Measure may clarify gross receipts tax debate

Cities and the New Mexico Taxation and Revenue Department have different interpretations about the meaning of the term 'average distribution'

Hannah Grover
Customer Loren Diede, left, gets help picking plants from assistant manager Scott Rubenstein Friday at San Juan Nurseries in Farmington. A bill passed by the state Legislature is designed to eliminate confusion between cities and counties, and the New Mexico Taxation and Revenue Department over tax revenue distributions.

FARMINGTON — A bill recently passed by the state Legislature and awaiting action by the governor may help clear up some confusion between various cities and counties in the state and the New Mexico Taxation and Revenue Department.

The confusion is based on reductions made to distributions of gross receipts tax revenues to cities and counties. The New Mexico Taxation and Revenue Department and several cities disagree about the definition of average monthly distribution.

The Taxation and Revenue Department collects gross receipts tax revenues and distributes or transfers a portion of that to cities or counties where the transaction took place. The money is distributed to city and county governments on a monthly basis.

But if a business amends its tax return or protests the tax assessment, the department may reduce the city's next monthly distribution. If that reduction is going to be greater than 20 percent of the average distribution, the city can spread out the reductions over time.

Senate Bill 236, which was adopted by unanimous votes in both the House of Representatives and Senate, aims to clarify confusion about what period of time is used to determine the average monthly distribution. Municipalities believe the law refers to 20 percent of the average monthly distribution. The Taxation and Revenue Department interprets it to refer to 20 percent of the average annual distribution.

Manager Manny Viveros completes Lisa McCord's purchase Friday at San Juan Nurseries in Farmington.

The legislation, sponsored by Sen. Carroll Leavell, R-Jal, would define it as an average monthly distribution.

“The bill is important because it allows cities to negotiate a loan from the Taxation and Revenue Department and a repayment plan when gross receipts in a city fall, and the city does not have enough money to operate and provide essential city services,” Leavell said in an emailed statement.

The confusion was one of the points that five cities, including Farmington and Bloomfield, hope to have clarified. About a year ago, the cities hired lawyers to develop clarity and transparency on the issue. The cities were also concerned about what they characterized as a lack of transparency from the taxation and revenue department about the reductions. City officials went through training and will view documents that may provide them with some answers later this month or early next month, according to the lawyers.

A spokesman for New Mexico Taxation and Revenue did not respond to email requests or phone calls from The Daily Times on Friday seeking comment.

Gov. Susana Martinez still must sign SB 236 in order for it to become law.

Hannah Grover covers government for The Daily Times. She can be reached at 505-564-4652.