New Mexico – Manufacturing Deduction Expanded and Hold Harmless Gross Receipts Taxes Enacted

SALT Report 2353 – New Mexico has enacted legislation that creates both a municipal hold harmless gross receipts tax and a county hold harmless gross receipts tax. The Bill also amends the manufacturing gross receipts deduction to include consumables.

Hold Harmless Gross Receipts Tax

Municipalities and counties are authorized to pass ordinances to impose a hold harmless gross receipts tax. The tax cannot exceed 3/8% of the gross receipts of any person engaged in business in the municipality or county and will be imposed in increments of 1/8%.

Manufacturing Deduction

A portion of the receipts from selling tangible personal property that is a “consumable” can be deducted from the gross receipts and the governmental gross receipts so long as it is consumed in the manufacturing process of a product. Consumables are defined as follows:

  • A consumable is property that is incorporated into, destroyed, depleted or transformed in the process of manufacturing a product
  • A consumable includes electricity, fuels, water, manufacturing aids and supplies, chemicals, gases, repair parts, spares and other tangibles used to manufacture a product,
  • A consumable does not include property used in the generation of power, the processing of natural resources, including hydrocarbons, and the preparation of meals for immediate consumption on or off premises

Purchasers who issue a non-taxable transaction certificate to the seller may deduct the following amounts from their gross receipts:

  • 20% of receipts received prior to January 1, 2014,
  • 40% of receipts received in calendar year 2014,
  • 60% of receipts received in calendar year 2015
  • 80% of receipts received in calendar year 2016, and
  • 100% of receipts received on or after January 1, 2017

The purpose of the deduction is to encourage new manufacturing businesses into New Mexico and to reduce the overall tax burden, including reduced pyramiding, on the tangible personal property that is purchased by manufacturing businesses in the state.

The provisions in this Bill are effective July 1, 2013.

For Further Information

New Mexico State Legislature – House Bill 641, Laws 2013