New Mexico – Medical Alarm Service Provider Had Nexus

SALT Report 1893 – The New Mexico Taxation and Revenue Department ruled that an out-of-state alarm monitoring company had nexus with New Mexico and was liable for gross receipts tax on its sales of services in New Mexico.

The Taxpayer sells alarm monitoring services, which includes pendants and wristbands, to New Mexico customers for a monthly fee.  The Taxpayer contracts with a California call center to provide the monitoring services.  When the call center receives a distress call from a New Mexico customer they notify the appropriate agency or medical personnel in New Mexico to assist the New Mexico customer.

During an audit the Department determined that the Taxpayer had failed to report gross receipts in the amount of $213,880.53 from January 2001 through December 2007.  In July 2008, the Department assessed $10,694.09 in unpaid gross receipts taxes plus $2,127.08 in penalties and $4,438.71 in interest.

The Taxpayer appealed the assessment claiming that he did not have a physical presence in New Mexico during the audit period. The Taxpayer claimed that because the call center that responds to the New Mexico customers is in California the actual service is performed in California, not New Mexico.

Upon review of the case the Department determined that the Taxpayer’s services were not performed in California as the Taxpayer was simply reselling the services provided by the call center to New Mexico customers.  Further, the Department ruled that the monitoring of the medical alarm system occurs at the point at which the alarm originates.  Therefore, if the customer was in New Mexico, the service was performed in New Mexico.

The Department also noted that any “gain or benefit” that the Taxpayer acquired through the provision of the services was incurred and paid in New Mexico.   Consequently, this rule must also be applied to any liability for not responding to the calls in New Mexico.   As a result, the Department ruled that the services were performed in New Mexico and the Taxpayer’s appeal was denied.

For Further Information:

New Mexico Taxation and Revenue Department – Decision Number 12-15