On August 9, 2022, the New Mexico Taxation and Income Division printed proposed laws addressing the gross receipts tax (New Mexico’s model of a gross sales tax) remedy of digital promoting providers. The Division states the proposed laws don’t replicate a change in coverage however as a substitute guarantee the foundations are constant for all promoting platforms.
Whereas the proposed laws present some readability relating to the taxation of digital promoting providers underneath preexisting guidelines, they introduce a number of inconsistencies and different gaps, notably with respect to the finer particulars of the sourcing provisions. For instance, we imagine the proposed laws go away ambiguity relating to whether or not gross receipts from the availability of digital promoting providers must be sourced to:
- The purchaser’s tackle
- The server’s location
- The viewer’s location
Individually, the proposed laws would enable a deduction for gross receipts from nationwide or regional promoting. Nevertheless, the deduction will not be allowed if the purchaser is integrated in or has its principal place of job in New Mexico. Whereas this considerably narrows the bottom for the tax, it injects complexity by requiring that the vendor know the state wherein its purchaser is integrated or has its principal place of job, info not going obtainable within the context of internet-based promoting platforms.
Collectively, these inconsistencies and lack of readability might result in future compliance points, which we hope shall 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 laws could be efficient upon publication within the New Mexico Register, which might occur as quickly as October 11, 2022 (or thereabout).
Please contact the McDermott Will & Emery State & Native Tax staff in case you have any questions concerning the potential affect of those proposed laws in your firm. Within the meantime, we shall be monitoring the regulation approval course of and collaborating in subsequent month’s public listening to.