HOUSE BILL 579

54th legislature - STATE OF NEW MEXICO - first session, 2019

INTRODUCED BY

Jason C. Harper and Carlos R. Cisneros

AN ACT

RELATING TO TAXATION; CREATING A DEPENDENT DEDUCTION PURSUANT TO THE INCOME TAX ACT; AMENDING THE UNIFORM DIVISION OF INCOME FOR TAX PURPOSES ACT TO DETERMINE IN-STATE SALES OF INTANGIBLES AND SERVICES BASED ON MARKET SOURCING RATHER THAN COST OF PERFORMANCE; PROVIDING FOR TAXATION OF CERTAIN INTERNET SELLERS AND MARKETPLACE PROVIDERS PURSUANT TO THE GROSS RECEIPTS AND COMPENSATING TAX ACT; ADDING AND AMENDING DEFINITIONS PURSUANT TO THAT ACT; AMENDING SOURCING RULES FROM THE PLACE OF BUSINESS OF THE SELLER TO DESTINATION-BASED SOURCING; INCREASING THE COMPENSATING TAX ON SERVICES; PROHIBITING CLASS ACTION SUITS AGAINST A MARKETPLACE PROVIDER FOR TAX OVERPAYMENTS; AMENDING A GROSS RECEIPTS TAX EXEMPTION FOR NONPROFITS AND A DEDUCTION FOR MANUFACTURERS; CREATING A DEDUCTION FOR MARKETPLACE SELLERS; AMENDING APPORTIONMENT OF BUSINESS INCOME PROVISIONS; IMPOSING A MUNICIPAL COMPENSATING TAX AND A COUNTY COMPENSATING TAX; AMENDING, REPEALING AND ENACTING SECTIONS OF THE NMSA 1978; MAKING AN APPROPRIATION.

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

     SECTION 1. Section 7-1-2 NMSA 1978 (being Laws 1965, Chapter 248, Section 2, as amended) is amended to read:

     "7-1-2. APPLICABILITY.--The Tax Administration Act applies to and governs:

          A. the administration and enforcement of the following taxes or tax acts as they now exist or may hereafter be amended:

                (1) Income Tax Act;

                (2) Withholding Tax Act;

                (3) [Venture Capital Investment] Oil and Gas Proceeds and Pass-Through Entity Withholding Tax Act;

                (4) Gross Receipts and Compensating Tax Act, Interstate Telecommunications Gross Receipts Tax Act and [any state gross receipts tax] Leased Vehicle Gross Receipts Tax Act;

                (5) Liquor Excise Tax Act;

                (6) Local Liquor Excise Tax Act;

                (7) any municipal local option gross receipts tax or municipal compensating tax;

                (8) any county local option gross receipts tax or county compensating tax;

                (9) Special Fuels Supplier Tax Act;

                (10) Gasoline Tax Act;

                (11) petroleum products loading fee, which fee shall be considered a tax for the purpose of the Tax Administration Act;

                (12) Alternative Fuel Tax Act;

                (13) Cigarette Tax Act;

                (14) Estate Tax Act;

                (15) Railroad Car Company Tax Act;

                (16) Investment Credit Act, rural job tax credit, Laboratory Partnership with Small Business Tax Credit Act, Technology Jobs and Research and Development Tax Credit Act, Film Production Tax Credit Act, Affordable Housing Tax Credit Act and high-wage jobs tax credit;

                (17) Corporate Income and Franchise Tax Act;

                (18) Uniform Division of Income for Tax Purposes Act;

                (19) Multistate Tax Compact;

                (20) Tobacco Products Tax Act; and

                (21) the telecommunications relay service surcharge imposed by Section 63-9F-11 NMSA 1978, which surcharge shall be considered a tax for the purposes of the Tax Administration Act;

          B. the administration and enforcement of the following taxes, surtaxes, advanced payments or tax acts as they now exist or may hereafter be amended:

                (1) Resources Excise Tax Act;

                (2) Severance Tax Act;

                (3) any severance surtax;

                (4) Oil and Gas Severance Tax Act;

                (5) Oil and Gas Conservation Tax Act;

                (6) Oil and Gas Emergency School Tax Act;

                (7) Oil and Gas Ad Valorem Production Tax Act;

                (8) Natural Gas Processors Tax Act;

                (9) Oil and Gas Production Equipment Ad Valorem Tax Act;

                (10) Copper Production Ad Valorem Tax Act;

                (11) any advance payment required to be made by any act specified in this subsection, which advance payment shall be considered a tax for the purposes of the Tax Administration Act;

                (12) Enhanced Oil Recovery Act;

                (13) Natural Gas and Crude Oil Production Incentive Act; and

                (14) intergovernmental production tax credit and intergovernmental production equipment tax credit;

          C. the administration and enforcement of the following taxes, surcharges, fees or acts as they now exist or may hereafter be amended:

                (1) Weight Distance Tax Act;

                (2) the workers' compensation fee authorized by Section 52-5-19 NMSA 1978, which fee shall be considered a tax for purposes of the Tax Administration Act;

                (3) Uniform Unclaimed Property Act (1995);

                (4) 911 emergency surcharge and the network and database surcharge, which surcharges shall be considered taxes for purposes of the Tax Administration Act;

                (5) the solid waste assessment fee authorized by the Solid Waste Act, which fee shall be considered a tax for purposes of the Tax Administration Act;

                (6) the water conservation fee imposed by Section 74-1-13 NMSA 1978, which fee shall be considered a tax for the purposes of the Tax Administration Act; and

                (7) the gaming tax imposed pursuant to the Gaming Control Act; and

          D. the administration and enforcement of all other laws, with respect to which the department is charged with responsibilities pursuant to the Tax Administration Act, but only to the extent that the other laws do not conflict with the Tax Administration Act."

     SECTION 2. Section 7-1-3 NMSA 1978 (being Laws 1965, Chapter 248, Section 3, as amended) is amended to read:

     "7-1-3. DEFINITIONS.--Unless the context clearly indicates a different meaning, the definitions of words and phrases as they are stated in this section are to be used, and whenever in the Tax Administration Act these words and phrases appear, the singular includes the plural and the plural includes the singular:

          A. "automated clearinghouse transaction" means an electronic credit or debit transmitted through an automated clearinghouse payable to the state treasurer and deposited with the fiscal agent of New Mexico;

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

          C. "electronic payment" means a payment made by automated clearinghouse deposit, any funds wire transfer system or a credit card, debit card or electronic cash transaction through the internet;

          D. "employee of the department" means any employee of the department, including the secretary, or any person acting as agent or authorized to represent or perform services for the department in any capacity with respect to any law made subject to administration and enforcement under the provisions of the Tax Administration Act;

          E. "financial institution" means any state or federally chartered, federally insured depository institution;

          F. "hearing officer" means a person who has been designated by the chief hearing officer to serve as a hearing officer and who is:

                (1) the chief hearing officer;

                (2) an employee of the administrative hearings office; or

                (3) a contractor of the administrative hearings office;

          G. "Internal Revenue Code" means the Internal Revenue Code of 1986, as that code may be amended or its sections renumbered;

          H. "levy" means the lawful power, hereby invested in the secretary, to take into possession or to require the present or future surrender to the secretary or the secretary's delegate of any property or rights to property belonging to a delinquent taxpayer;

          I. "local option gross receipts tax" means a tax authorized to be imposed by a county or municipality upon [the] a taxpayer's gross receipts, as that term is defined in the Gross Receipts and Compensating Tax Act, 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 and 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 in the same time and in the same manner as it collects the gross receipts tax;]

          J. "managed audit" means a review and analysis conducted by a taxpayer under an agreement with the department to determine the taxpayer's compliance with a tax administered pursuant to the Tax Administration Act and the presentation of the results to the department for assessment of tax found to be due;

          K. "net receipts" means the total amount of money paid by taxpayers to the department in a month pursuant to a tax or tax act less any refunds disbursed in that month with respect to that tax or tax act;

          L. "overpayment" means an amount paid, pursuant to any law subject to administration and enforcement under the provisions of the Tax Administration Act, by a person to the department or withheld from the person in excess of tax due from the person to the state at the time of the payment or at the time the amount withheld is credited against tax due;

          M. "paid" includes the term "paid over";

          N. "pay" includes the term "pay over";

          O. "payment" includes the term "payment over";

          P. "person" means any individual, estate, trust, receiver, cooperative association, club, corporation, company, firm, partnership, limited liability company, limited liability partnership, joint venture, syndicate, other association or gas, water or electric utility owned or operated by a county or municipality; "person" also means, to the extent permitted by law, a federal, state or other governmental unit or subdivision, or an agency, department or instrumentality thereof; and "person", as used in Sections 7-1-72 through 7-1-74 NMSA 1978, also includes an officer or employee of a corporation, a member or employee of a partnership or any individual who, as such, is under a duty to perform any act in respect of which a violation occurs;

          Q. "property" means property or rights to property;

          R. "property or rights to property" means any tangible property, real or personal, or any intangible property of a taxpayer;

          S. "return" means any tax or information return, application or form, declaration of estimated tax or claim for refund, including any amendments or supplements to the return, required or permitted pursuant to a law subject to administration and enforcement pursuant to the Tax Administration Act and filed with the secretary or the secretary's delegate by or on behalf of any person;

          T. "return information" means a taxpayer's name, address, government-issued identification number and other identifying information; any information contained in or derived from a taxpayer's return; any information with respect to any actual or possible administrative or legal action by an employee of the department concerning a taxpayer's return, such as audits, managed audits, denial of credits or refunds, assessments of tax, penalty or interest, protests of assessments or denial of refunds or credits, levies or liens; or any other information with respect to a taxpayer's return or tax liability that was not obtained from public sources or that was created by an employee of the department; but "return information" does not include statistical data or other information that cannot be associated with or directly or indirectly identify a particular taxpayer;

          U. "secretary" means the secretary of taxation and revenue and, except for purposes of Subsection B of Section 7-1-4 NMSA 1978, also includes the deputy secretary or a division director or deputy division director delegated by the secretary;

          V. "secretary or the secretary's delegate" means the secretary or any employee of the department exercising authority lawfully delegated to that employee by the secretary;

          W. "security" means money, property or rights to property or a surety bond;

          X. "state" means any state of the United States, the District of Columbia, the commonwealth of Puerto Rico and any territory or possession of the United States;

          Y. "tax" means the total amount of each tax imposed and required to be paid, withheld and paid or collected and paid under provision of any law made subject to administration and enforcement according to the provisions of the Tax Administration Act, including the amount of any interest or civil penalty relating thereto; "tax" also means any amount of any abatement of tax made or any credit, rebate or refund paid or credited by the department under any law subject to administration and enforcement under the provisions of the Tax Administration Act to any person contrary to law, including the amount of any interest or civil penalty relating thereto;

          Z. "tax return preparer" means a person who prepares for others for compensation or who employs one or more persons to prepare for others for compensation any return of income tax, a substantial portion of any return of income tax, any claim for refund with respect to income tax or a substantial portion of any claim for refund with respect to income tax; provided that a person shall not be a "tax return preparer" merely because such person:

                (1) furnishes typing, reproducing or other mechanical assistance;

                (2) is an employee who prepares an income tax return or claim for refund with respect to an income tax return of the employer, or of an officer or employee of the employer, by whom the person is regularly and continuously employed; or

                (3) prepares as a trustee or other fiduciary an income tax return or claim for refund with respect to income tax for any person; and

          AA. "taxpayer" means a person liable for payment of any tax; a person responsible for withholding and payment or for collection and payment of any tax; a person to whom an assessment has been made, if the assessment remains unabated or the amount thereof has not been paid; or a person who entered into a special agreement pursuant to Section 7-1-21.1 NMSA 1978 to assume the liability of gross receipts tax or governmental gross receipts tax of another person and the special agreement was approved by the secretary pursuant to the Tax Administration Act."

     SECTION 3. Section 7-1-6.12 NMSA 1978 (being Laws 1983, Chapter 211, Section 17, as amended) is amended to read:

     "7-1-6.12. TRANSFER--REVENUES FROM MUNICIPAL LOCAL OPTION GROSS RECEIPTS AND COMPENSATING TAXES.--

          A. A transfer pursuant to Section 7-1-6.1 NMSA 1978 shall be made to each municipality for which the department is collecting a local option gross receipts tax and municipal compensating tax imposed by that municipality in an amount, subject to any increase or decrease made pursuant to Section 7-1-6.15 NMSA 1978, equal to the net receipts attributable to the local option gross receipts tax and municipal compensating tax imposed by that municipality, less any deduction for administrative cost determined and made by the department pursuant to the provisions of the act authorizing imposition by that municipality of the local option gross receipts tax and municipal compensating tax and any additional administrative fee withheld pursuant to [Subsection C of] Section 7-1-6.41 NMSA 1978.

          B. A transfer pursuant to this section may be adjusted for a distribution made to a tax increment development district with respect to a portion of a gross receipts tax increment dedicated by a municipality pursuant to the Tax Increment for Development Act."

     SECTION 4. Section 7-1-6.13 NMSA 1978 (being Laws 1983, Chapter 211, Section 18, as amended) is amended to read:

     "7-1-6.13. TRANSFER--REVENUES FROM COUNTY LOCAL OPTION GROSS RECEIPTS AND COMPENSATING TAXES.--

          A. Except as provided in Subsection B of this section, a transfer pursuant to Section 7-1-6.1 NMSA 1978 shall be made to each county for which the department is collecting a local option gross receipts tax and county compensating tax imposed by that county in an amount, subject to any increase or decrease made pursuant to Section 7-1-6.15 NMSA 1978, equal to the net receipts attributable to the local option gross receipts tax and county compensating tax imposed by that county, less any deduction for administrative cost determined and made by the department pursuant to the provisions of the act authorizing imposition by that county of the local option gross receipts tax and county compensating tax and any additional administrative fee withheld pursuant to [Subsection C of] Section 7-1-6.41 NMSA 1978.

          B. A transfer pursuant to this section may be adjusted for a distribution made to a tax increment development district with respect to a portion of a gross receipts tax increment dedicated by a county pursuant to the Tax Increment for Development Act."

     SECTION 5. Section 7-1-6.15 NMSA 1978 (being Laws 1983, Chapter 211, Section 20, as amended by Laws 2015, Chapter 89, Section 1 and by Laws 2015, Chapter 100, Section 1) is amended to read:

     "7-1-6.15. ADJUSTMENTS OF DISTRIBUTIONS OR TRANSFERS TO MUNICIPALITIES OR COUNTIES.--

          A. The provisions of this section apply to:

                (1) any distribution to a municipality pursuant to Section 7-1-6.4, 7-1-6.36 or 7-1-6.46 NMSA 1978;

                (2) any transfer to a municipality with respect to any local option gross receipts tax or municipal compensating tax imposed by that municipality;

                (3) any transfer to a county with respect to any local option gross receipts tax or county compensating tax imposed by that county;

                (4) any distribution to a county pursuant to Section 7-1-6.16 or 7-1-6.47 NMSA 1978;

                (5) any distribution to a municipality or a county of gasoline taxes pursuant to Section 7-1-6.9 NMSA 1978;

                (6) any transfer to a county with respect to any tax imposed in accordance with the Local Liquor Excise Tax Act;

                (7) any distribution to a county from the county government road fund pursuant to Section 7-1-6.26 NMSA 1978;

                (8) any distribution to a municipality of gasoline taxes pursuant to Section 7-1-6.27 NMSA 1978; and

                (9) any distribution to a municipality of compensating taxes pursuant to Section 7-1-6.55 NMSA 1978.

          B. Before making a distribution or transfer specified in Subsection A of this section to a municipality or county for the month, amounts comprising the net receipts shall be segregated into two mutually exclusive categories. One category shall be for amounts relating to the current month, and the other category shall be for amounts relating to prior periods. The total of each category for a municipality or county shall be reported each month to that municipality or county. If the total of the amounts relating to prior periods is less than zero and its absolute value exceeds the greater of one hundred dollars ($100) or an amount equal to twenty percent of the average distribution or transfer amount for that municipality or county, then the following procedures shall be carried out:

                (1) all negative amounts relating to any period prior to the three calendar years preceding the year of the current month, net of any positive amounts in that same time period for the same taxpayers to which the negative amounts pertain, shall be excluded from the total relating to prior periods. Except as provided in Paragraph (2) of this subsection, the net receipts to be distributed or transferred to the municipality or county shall be adjusted to equal the amount for the current month plus the revised total for prior periods; and

                (2) if the revised total for prior periods determined pursuant to Paragraph (1) of this subsection is negative and its absolute value exceeds the greater of one hundred dollars ($100) or an amount equal to twenty percent of the average distribution or transfer amount for that municipality or county, the revised total for prior periods shall be excluded from the distribution or transfers and the net receipts to be distributed or transferred to the municipality or county shall be equal to the amount for the current month.

          C. The department shall recover from a municipality or county the amount excluded by Paragraph (2) of Subsection B of this section. This amount may be referred to as the "recoverable amount".

          D. Prior to or concurrently with the distribution or transfer to the municipality or county of the adjusted net receipts, the department shall notify the municipality or county whose distribution or transfer has been adjusted pursuant to Paragraph (2) of Subsection B of this section:

                (1) that the department has made such an adjustment, that the department has determined that a specified amount is recoverable from the municipality or county and that the department intends to recover that amount from future distributions or transfers to the municipality or county;

                (2) that the municipality or county has ninety days from the date notice is made to enter into a mutually agreeable repayment agreement with the department;

                (3) that if the municipality or county takes no action within the ninety-day period, the department will recover the amount from the next six distributions or transfers following the expiration of the ninety days; and

                (4) that the municipality or county may inspect, pursuant to Section 7-1-8.9 NMSA 1978, an application for a claim for refund that gave rise to the recoverable amount, exclusive of any amended returns that may be attached to the application.

          E. No earlier than ninety days from the date notice pursuant to Subsection D of this section is given, the department shall begin recovering the recoverable amount from a municipality or county as follows:

                (1) the department may collect the recoverable amount by:

                     (a) decreasing distributions or transfers to the municipality or county in accordance with a repayment agreement entered into with the municipality or county; or

                     (b) except as provided in Paragraphs (2) and (3) of this subsection, if the municipality or county fails to act within the ninety days, decreasing the amount of the next six distributions or transfers to the municipality or county following expiration of the ninety-day period in increments as nearly equal as practicable and sufficient to recover the amount;

                (2) if, pursuant to Subsection B of this section, the secretary determines that the recoverable amount is more than fifty percent of the average distribution or transfer of net receipts for that municipality or county, the secretary:

                     (a) shall recover only up to fifty percent of the average distribution or transfer of net receipts for that municipality or county; and

                     (b) may, in the secretary's discretion, waive recovery of any portion of the recoverable amount, subject to approval by the state board of finance; and

                (3) if, after application of a refund claim, audit adjustment, correction of a mistake by the department or other adjustment of a prior period, but prior to any recovery of the department pursuant to this section, the total net receipts of a municipality or county for the twelve-month period beginning with the current month are reduced or are projected to be reduced to less than fifty percent of the average distribution or transfer of net receipts, the secretary may waive recovery of any portion of the recoverable amount, subject to approval by the state board of finance.

          F. No later than ninety days from the date notice pursuant to Subsection D of this section is given, the department shall provide the municipality or county adequate opportunity to review an application for a claim for refund that gave rise to the recoverable amount, exclusive of any amended returns that may be attached to the application, pursuant to Section 7-1-8.9 NMSA 1978.

          G. On or before September 1 of each year beginning in 2016, the secretary shall report to the state board of finance and the legislative finance committee the total recoverable amount waived pursuant to Subparagraph (b) of Paragraph (2) and Paragraph (3) of Subsection E of this section for each municipality and county in the prior fiscal year.

          H. The secretary is authorized to decrease a distribution or transfer to a municipality or county upon being directed to do so by the secretary of finance and administration pursuant to the State Aid Intercept Act or to redirect a distribution or transfer to the New Mexico finance authority pursuant to an ordinance or a resolution passed by the county or municipality and a written agreement of the municipality or county and the New Mexico finance authority. Upon direction to decrease a distribution or transfer or notice to redirect a distribution or transfer to a municipality or county, the secretary shall decrease or redirect the next designated distribution or transfer, and succeeding distributions or transfers as necessary, by the amount of the state distributions intercept authorized by the secretary of finance and administration pursuant to the State Aid Intercept Act or by the amount of the state distribution intercept authorized pursuant to an ordinance or a resolution passed by the county or municipality and a written agreement with the New Mexico finance authority. The secretary shall transfer the state distributions intercept amount to the municipal or county treasurer or other person designated by the secretary of finance and administration or to the New Mexico finance authority pursuant to written agreement to pay the debt service to avoid default on qualified local revenue bonds or meet other local revenue bond, loan or other debt obligations of the municipality or county to the New Mexico finance authority. A decrease to or redirection of a distribution or transfer pursuant to this subsection that arose:

                (1) prior to an adjustment of a distribution or transfer of net receipts creating a recoverable amount owed to the department takes precedence over any collection of any recoverable amount pursuant to Paragraph (2) of Subsection B of this section, which may be made only from the net amount of the distribution or transfer remaining after application of the decrease or redirection pursuant to this subsection; and

                (2) after an adjustment of a distribution or transfer of net receipts creating a recoverable amount owed to the department shall be subordinate to any collection of any recoverable amount pursuant to Paragraph (2) of Subsection B of this section.

          I. Upon the direction of the secretary of finance and administration pursuant to Section 9-6-5.2 NMSA 1978, the secretary shall temporarily withhold the balance of a distribution to a municipality or county, net of any decrease or redirected amount pursuant to Subsection H of this section and any recoverable amount pursuant to Paragraph (2) of Subsection B of this section, that has failed to submit an audit report required by the Audit Act or a financial report required by Subsection F of Section 6-6-2 NMSA 1978. The amount to be withheld, the source of the withheld distribution and the number of months that the distribution is to be withheld shall be as directed by the secretary of finance and administration. A distribution withheld pursuant to this subsection shall remain in the tax administration suspense fund until distributed to the municipality or county and shall not be distributed to the general fund. An amount withheld pursuant to this subsection shall be distributed to the municipality or county upon direction of the secretary of finance and administration.

          J. As used in this section:

                (1) "amounts relating to the current month" means any amounts included in the net receipts of the current month that represent payment of tax due for the current month, correction of amounts processed in the current month that relate to the current month or that otherwise relate to obligations due for the current month;

                (2) "amounts relating to prior periods" means any amounts processed during the current month that adjust amounts processed in a period or periods prior to the current month regardless of whether the adjustment is a correction of a department error or due to the filing of amended returns, payment of department-issued assessments, filing or approval of claims for refund, audit adjustments or other cause;

                (3) "average distribution or transfer amount" means the following amounts; provided that a distribution or transfer that is negative shall not be used in calculating the amounts:

                     (a) the annual average of the total amount distributed or transferred to a municipality or county in each of the three twelve-month periods preceding the current month;

                     (b) if a distribution or transfer to a municipality or county has been made for less than three years, the total amount distributed or transferred in the year preceding the current month; or

                     (c) if a municipality or county has not received distributions or transfers of net receipts for twelve or more months, the monthly average of net receipts distributed or transferred to the municipality or county preceding the current month multiplied by twelve;

                (4) "current month" means the month for which the distribution or transfer is being prepared; and

                (5) "repayment agreement" means an agreement between the department and a municipality or county under which the municipality or county agrees to allow the department to recover an amount determined pursuant to Paragraph (2) of Subsection B of this section by decreasing distributions or transfers to the municipality or county for one or more months beginning with the distribution or transfer to be made with respect to a designated month. No interest shall be charged."

     SECTION 6. A new section of the Tax Administration Act is enacted to read:

     "[NEW MATERIAL] DISTRIBUTION--MUNICIPALITIES AND COUNTIES.--

          A. Prior to January 1, 2021, a distribution pursuant to Section 7-1-6.1 NMSA 1978 shall be made to municipalities from the net receipts attributable to the gross receipts tax in an amount equal to one million two hundred fifty thousand dollars ($1,250,000). The amount to be distributed to each municipality shall be in proportion to the amount of net receipts transferred to the municipality pursuant to Section 7-1-6.12 NMSA 1978 in the previous calendar year to the total net receipts transferred to all municipalities in that year.

          B. Prior to January 1, 2021, a distribution pursuant to Section 7-1-6.1 NMSA 1978 shall be made to counties from the net receipts attributable to the gross receipts tax in an amount equal to seven hundred fifty thousand dollars ($750,000). The amount to be distributed to each county shall be in proportion to the amount of net receipts transferred to the county pursuant to Section 7-1-6.13 NMSA 1978 in the previous calendar year to the total net receipts transferred to all counties in that year."

     SECTION 7. Section 7-1-11 NMSA 1978 (being Laws 1965, Chapter 248, Section 16, as amended) is amended to read:

     "7-1-11. INSPECTION OF BOOKS OF TAXPAYERS--CREDENTIALS.--

          A. To determine the correct amount of tax due, the department shall cause the records and books of account of taxpayers to be inspected or audited at such times as the department deems necessary for the effective execution of the department's responsibilities; provided that the department shall exclusively audit a marketplace provider for sales, leases and licenses made by a marketplace seller that are facilitated by the marketplace provider.

          B. Auditors and other officials of the department designated by the secretary are authorized to request and require the production for examination of the records and books of account of a taxpayer. Auditors and officials of the department designated by the secretary shall be furnished with credentials identifying them as such, which they shall display to any taxpayer whose books are sought to be examined.

          C. Taxpayers shall upon request make their records and books of account available for inspection at reasonable hours to the secretary or the secretary's delegate who presents proper identification to the taxpayer.

          D. If the taxpayer's records and books of account do not exist or are insufficient to determine the taxpayer's tax liability, if any, the department may use any reasonable method of estimating the tax liability, including [but not limited to] using information about similar persons, businesses or industries to estimate the taxpayer's liability.

          E. The secretary or the secretary's delegate shall develop and maintain written audit policies and procedures for all audit programs in which the department routinely conducts field audits of taxpayers, including policies and procedures concerning audit notification, scheduling, records that may be examined, analysis that may be done, sampling procedures, gathering information or evidence from third parties, policies concerning the rights of taxpayers under audit and related matters. Department audit policies and procedures shall be made available to a person who requests them, at a reasonable charge to defray the cost of preparing and distributing those policies and procedures.

          F. Nothing in this section shall be construed to require the department to provide the following:

                (1) information that is confidential pursuant to Section 7-1-8 NMSA 1978; or

                (2) methods, techniques and analysis used to select taxpayers for audit, including the use of:

                     (a) data analytics;

                     (b) data mining;

                     (c) a scoring model;

                     (d) internal controls; and

                     (e) metadata used to detect fraud and noncompliance.

          G. For purposes of this section:

                (1) "data analytics" means the science of examining data with the purpose of drawing conclusions about the information;

                (2) "data mining" means the process of analyzing data from different perspectives and summarizing it into useful information by collecting data into data sets for the purpose of discovering patterns;

                (3) "scoring model" means a predictive model that can predict the chance of occurring of a fact and its occurrence;

                (4) "methods, techniques and methodology" means a systematic way to accomplish a tactic, qualitative or quantitative component of research and the use of a specific method;

                (5) "internal controls" means a process of assuring achievement of an organization's objectives in operational effectiveness and efficiency, reliable financial reporting and compliance with laws, regulations and policies; [and]

                (6) "marketplace provider" means a "marketplace provider" as that term is used in the Gross Receipts and Compensating Tax Act;

                (7) "marketplace seller" means a "marketplace seller" as that term is used in the Gross Receipts and Compensating Tax Act; and

                [(6)] (8) "metadata" means data that provides information about other data."

     SECTION 8. Section 7-1-14 NMSA 1978 (being Laws 1969, Chapter 145, Section 1, as amended) is repealed and a new Section 7-1-14 NMSA 1978 is enacted to read:

     "7-1-14. [NEW MATERIAL] LOCATION WHERE CERTAIN GROSS RECEIPTS ARE TO BE REPORTED.--

          A. Gross receipts and deductions required to be reported pursuant to the Gross Receipts and Compensating Tax Act, Interstate Telecommunications Gross Receipts Tax Act, Leased Vehicle Gross Receipts Tax Act, Supplemental Municipal Gross Receipts Tax Act, Municipal Local Option Gross Receipts and Compensating Taxes Act, Local Hospital Gross Receipts Tax Act, County Local Option Gross Receipts and Compensating Taxes Act and County Correctional Facility Gross Receipts Tax Act shall be reported as follows:

                (1) gross receipts and deductions from the sale or lease of tangible personal property or licenses and from the licensing of tangible personal property shall be reported to the location of delivery of that tangible personal property to the customer; provided that beginning January 1, 2021, the reporting location for receipts from leasing a vehicle is the location where the customer first makes use of the vehicle;

                (2) except as otherwise provided in this section, a seller of services shall report the seller's gross receipts and deductions as follows:

                     (a) professional services shall be reported to the seller's place of business;

                     (b) for a person engaged in the construction business, the location where the construction project is performed is the "place of business", and all gross receipts and deductions from that project are to be reported from that place of business;

                     (c) for a person engaged in the business of providing services with respect to the selling of real estate, the location of the real property is the "place of business", and all gross receipts and deductions from that sale are to be reported from that place of business; and

                     (d) services, other than those described in Subparagraphs (a) through (c) of this paragraph, beginning January 1, 2021, are to be reported at the location where the service is performed;

                (3) gross receipts and deductions from the sale, lease or granting of a license to use real property shall be reported to the location of the real property; and

                (4) the reporting location for gross receipts and deductions from a customer for services provided by a transportation network company pursuant to the Transportation Network Company Services Act shall be the location where the customer enters the vehicle offered for a prearranged ride.

          B. Consistent with this section and with intergovernmental agreements, the secretary may, by rule, provide for the reporting of gross receipts and deductions from transactions not otherwise specified in this section, including reporting gross receipts and deductions to locations:

                (1) by taxpayers having more than one place of business; and

                (2) for reporting tax imposed by taxing jurisdictions at the jurisdiction's location, including:

                     (a) outside a municipality;

                     (b) within an Indian reservation or pueblo grant;

                     (c) within a tax increment development district; and

                     (d) within any other taxing jurisdiction.

          C. The secretary shall develop and provide to taxpayers a location-rate database that sets out the tax rates applicable to locations within the state, by address, and sellers who properly rely on this database shall not be liable for any additional tax due to the use of an incorrect rate."

     SECTION 9. A new section of the Income Tax Act is enacted to read:

     "[NEW MATERIAL] DEDUCTION FROM NET INCOME FOR CERTAIN DEPENDENTS.--

          A. As long as the exemption amount pursuant to Section 151 of the Internal Revenue Code means zero, a taxpayer who is not a dependent of another individual and files a return as a head of household or married filing jointly may claim a deduction from net income in the amount calculated as follows:

                (1) for a taxpayer filing as a head of household, the product of four thousand dollars ($4,000) multiplied by the difference between the number of dependents claimed on the taxpayer's return minus one; and

                (2) for a taxpayer filing as married filing jointly, the product of four thousand dollars ($4,000) multiplied by the difference between the number of dependents claimed on the taxpayer's return minus two.

          B. A taxpayer allowed a deduction pursuant to this section shall report the amount of the deduction to the department in a manner required by the department.

          C. The department shall compile an annual report on the deduction provided by this section that shall include the number of taxpayers that claimed the deduction, the aggregate amount of deductions claimed and any other information necessary to evaluate the effectiveness of the deduction. The department shall present the annual report to the revenue stabilization and tax policy committee and the legislative finance committee with an analysis of the cost of the deduction.

          D. As used in this section, "dependent" means "dependent" as defined in Section 152 of the Internal Revenue Code."

     SECTION 10. Section 7-4-10 NMSA 1978 (being Laws 1993, Chapter 153, Section 1, as amended) is amended to read:

     "7-4-10. APPORTIONMENT OF BUSINESS INCOME.--

          A. Except as provided in Subsections B and C of this section, all business income shall be apportioned to this state by multiplying the income by a fraction, the numerator of which is the property factor plus the payroll factor plus the sales factor and the denominator of which is three.

          B. A taxpayer whose principal business activity in New Mexico is manufacturing may elect to have business income apportioned to this state

                [(1) in the taxable year beginning on or after January 1, 2014 and prior to January 1, 2015, by multiplying the income by a fraction, the numerator of which is twice the sales factor plus the property factor plus the payroll factor and the denominator of which is four;

                (2) in the taxable year beginning on or after January 1, 2015 and prior to January 1, 2016, by multiplying the income by a fraction, the numerator of which is three multiplied by the sales factor plus the property factor plus the payroll factor and the denominator of which is five;

                (3) in the taxable year beginning on or after January 1, 2016 and prior to January 1, 2017, by multiplying the income by a fraction, the numerator of which is seven multiplied by the sales factor plus one and one-half multiplied by the property factor plus one and one-half multiplied by the payroll factor and the denominator of which is ten;

                (4) in the taxable year beginning on or after January 1, 2017 and prior to January 1, 2018, by multiplying the income by a fraction, the numerator of which is eight multiplied by the sales factor plus the property factor plus the payroll factor and the denominator of which is ten; and

                (5) in taxable years beginning on or after January 1, 2018, by multiplying the income by a fraction, the numerator of which is the total sales of the taxpayer in New Mexico during the taxable year and the denominator of which is the total sales of the taxpayer from any location within or outside of the state during] by multiplying the income by the sales factor for the taxable year.

          C. A taxpayer whose principal business activity in New Mexico is a headquarters operation may elect to have business income apportioned to this state by multiplying the income by [a fraction, the numerator of which is the total sales of the taxpayer in New Mexico during the taxable year and the denominator of which is the total sales of the taxpayer from any location within or outside of the state during] the sales factor for the taxable year.

          D. To elect the method of apportionment provided by Subsection B or C of this section, the taxpayer shall notify the department of the election, in writing, no later than the date on which the taxpayer files the return for the first taxable year to which the election will apply. The election will apply to that taxable year and to each taxable year thereafter until the taxpayer notifies the department, in writing, that the election is terminated, except that the taxpayer shall not terminate the election until the method of apportioning business income provided by Subsection B or C of this section has been used by the taxpayer for at least three consecutive taxable years, including a total of at least thirty-six calendar months. The election will apply to the separately filed return of the taxpayer or the combined or consolidated return the taxpayer has elected to [be included] file pursuant to Section 7-2A-8.3 or 7-2A-8.4 NMSA 1978.

          E. For purposes of this section:

                (1) "headquarters operation" means:

                     (a) the center of operations of a business: 1) where corporate staff employees are physically employed; 2) where centralized functions are performed, including administrative, planning, managerial, human resources, purchasing, information technology and accounting, but not including operating a call center; 3) the function and purpose of which is to manage and direct most aspects and functions of the business operations within a subdivided area of the United States; 4) from which final authority over regional or subregional offices, operating facilities and any other offices of the business are issued; and 5) including national and regional headquarters if the national headquarters is subordinate only to the ownership of the business or its representatives and the regional headquarters is subordinate to the national headquarters; or

                     (b) the center of operations of a business: 1) the function and purpose of which is to manage and direct most aspects of one or more centralized functions; and 2) from which final authority over one or more centralized functions is issued; and

                (2) "manufacturing" means combining or processing components or materials to increase their value for sale in the ordinary course of business, but does not include:

                     (a) construction services;

                     (b) farming;

                     (c) electric power generation; [except for electricity generation at a facility other than one for which both location approval and a certificate of convenience and necessity are required prior to commencing construction or operation of the facility, pursuant to the Public Utility Act; or]

                     (d) processing natural resources, including hydrocarbons; or

                     (e) processing or preparation of meals for immediate consumption."

     SECTION 11. Section 7-4-18 NMSA 1978 (being Laws 1965, Chapter 203, Section 18) is amended to read:

     "7-4-18. DETERMINATION OF SALES IN THIS STATE OF SERVICES AND OTHER [THAN TANGIBLE PERSONAL] PROPERTY FOR INCLUSION IN SALES FACTOR.--

          A. Sales, other than sales [of tangible personal property] described in Section 7-4-17 NMSA 1978, are in this state [if

          A. the income-producing activity is performed in this state; or

          B. the income-producing activity is performed both in and outside this state and a greater proportion of the income-producing activity is performed in this state than in any other state based on costs of performance]:

                (1) in the case of sale, rental, lease or license of real property, if and to the extent the real property is located in this state;

                (2) in the case of rental, lease or license of tangible personal property, if and to the extent the tangible personal property is located in this state;

                (3) in the case of sale of a service, if and to the extent the service is delivered to a location in this state; and

                (4) in the case of sale, rental, lease or license of intangible property, if and to the extent the intangible property is used in this state.

          B. If the state or states of assignment under Subsection A of this section cannot be determined, the state or states of assignment shall be reasonably approximated.

          C. If the taxpayer is not taxable in a state to which a sale is assigned pursuant to Subsection A of this section or if the state of assignment cannot be determined or reasonably approximated pursuant to Subsection B of this section, that sale shall be excluded from the numerator and denominator of the sales factor.

          D. The department may promulgate rules as necessary or appropriate to carry out the purposes of this section."

     SECTION 12. Section 7-9-3 NMSA 1978 (being Laws 1978, Chapter 46, Section 1, as amended) is amended to read:

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

          A. "buying" or "selling" means a transfer of property for consideration or the performance of service for consideration;

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

          C. "digital good" means a digital product delivered electronically, including software, music, photography, video, reading material, an application and a ringtone;

          [C.] D. "financial corporation" means a savings and loan association or an incorporated savings and loan company, trust company, mortgage banking company, consumer finance company or other financial corporation;

          [D.] E. "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;

          [E.] F. "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 licensing and is not a lease;

          [F.] G. "local option gross receipts tax" means a tax authorized to be imposed by a county or municipality upon [the] a 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;

          G.] H. "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;

          [H.] I. "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 services; farming; electric power generation; processing of natural resources, including hydrocarbons; or the processing or preparation of meals for immediate consumption;

          J. "manufacturing service" means the service of combining or processing components or materials owned by another but does not include construction services; farming; electric power generation; processing of natural resources, including hydrocarbons; or the processing or preparation of meals for immediate consumption;

          K. "marketplace provider" means a person who facilitates the sale, lease or license of tangible personal property or services or licenses for use of real property on a marketplace seller's behalf, or on the marketplace provider's own behalf, by:

                (1) listing or advertising the sale, lease or license, by any means, whether physical or electronic, including by catalog, internet website or television or radio broadcast; and

                (2) either directly or indirectly, through agreements or arrangements with third parties collecting payment from the customer and transmitting that payment to the seller, regardless of whether the marketplace provider receives compensation or other consideration in exchange for the marketplace provider's services;

          L. "marketplace seller" means a person who sells, leases or licenses tangible personal property or services or who licenses the use of real property through a marketplace provider;

          [I.] M. "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;

          [J.] N. "property" means:

                (1) real property;

                (2) tangible personal property, including electricity and manufactured homes;

                (3) licenses, [other than] including licenses of digital goods, but not including the licenses of copyrights, trademarks or patents; and

                (4) franchises; [Tangible personal property includes electricity and manufactured homes;

          K.] O. "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) developing 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) developing 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) developing 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) designing and developing prototypes or integrating systems incorporating the advances, developments or improvements included in Paragraphs (1) through (5) of this subsection;

          [L.] P. "secretary" means the secretary of taxation and revenue or the secretary's delegate;

          [M.] Q. "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. That 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. 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; and

          [N.] R. "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."

     SECTION 13. Section 7-9-3.3 NMSA 1978 (being Laws 2003, Chapter 272, Section 4) is amended to read:

     "7-9-3.3. DEFINITION--ENGAGING IN BUSINESS.--As used in the Gross Receipts and Compensating Tax Act, "engaging in business" means carrying on or causing to be carried on any activity with the purpose of direct or indirect benefit. [except that:

          A.] For a person who lacks physical presence in this state, including a marketplace provider, "engaging in business" [does not include: having a worldwide web site as a third-party content provider on a computer physically located in New Mexico but owned by another nonaffiliated person; and

          B. "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, or to provide services primarily to non-New Mexico customers] means having, in the previous calendar year, total taxable gross receipts from sales, leases and licenses of tangible personal property, sales of licenses and sales of services and licenses for use of real property sourced to this state pursuant to Section 7-1-14 NMSA 1978, of at least one hundred thousand dollars ($100,000)."

     SECTION 14. Section 7-9-3.5 NMSA 1978 (being Laws 2003, Chapter 272, Section 3, as amended) is amended to read:

     "7-9-3.5. DEFINITION--GROSS RECEIPTS.--

          A. As used in the Gross Receipts and Compensating Tax Act:

                (1) "gross receipts" means the total amount of money or the value of other consideration received from selling property in New Mexico, from leasing or licensing property employed in New Mexico, from granting a right to use a franchise 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;

                (2) "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 lease, 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;

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

                     (e) amounts received by a New Mexico florist from the sale of flowers, plants or other products that are customarily sold by florists where the sale is made pursuant to orders placed with the New Mexico florist that are filled and delivered outside New Mexico by an out-of-state florist; [and]

                     (f) the receipts of a home service provider from providing mobile telecommunications services to customers whose place of primary use is in New Mexico if: 1) the mobile telecommunications services originate and terminate in the same state, regardless of where the services originate, terminate or pass through; and 2) the charges for mobile telecommunications services are billed by or for a customer's home service provider and are deemed provided by the home service provider. For the purposes of this section, "home service provider", "mobile telecommunications services", "customer" and "place of primary use" have the meanings given in the federal Mobile Telecommunications Sourcing Act; and

                     (g) receipts collected by a marketplace provider engaging in business in the state from sales, leases and licenses of tangible personal property, sales of licenses and sales of services or licenses for use of real property that are sourced to this state and are facilitated by the marketplace provider on behalf of marketplace sellers, regardless of whether the marketplace sellers are engaging in business in the state; and

                (3) "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;

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

                     (g) amounts received by a New Mexico florist from the sale of flowers, plants or other products that are customarily sold by florists where the sale is made pursuant to orders placed with an out-of-state florist for filling and delivery in New Mexico by a New Mexico florist.

          B. 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 the seller's or lessor's 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."

     SECTION 15. Section 7-9-5 NMSA 1978 (being Laws 1966, Chapter 47, Section 5, as amended) is amended to read:

     "7-9-5. PRESUMPTION OF TAXABILITY--PROHIBITION AGAINST CLASS ACTIONS.--

          A. To prevent evasion of the gross receipts tax and to aid in its administration, it is presumed that all receipts of a person engaging in business are subject to the gross receipts tax. [Any] A person engaged solely in transactions specifically exempt under the provisions of the Gross Receipts and Compensating Tax Act shall not be required to register or file a return under that act.

          B. If receipts from nontaxable charges for mobile telecommunications services are aggregated with and not separately stated from taxable charges for mobile telecommunications services, [then] the charges for nontaxable mobile telecommunications services shall be subject to gross receipts tax unless the home service provider can reasonably identify nontaxable charges in its books and records that are kept in the regular course of business. For the purposes of this subsection, "charges for mobile telecommunications services", "home service provider" and "mobile telecommunications services" have the meanings given in the federal Mobile Telecommunications Sourcing Act.

          C. A marketplace provider engaging in business in this state is not liable for amounts of gross receipts tax collected incorrectly due to the marketplace provider reasonably relying on erroneous information provided by the seller.

          D. No class action shall be brought in a court in this state on behalf of purchasers in this state against a marketplace provider arising from, or in any way related to, an overpayment of gross receipts tax or compensating tax collected by the marketplace provider, regardless of how such an action is characterized."

     SECTION 16. Section 7-9-6 NMSA 1978 (being Laws 1966, Chapter 47, Section 6, as amended) is amended to read:

     "7-9-6. SEPARATELY STATING THE GROSS RECEIPTS TAX.--

          A. Taxpayers subject to the Gross Receipts and Compensating Tax Act, when billing a customer, shall separately state the amount of tax associated with the transaction or provide a statement affirmatively indicating that the gross receipts tax is included in the amount billed.

          B. When the gross receipts tax is stated separately on the books of the seller or lessor, and if the total amount of tax that is stated separately on transactions reportable within one reporting period is in excess of the amount of gross receipts tax otherwise payable on the transactions on which the tax was stated separately, the excess amount of tax stated on the transactions within that reporting period shall be included in gross receipts."

     SECTION 17. Section 7-9-7 NMSA 1978 (being Laws 1966, Chapter 47, Section 7, as amended) is amended to read:

     "7-9-7. IMPOSITION AND RATE OF TAX--DENOMINATION AS "COMPENSATING TAX".--

          A. For the privilege of using tangible property in New Mexico, there is imposed on the person using the property an excise tax equal to five and one-eighth percent of the value of tangible property that was:

                (1) manufactured by the person using the property in the state; or

                (2) acquired inside or outside of this state as the result of a transaction with a person located outside this state that would have been subject to the gross receipts tax had the tangible personal property been acquired from a person with nexus with New Mexico [or

                (3) acquired as the result of a transaction that was not initially subject to the compensating tax imposed by Paragraph (2) of this subsection or the gross receipts tax but which transaction, because of the buyer's subsequent use of the property, should have been subject to the compensating tax imposed by Paragraph (2) of this subsection or the gross receipts tax].

          B. For the purpose of Subsection A of this section, value of tangible property shall be the adjusted basis of the property for federal income tax purposes determined as of the time of acquisition or introduction into this state or of conversion to use, whichever is later. If no adjusted basis for federal income tax purposes is established for the property, a reasonable value of the property shall be used.

          C. For the privilege of using a license or franchise in New Mexico, there is imposed on the person using the license or franchise an excise tax equal to the rate provided in Subsection A of this section against the value of the license or franchise in its use in this state. The department by rule, ruling or instruction shall fairly apportion, where appropriate, the value of a license or franchise to its value in use in New Mexico. For use of a license or franchise to be taxable under this subsection, the value of the license or franchise shall be acquired inside or outside this state as the result of a transaction with a person located outside this state that would have been subject to the gross receipts tax had the license or franchise been acquired from a person with nexus with this state.

          [C.] D. For the privilege of using services [rendered] in New Mexico, there is imposed on the person using [such] the services an excise tax equal to [five percent of] the rate provided in Subsection A of this section against the value of the services at the time [they were rendered] the product of the service was acquired. For use of services to be taxable under this subsection, [must] the services shall have been [rendered as the result of a transaction that was not initially subject to the gross receipts tax but which transaction, because of the buyer's subsequent use of the services, should have been subject to the gross receipts tax] performed by a person outside this state and the product of the service was acquired inside or outside this state as the result of a transaction with a person located outside this state that would have been subject to the gross receipts tax had the service or product of the service been acquired from a person with nexus with this state.

          [D.] E. The tax imposed by this section shall be referred to as the "compensating tax"."

     SECTION 18. Section 7-9-7.1 NMSA 1978 (being Laws 1993, Chapter 45, Section 1, as amended) is amended to read:

     "7-9-7.1. DEPARTMENT BARRED FROM TAKING COLLECTION ACTIONS WITH RESPECT TO CERTAIN [COMPENSATING] TAX LIABILITIES.--

          [A. The department shall take no action to enforce collection of compensating tax due on purchases made by an individual if:

                (1) the property is used only for nonbusiness purposes;

                (2) the property is not a manufactured home; and

                (3) the individual is not an agent for collection of compensating tax pursuant to Section 7-9-10 NMSA 1978.

          B. The prohibition in Subsection A of this section does not prevent the department from enforcing collection of compensating tax on purchases from persons who are not individuals, who are agents for collection pursuant to Section 7-9-10 NMSA 1978 or who use the property in the course of engaging in business in New Mexico or from enforcing collection of compensating tax due on purchase of manufactured homes.] The department shall take no action to enforce collection of gross receipts tax for a tax period prior to July 1, 2019 on persons engaging in business if that person:

                (1) lacked physical presence in the state; and

                (2) did not report taxable gross receipts prior to July 1, 2019."

     SECTION 19. Section 7-9-13.1 NMSA 1978 (being Laws 1989, Chapter 262, Section 4) is amended to read:

     "7-9-13.1. EXEMPTION--GROSS RECEIPTS TAX--CERTAIN SERVICES [PERFORMED OUTSIDE THE STATE THE PRODUCT OF WHICH IS INITIALLY USED IN NEW MEXICO--EXCEPTIONS].--

          A. [Except as provided otherwise in Subsection B of this section] Exempted from the gross receipts tax are the receipts from selling research and development services [performed outside New Mexico the product of which is initially used in New Mexico.

          B. The exemption provided by this section does not apply to research and development services other than research and development services] that are sold:

                (1) [sold] between affiliated corporations;

                (2) [sold] to the United States by persons, other than organizations described in Subsection A of Section 7-9-29 NMSA 1978, who are prime contractors operating facilities in New Mexico designated as national laboratories by act of congress; or

                (3) [sold] to persons, other than organizations described in Subsection A of Section 7-9-29 NMSA 1978, who are prime contractors operating facilities in New Mexico designated as national laboratories by act of congress.

          [C.] B. An "affiliated corporation" means a corporation that directly or indirectly, through one or more intermediaries controls, is controlled by or is under common control with the subject corporation. "Control" means ownership of stock in a corporation [which] that represents at least eighty percent of the total voting power of that corporation and has a stated or par value equal to at least eighty percent of the total stated or par value of the stock of that corporation."

     SECTION 20. Section 7-9-29 NMSA 1978 (being Laws 1970, Chapter 12, Section 3, as amended) is amended to read:

     "7-9-29. EXEMPTION--GROSS RECEIPTS TAX--CERTAIN ORGANIZATIONS.--

          A. Exempted from the gross receipts tax are the receipts of organizations that demonstrate to the department that they have been granted exemption from the federal income tax by the United States commissioner of internal revenue as organizations described in Section 501(c)(3) of the United States Internal Revenue Code of [1954] 1986, as that section may be amended or renumbered.

          B. Exempted from the gross receipts tax are the receipts from carrying on chamber of commerce, visitor bureau and convention bureau functions of organizations that demonstrate to the department that they have been granted exemption from the federal income tax by the United States commissioner of internal revenue as organizations described in Section 501(c)(6) of the United States Internal Revenue Code of [1954] 1986, as that section may be amended or renumbered.

          C. This section does not apply to receipts derived from an unrelated trade or business as defined in Section 513 of the United States Internal Revenue Code of [1954] 1986, as that section may be amended or renumbered.

          D. The exemptions provided by this section do not apply to an organization that in the previous calendar year had, or reasonably anticipates having in the current calendar year, more than seventy-five million dollars ($75,000,000) in gross receipts; provided that the organization is not a health care facility licensed by the state or a federally qualified health care facility."

     SECTION 21. Section 7-9-46 NMSA 1978 (being Laws 1969, Chapter 144, Section 36, as amended) is amended to read:

     "7-9-46. DEDUCTION--GROSS RECEIPTS [TAX]--GOVERNMENTAL GROSS RECEIPTS--SALES TO MANUFACTURERS AND MANUFACTURING SERVICE PROVIDERS.--

          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. The buyer delivering the nontaxable transaction certificate 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 manufacturing 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 to the seller] to a manufacturer or a manufacturing service provider may be deducted [in the following percentages] from gross receipts or from governmental gross receipts

                [(1) twenty percent of receipts received prior to January 1, 2014;

                (2) forty percent of receipts received in calendar year 2014;

                (3) sixty percent of receipts received in calendar year 2015;

                (4) eighty percent of receipts received in calendar year 2016; and

                (5) one hundred percent of receipts received on or after January 1, 2017] if the buyer delivers a nontaxable transaction certificate to the seller.

          C. Receipts from selling or leasing qualified equipment may be deducted from gross receipts if the sale is made to, or the lease is entered into with, a person engaged in the business of manufacturing or a manufacturing service provider who delivers a nontaxable transaction certificate to the seller; provided that a manufacturer or manufacturing service provider delivering a nontaxable transaction certificate with respect to the qualified equipment may not claim an investment credit pursuant to the Investment Credit Act for that same equipment.

          [C.] 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.

          [D.] 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.

          [E.] 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.

          [F.] G. As used in [Subsection B of] this section:

                (1) "manufacturing consumable" means tangible personal property, other than qualified equipment or an ingredient or component part of a manufactured product, 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 processing and preparation of meals for immediate consumption [on- or off-premises];

                (2) "manufacturing operation" means a plant operated by a manufacturer or manufacturing service provider that employs personnel to perform production tasks to produce goods, in conjunction with machinery and equipment; and

                (3) "qualified equipment" means machinery, equipment and tools, including component, repair, replacement and spare parts thereof, that are used directly in the manufacturing process of a manufacturing operation. "Qualified equipment" includes computer hardware and software used directly in the manufacturing process of a manufacturing operation but excludes any motor vehicle that is required to be registered in this state pursuant to the Motor Vehicle Code."

     SECTION 22. A new section of the Gross Receipts and Compensating Tax Act is enacted to read:

     "[NEW MATERIAL] DEDUCTION--GROSS RECEIPTS--MARKETPLACE SELLER.--

          A. A marketplace seller may deduct receipts for sales, leases and licenses of tangible personal property, sales of licenses and sales of services or licenses for use of real property that are facilitated by a marketplace provider; provided that the marketplace seller obtains documentation from the marketplace provider indicating that the marketplace provider is registered with the department and has remitted or will remit the taxes due on the gross receipts from those transactions.

          B. The deduction provided by this section shall not apply if the marketplace provider is determined not to owe the tax due to the marketplace provider's reliance on information provided by the seller as determined pursuant to Subsection C of Section 7-9-5 NMSA 1978."

     SECTION 23. A new section of the Gross Receipts and Compensating Tax Act is enacted to read:

     "[NEW MATERIAL] AUTHORITY TO ESTABLISH STANDARDS FOR CERTIFIED SERVICE PROVIDERS.--

          A. The secretary is authorized to provide information, upon which taxpayers may rely, as to the taxability of gross receipts from particular transactions, including taxability matrices, and is further authorized to establish standards for the certification of service providers that offer software-based systems to enable taxpayers to properly determine the taxability of gross receipts from particular transactions.

          B. As used in this section, "certified service provider" means "certified service provider" as defined in the Streamlined Sales and Use Tax Administration Act."

     SECTION 24. Section 7-19-14 NMSA 1978 (being Laws 1979, Chapter 397, Section 5, as amended) is amended to read:

     "7-19-14. SPECIFIC EXEMPTIONS.--No supplemental municipal gross receipts tax shall be imposed on the gross receipts arising from

          [A. transporting persons or property for hire by railroad, motor vehicle, air transportation or any other means from one point within the municipality to another point outside the municipality; or

          B.] a business located outside the boundaries of a municipality on land owned by that municipality for which a gross receipts tax distribution is made pursuant to Section 7-1-6.4 NMSA 1978."

     SECTION 25. Section 7-19D-1 NMSA 1978 (being Laws 1993, Chapter 346, Section 1) is amended to read:

     "7-19D-1. SHORT TITLE.--Chapter 7, Article 19D NMSA 1978 may be cited as the "Municipal Local Option Gross Receipts and Compensating Taxes Act"."

     SECTION 26. Section 7-19D-5 NMSA 1978 (being Laws 1993, Chapter 346, Section 5, as amended) is amended to read:

     "7-19D-5. SPECIFIC EXEMPTIONS.--No tax authorized by the provisions of the Municipal Local Option Gross Receipts and Compensating Taxes Act shall be imposed on the gross receipts arising from

          [A. transporting persons or property for hire by railroad, motor vehicle, air transportation or any other means from one point within the municipality to another point outside the municipality; or

          B.] a business located outside the boundaries of a municipality on land owned by that municipality for which a state gross receipts tax distribution is made pursuant to Section 7-1-6.4 NMSA 1978."

     SECTION 27. Section 7-19D-7 NMSA 1978 (being Laws 1993, Chapter 346, Section 7, as amended) is amended to read:

     "7-19D-7. COLLECTION BY DEPARTMENT [TRANSFER OF PROCEEDS--DEDUCTIONS].--[A.] The department shall collect each tax imposed pursuant to the provisions of the Municipal Local Option Gross Receipts and Compensating Taxes Act in the same manner and at the same time it collects the state gross receipts [tax] and compensating taxes.

          [B. Except as provided in Subsection C of this section, the department shall withhold an administrative fee pursuant to Section 1 of this 1997 act. The department shall transfer to each municipality for which it is collecting a tax pursuant to the provisions of the Municipal Local Option Gross Receipts Taxes Act the amount of each tax collected for that municipality, less the administrative fee withheld and less any disbursements for tax credits, refunds and the payment of interest applicable to the tax. The transfer to the municipality shall be made within the month following the month in which the tax is collected.

          C. With respect to the municipal gross receipts tax imposed by a municipality pursuant to Section 7-19D-9 NMSA 1978, the department shall withhold the administrative fee pursuant to Section 1 of this 1997 act only on that portion of the municipal gross receipts tax arising from a municipal gross receipts tax rate in excess of one-half of one percent.]"

     SECTION 28. A new Section 7-19D-9.1 NMSA 1978 is enacted to read:

     "7-19D-9.1. [NEW MATERIAL] MUNICIPAL COMPENSATING TAX.--

          A. For the privilege of using tangible personal property in a municipality, there is imposed on the person using the property an excise tax at a rate equal to the combined rates imposed and in effect pursuant to the Supplemental Municipal Gross Receipts Tax Act and the Municipal Local Option Gross Receipts and Compensating Taxes Act of the value of tangible personal property that was:

                (1) manufactured by the person using the property in the state; or

                (2) acquired inside or outside this state as the result of a transaction with a person located outside this state that would have been subject to the state gross receipts tax had the tangible personal property been acquired from a person with nexus with New Mexico.

          B. For the purpose of Subsection A of this section, the value of tangible personal property shall be the adjusted basis of the property for federal income tax purposes determined as of the time of acquisition or introduction into this state or of conversion to use, whichever is later. If no adjusted basis for federal income tax purposes is established for the property, a reasonable value of the property shall be used.

          C. For the privilege of using a license or franchise in a municipality, there is imposed on the person using the license or franchise an excise tax equal to the tax rate provided in Subsection A of this section against the value of the license or franchise as determined pursuant to Section 7-9-7 NMSA 1978. The department by rule, ruling or instruction shall fairly apportion, where appropriate, the value of a license or franchise to its value in use in the municipality. For use of a license or franchise to be taxable under this subsection, the value of the license or franchise shall be acquired inside or outside this state as the result of a transaction with a person located outside this state that would have been subject to the gross receipts tax had the license or franchise been acquired from a person with nexus with this state.

          D. For the privilege of using services in a municipality, there is imposed on the person using the services an excise tax at the rate provided in Subsection A of this section of the value of the services at the time the product of the service was acquired. For use of services to be taxable under this subsection, the services shall have been performed by a person outside this state and the product of which was acquired inside or outside this state as the result of a transaction with a person located outside this state that would have been subject to the gross receipts tax had the service or product of the service been acquired from a person with nexus with this state.

          E. The governing body of a municipality may dedicate the revenue from the tax imposed pursuant to this section for any municipal purpose. If the governing body proposes to dedicate revenue for a specific purpose, the dedicated revenue shall be used by the municipality for that purpose unless a subsequent ordinance is adopted to change the purpose to which the revenue is dedicated or to place the revenue in the general fund of the municipality.

          F. Any law that affects the municipal compensating tax, or any law supplemental or otherwise appertaining thereto, shall not be repealed or amended or otherwise directly or indirectly modified in such a manner as to impair adversely any outstanding revenue bonds that may be secured by a pledge of such municipal compensating tax unless such outstanding revenue bonds have been discharged in full or provision has been fully made therefor.

          G. The tax imposed by this section may be cited as the "municipal compensating tax"."

     SECTION 29. Section 7-20E-1 NMSA 1978 (being Laws 1993, Chapter 354, Section 1) is amended to read:

     "7-20E-1. SHORT TITLE.--Chapter 7, Article 20E NMSA 1978 may be cited as the "County Local Option Gross Receipts and Compensating Taxes Act"."

     SECTION 30. Section 7-20E-7 NMSA 1978 (being Laws 1993, Chapter 354, Section 7, as amended) is amended to read:

     "7-20E-7. COLLECTION BY DEPARTMENT [TRANSFER OF

PROCEEDS--DEDUCTIONS].--[A.] The department shall collect each tax imposed pursuant to the provisions of the County Local Option Gross Receipts and Compensating Taxes Act in the same manner and at the same time it collects the state gross receipts [tax] and compensating taxes.

          [B. The department shall withhold an administrative fee pursuant to Section 7-1-6.41 NMSA 1978. The department shall transfer to each county for which it is collecting a tax pursuant to the provisions of the County Local Option Gross Receipts Taxes Act the amount of each tax collected for that county, less the administrative fee withheld and less any disbursements for tax credits, refunds and the payment of interest applicable to the tax. The transfer to the county shall be made within the month following the month in which the tax is collected.]"

     SECTION 31. A new Section 7-20E-9.1 NMSA 1978 is enacted to read:

     "7-20E-9.1. [NEW MATERIAL] COUNTY COMPENSATING TAX.--

          A. For the privilege of using tangible personal property in a county, there is imposed on the person using the property an excise tax at a rate equal to the combined rates imposed and in effect pursuant to the Local Hospital Gross Receipts Tax Act, the County Local Option Gross Receipts and Compensating Taxes Act and the County Correctional Facility Gross Receipts Tax Act of the value of tangible personal property that was:

                (1) manufactured by the person using the property in the state; or

                (2) acquired inside or outside this state as the result of a transaction with a person located outside this state that would have been subject to the state gross receipts tax had the tangible personal property been acquired from a person with nexus with New Mexico.

          B. For the purpose of Subsection A of this section, the value of tangible personal property shall be the adjusted basis of the property for federal income tax purposes determined as of the time of acquisition or introduction into this state or of conversion to use, whichever is later. If no adjusted basis for federal income tax purposes is established for the property, a reasonable value of the property shall be used.

          C. For the privilege of using a license or franchise in a county, there is imposed on the person using the license or franchise an excise tax equal to the tax rate provided in Subsection A of this section against the value of the license or franchise as determined pursuant to Section 7-9-7 NMSA 1978. The department by rule, ruling or instruction shall fairly apportion, where appropriate, the value of a license or franchise to its value in use in the county. For use of a license or franchise to be taxable under this subsection, the value of the license or franchise shall be acquired inside or outside this state as the result of a transaction with a person located outside this state that would have been subject to the gross receipts tax had the license or franchise been acquired from a person with nexus with this state.

          D. For the privilege of using services in a county, there is imposed on the person using the services an excise tax at the rate provided in Subsection A of this section of the value of the services at the time the product of the service was acquired. For use of services to be taxable under this subsection, the services shall have been performed by a person outside this state and the product of which was acquired inside or outside this state as the result of a transaction with a person located outside this state that would have been subject to the gross receipts tax had the service or product of the service been acquired from a person with nexus with this state.

          E. The governing body of a county may dedicate the revenue from the tax imposed pursuant to this section for any county purpose. If the governing body proposes to dedicate revenue for a specific purpose, the dedicated revenue shall be used by the county for that purpose unless a subsequent ordinance is adopted to change the purpose to which the revenue is dedicated or to place the revenue in the general fund of the county.

          F. Any law that affects the county compensating tax, or any law supplemental or otherwise appertaining thereto, shall not be repealed or amended or otherwise directly or indirectly modified in such a manner as to impair adversely any outstanding revenue bonds that may be secured by a pledge of such county compensating tax unless such outstanding revenue bonds have been discharged in full or provision has been fully made therefor.

          G. The tax imposed by this section may be cited as the "county compensating tax"."

     SECTION 32. TEMPORARY PROVISION--REFERENCES IN LAW.--

          A. References in law to the County Local Option Gross Receipts Taxes Act shall be deemed to be references to the County Local Option Gross Receipts and Compensating Taxes Act.

          B. References in law to the Municipal Local Option Gross Receipts Taxes Act shall be deemed to be references to the Municipal Local Option Gross Receipts and Compensating Taxes Act.

     SECTION 33. REPEAL.--Sections 7-9-26.1, 7-9-54.1, 7-9-57, 7-9-74, 7-9-76, 7-9-76.2, 7-9-79.2, 7-9-86, 7-9-91, 7-9-94, 7-9-96, 7-9-97, 7-9-99 through 7-9-102, 7-9-103.1, 7-9-103.2, 7-9-105 and 7-9-106 NMSA 1978 (being Laws 2003, Chapter 62, Section 1, Laws 1992, Chapter 40, Section 1, Laws 1969, Chapter 144, Section 47, Laws 1971, Chapter 217, Section 2, Laws 1977, Chapter 288, Section 2, Laws 1984, Chapter 2, Section 6, Laws 2007, Chapter 204, Section 9, Laws 1995, Chapter 80, Section 1, Laws 2001, Chapter 135, Section 1, Laws 2005, Chapter 104, Sections 23 and 26, Laws 2005, Chapter 169, Section 1, Laws 2006, Chapter 35, Sections 1 and 2, Laws 2007, Chapter 3, Sections 16 and 17, Laws 2012, Chapter 12, Sections 2 and 3, Laws 2007, Chapter 45, Section 6 and Laws 2018, Chapter 62, Section 1, as amended) are repealed.

     SECTION 34. DELAYED REPEAL.--

          A. Sections 7-9A-1 through 7-9A-11 NMSA 1978 (being Laws 1979, Chapter 347, Sections 1 and 2; Laws 2001, Chapter 57, Section 2 and Laws 2001, Chapter 337, Section 2; Laws 1979, Chapter 347, Sections 3 through 7; Laws 1983, Chapter 206, Section 6; Laws 1979, Chapter 347, Sections 8 and 9; and Laws 1997, Chapter 62, Section 2, as amended) are repealed effective July 1, 2020.

          B. Sections 7-20C-5, 7-20E-5 and 7-20F-6 NMSA 1978 (being Laws 1991, Chapter 176, Section 5, Laws 1993, Chapter 354, Section 5 and Laws 1993, Chapter 303, Section 6, as amended) are repealed effective January 1, 2021.

          C. Section 7-1-6.55 NMSA 1978 (being Laws 2007, Chapter 331, Section 4) is repealed effective July 1, 2021.

     SECTION 35. APPLICABILITY.--

          A. The provisions of Section 9 of this act apply to taxable years beginning on or after January 1, 2019.

          B. The provisions of Sections 10 and 11 of this act apply to taxable years beginning on or after January 1, 2020.

     SECTION 36. EFFECTIVE DATE.--

          A. The effective date of the provisions of Sections 6, 7, 12 through 16, 18, 20 through 23 and 33 of this act is July 1, 2019.

          B. The effective date of the provisions of Sections 8, 10 and 11 of this act is January 1, 2020.

          C. The effective date of the provisions of Sections 1 through 5, 17, 19 and 24 through 32 of this act is January 1, 2021.

- 72 -