The New Mexico Taxation and Revenue Department ("Department") recently ruled that a nail technician's receipts were nontaxable wages.
The New Mexico gross receipts tax applies to receipts from services performed in the state. The tax does not apply to an employee's receipts from wages, salaries, or commissions. The following indicate that a person is an employee: (1) the person is paid a wage or salary; (2) the employer is required to withhold income tax for that person; (3) the employer is required to pay F.I.C.A tax for that person; (4) the person is covered by workmen's compensation insurance; (5) the employer is required to make unemployment insurance contributions for that person; (6) the employer considers the person to be an employee; and (7) the employer has a right to exercise control over how the person works.
The taxpayer worked as a nail technician for a salon. The taxpayer performed all his work at the salon and received a regular paycheck from the owner. The owner of the salon collected payments for the taxpayer's services and paid the gross receipts tax on those payments. The owner referred to the taxpayer as an employee. The state assessed gross receipts tax on the taxpayer's receipts from his work at the salon.
The Department ruled that these receipts were wages and that the taxpayer was an employee. Because the salon owner considered the taxpayer an employee, paid the taxpayer regularly, and had a right to control the environment in which the taxpayer worked, the taxpayer was an employee. The taxpayer's receipts from the salon were therefore wages and were not subject to the gross receipts tax.