SALT Report 2628 – The New Mexico Taxation and Revenue Department has amended certain gross receipts and use tax rules related to manufacturing and issued a new rule regarding tools used by manufacturers.
Rule 184.108.40.206 – This rule has been repealed. This rule provided that electricity used in manufacturing a product for sale does not become an ingredient or component part of the product. The repeal date for this provision was June 28, 2013.
Rule 220.127.116.11 – The rule provides that film used by a photographer is not an ingredient or component part of a finished photograph. However, for transactions that occur on or after January 1, 2013, it will be considered consumed in the manufacture of photographs. Therefore, on that date, the sale of film to a photographer will be deductible as tangible personal property consumed in the manufacturing process.
Newly Issued Rule
Rule 18.104.22.168 – This rule provides that tools and equipment used by a person engaged in the manufacturing business to manufacture a product are not considered to be consumed in the manufacturing process and, therefore, are not deductible. Additionally, if any piece of a tool or equipment breaks during the manufacturing process and must be replaced, it is not considered consumed in the manufacturing process, and the receipts are not deductible.
The rule defines a “tool” as an implement, instrument, or utensil, usually hand held, that is used to form, shape, fasten, add to, take away from, or otherwise change a manufactured product or equipment.
“Equipment” is defined as an essential machine, mechanism or tool, or a component or fitting of a machine, mechanism or tool, used directly and exclusively in a manufacturing operation and depreciable for federal tax purposes. This provision was effective June 28, 2013.
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