New Mexico Updates Definition of Use and Using
- Mar 5, 2012 | Susan McLain
The New Mexico Department of Revenue has updated their definition of the sales tax terms “use” and “using” in section 126.96.36.199 of the Gross Receipts and Compensating Tax Act. According to Tax Analysts, this was done in an effort to clarify the distinctions between use, consumption and storage.
The updates and modifications to the Act include the following:
Use “…means to employ or utilize property or a service for a particular purpose,” but it “…does not include mere ownership or possession.”
The primary examples used to explain the difference between use and using is:
“Example 1: The uses of a chair are many and varied. Its designed or intended use is being sat on by human beings. A chair, however, may also be “used” to wedge a door shut, as a step-ladder to reach something, as a receptacle to hold objects, as a display item, as a support to prop up a table or shelf and many other purposes not planned by its designer or maker. In contrast, a chair is not “used” by being assembled, polished, painted, upholstered or recaned.” [italics added for emphasis]
“The term ‘using’ includes storage in New Mexico except where the storage is for subsequent sale of the property in the ordinary course of the seller’s business or for use solely outside New Mexico.” [italics added for emphasis]
“Example 2: X Construction Company purchases a bulldozer in Illinois intending to use it in its construction business. The bulldozer is then delivered to X in New Mexico. X does not have any immediate use for the bulldozer so it is stored in the back lot of the construction company with other equipment. Two months later X changes plans and sells the bulldozer to Y Construction Company who needs it for a job. The bulldozer remained in storage from the day X received it until the day it was sold. Since the storage of the tractor was not for subsequent sale in the ordinary course of X's business, the storage of the tractor is a “use” within the meaning of Subsection N of Section 7-9-3 NMSA 1978. Therefore, X Construction Company will be subject to the compensating tax on the value of the tractor because it has used the property in New Mexico.”
To learn more about New Mexico’s Gross Receipts and Compensating Tax Act Regulations, click here. The Regulations were updated with the definitions of Use and Using February 29, 2012.