New Mexico – Expanded Deductions for Sales to Manufacturers

SALT Report 2845 – The New Mexico Taxation and Revenue Department updated its guidance regarding the expanded deductions available for sales of tangible personal property to manufacturers.  Specifically noted was that section 7-9-46 NMSA 1978 was amended to include “tangible personal property that is consumed in the manufacturing process.”

Under section 7-9-46 NMSA 1978 a seller may deduct receipts from sales of tangible personal property to a manufacturer if it will become an ingredient or component part of a manufactured product, or it is a consumable and is consumed in the manufacturing process. The deduction applies as follows:

  • 20% of receipts received in calendar year 2013
  • 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

Consumables that are consumed in the manufacturing process, include tangible personal property that is incorporated into, destroyed, depleted or transformed in the process of manufacturing a product, such as electricity, fuels, water, manufacturing aids and supplies, chemicals, gases, repair parts, spares and other tangibles used to manufacture a product.

However, effective July 1, 2013, the exemption will no longer apply to tangible personal property that is 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

Each deduction must be supported by a specific Nontaxable Transaction Certificate, and must be reported separately on the CRS-1 Form.

The publication provides further guidance as to which NTTC should be used to support a specific deduction, as well as how the separate reporting is to be done.

For Further Information

New Mexico Taxation and Revenue Department – FYI-275 Deductions for Certain Sales to Manufacturers