New Mexico Proposes Digital Promoting Providers Gross Receipts Tax Regs

On August 9, 2022, the New Mexico Taxation and Income Division printed proposed rules addressing the gross receipts tax (New Mexico’s model of a gross sales tax) therapy of digital promoting providers. The Division states the proposed rules don’t replicate a change in coverage however as an alternative guarantee the principles are constant for all promoting platforms.

Whereas the proposed rules present some readability concerning the taxation of digital promoting providers below preexisting guidelines, they introduce a number of inconsistencies and different gaps, significantly with respect to the finer particulars of the sourcing provisions. For instance, we consider the proposed rules go away ambiguity concerning whether or not gross receipts from the supply of digital promoting providers needs to be sourced to:

1. The purchaser’s handle

2. The server’s location

3. The viewer’s location

Individually, the proposed rules would enable a deduction for gross receipts from nationwide or regional promoting. Nonetheless, the deduction will not be allowed if the purchaser is included in or has its principal workplace in New Mexico. Whereas this considerably narrows the bottom for the tax, it injects complexity by requiring that the vendor know the state during which its purchaser is included or has its principal workplace, info unlikely accessible within the context of internet-based promoting platforms.

Collectively, these inconsistencies and lack of readability may result in future compliance points, which we hope might be mitigated as a part of the Division’s regulatory approval course of.

The Division scheduled a public listening to on the proposed guidelines for September 8, 2022, at 10:00 am MDT, which is also the due date for submission of written feedback. The proposed rules can be efficient upon publication within the New Mexico Register, which may occur as quickly as October 11, 2022 (or thereabout).