Gross Receipts Tax: How Should You Source Professional Services in New Mexico?

New Mexico Taxation and Revenue Department Provides Additional Guidance on the Sourcing of Services

In January, the New Mexico Taxation and Revenue Department issued revised information that discusses how to determine gross receipts tax location codes, and rates to use for professional services for sales and use tax purposes. The guidance published informs taxpayers on how to source services generally, and further defines professional and in-person services.

Specifically, the guidance provides that:

The business location for gross receipts from the performance or sale of the following services, and any related deductions, shall be at the following locations:

1. for professional services performed in New Mexico (other than construction-related services, or performed outside New Mexico when the product of the service is initially used in New Mexico), the location of the performer of the service or seller of the product of the service, as appropriate;
2. for construction services and construction-related services performed for a construction project in New Mexico, the location of the construction site;
3. for services with respect to the selling of real estate located in New Mexico, the location of the real estate;
4. for transportation of persons or property in, into, or from New Mexico, the location where the person or property enters the vehicle; and
5. for services other than those described in Paragraphs (1) through (4) of this subsection, the location where the product of the service is delivered.

To be considered a professional service, the service being performed must either require a license from the state of New Mexico to perform, or an advanced degree from an accredited post-secondary educational institution. “Advanced degree” means a master’s degree or better.

The business location for professional services is the location where the services are performed, or where the seller of the product of the services is located.

The business location is the reporting location for the receipts and sets the location code which determines the tax rate.

New Mexico also states that for professional services performed in-person (meaning those services are required to be done either upon property or a person at a location that is not the business location of the professional service provider), the location where the product of the services is delivered provides the location code and rate for those receipts.

Examples of services that will generally be treated as in-person services include, per Regulation 3.1.4.13(1) NMAC:

1. Services provided by healthcare workers that are generally performed or required to be performed on or in the presence of the patient.
2. Mental health services, unless the provider generally provides the particular service either only in-person, or with limited exceptions.
3. Services provided by athletic trainers or physical therapists for clients.
4. Services provided by barbers and cosmetologists.
5. Home healthcare services.

Examples of services that will generally NOT be treated as in-person services include:

1. Architectural and engineering services. Note, however, that when performed as part of or billed to a construction project, these services are considered “construction related services” rather than professional services pursuant to Subsection C of Section 7- 9-3.4 NMSA 1978, and the reporting location for gross receipts from these services is the construction site per Paragraph (2) of Subsection F of Section 7-1-14 NMSA 1978.
2. Legal services.
3. Accounting, auditing, and tax preparation services.
4. Real estate appraisal services.

We Welcome Your Sourcing Questions

Sourcing of services in New Mexico may not be straight-forward. For questions related to sourcing, the New Mexico Gross Receipts Tax, or any other sales and use or indirect tax matter, please reach out to your trusted REDW State & Local Tax advisors.