Waste Removal Service Taxable in New Mexico

Wednesday, December 19th, 2018

New Mexico

The New Mexico Tax Administrative Hearing Office recently decided that waste removal services are taxable in New Mexico if the purpose of the service is to remove the waste from a site in the state.

The taxpayer was a corporation established in New Mexico that provided hazardous removal services for the Drug Enforcement Agency (DEA). In routine circumstances, the DEA called the taxpayer to a location in New Mexico. There the taxpayer identified, packaged, and cleaned up the hazardous products before shipping them to an out-of-state third party.

New Mexico imposes a gross receipts tax on the receipts of any person engaged in business within its boundaries. The hearing officer determined that the primary objective of the taxpayer's service was the removal of hazardous materials from sites within the state. As a result, the service was taxable in New Mexico.

The ruling also explored whether the taxpayer was entitled to a deduction for certain services provided to an out-of-state buyer. In New Mexico, businesses are not eligible for this deduction if the out-of-state buyer either makes initial use or takes delivery of the product in the state. The hearing officer decided the product of this service was the removal of the hazardous waste in New Mexico, so the benefit of this action was not received out of state. Therefore, the taxpayer was not entitled to a deduction.


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