts Tax Act, County Correctional Facility Gross Receipts Tax Act and such other acts as may be enacted authorizing counties or municipalities to impose taxes on gross receipts, which taxes are to be collected by the department; [and]

R. "prescription drugs" means insulin and substances that are:

(1) dispensed by or under the supervision of a licensed pharmacist or by a physician or other person authorized under state law to do so;

(2) prescribed for a specified person by a person authorized under state law to prescribe the substance; and

(3) subject to the restrictions on sale contained in Subparagraph 1 of Subsection (b) of 21 USCA 353;

S. "food" means any food or food product for home consumption that meets the definition of food in 7 USCA 2012(g)(1) for purposes of the federal food stamp program; and

T. "retail food store" means an establishment that sells food for home preparation and consumption that meets the definition of "retail food store" in 7 USCA 2012(k)(1) for purposes of the federal food stamp program, whether or not the establishment participates in the food stamp program.

Section 14. EFFECTIVE DATE.--

A. The effective date of the provisions of Sections 2 through 11 of this act is July 1, 2001.

B. The effective date of the provisions of Sections 1 and 13 of this act is January 1, 2002.

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