29.401-4 New Mexico gross receipts and compensating tax
Source: FAR 29.401-4 on acquisition.gov
Include the New Mexico gross receipts and compensating tax clause in cost-reimbursement contracts for services performed in New Mexico, but only if your agency has an agreement with the state.
Overview
FAR 29.401-4 addresses the application of New Mexico's gross receipts and compensating tax to certain federal contracts. It defines "services" as per New Mexico law, encompassing a broad range of activities, including construction and the provision of tangible personal property for construction projects. The regulation requires contracting officers to include the clause at 52.229-10 in solicitations and contracts for cost-reimbursement contracts performed in whole or in part in New Mexico, where the contractor is authorized to acquire tangible personal property as a direct cost and title passes to the U.S. government. This requirement applies only to contracts issued by specific federal agencies that have agreements with New Mexico to avoid double taxation. Other agencies must establish similar agreements if they expect to award such contracts in New Mexico.
Key Rules
- Definition of Services
- "Services" includes all activities performed for consideration, especially those involving the performance of a service, construction activities, and provision of tangible personal property for construction projects in New Mexico.
- Contract Clause Requirement
- The clause at 52.229-10 must be included in applicable solicitations and contracts by specified agencies when the contract is cost-reimbursement, involves acquisition of tangible personal property as a direct cost, and is for services performed in New Mexico.
- Participating Agencies
- Only certain federal agencies with agreements with New Mexico are covered; others must negotiate their own agreements to benefit from the tax provisions.
Responsibilities
- Contracting Officers: Must insert the specified clause in qualifying contracts and ensure agency participation in the New Mexico agreement.
- Contractors: Must comply with the tax provisions and understand when the clause applies to their contracts.
- Agencies: Must maintain agreements with New Mexico or establish new ones to avoid double taxation.
Practical Implications
- This section ensures contractors are not subject to double taxation on tangible personal property used in cost-reimbursement contracts in New Mexico.
- Contractors and contracting officers must carefully determine contract eligibility and agency participation.
- Failure to include the required clause or to verify agency participation may result in tax liabilities or compliance issues.
(a) Definition.
Services, as used in this subsection, is as defined in the Gross Receipts and Compensating Tax Act of the State of New Mexico, Sec 7-9-3(k) NM SA1978, and means all activities engaged in for other persons for a consideration, which activities involve predominately the performance of a service as distinguished from selling or leasing property. "Services" includes activities performed by a person for its members or shareholders. In determining what is a service, the intended use, principal objective or ultimate objective of the contracting parties shall not be controlling. "Services" also includes construction activities and all tangible personal property that will become an ingredient or component part of a construction project. Such tangible personal property retains its character as tangible personal property until it is installed as an ingredient or component part of a construction project in New Mexico. However, sales of tangible personal property that will become an ingredient or component part of a construction project to persons engaged in the construction business are sales of tangible personal property.
(b) Contract clause. The contracting officer shall insert the clause at 52.229-10, State of New Mexico Gross Receipts and Compensating Tax, in solicitations and contracts issued by the agencies identified in paragraph (c) of this subsection when all three of the following conditions exist:
(1) The contractor will be performing a cost-reimbursement contract.
(2) The contract directs or authorizes the contractor to acquire tangible personal property as a direct cost under a contract and title to such property passes directly to and vests in the United States upon delivery of the property by the vendor.
(3) The contract will be for services to be performed in whole or in part within the State of New Mexico.
(c) Participating agencies.
(1) The agencies listed below have entered into an agreement with the State of New Mexico to eliminate the double taxation of Government cost-reimbursement contracts when contractors and their subcontractors purchase tangible personal property to be used in performing services in whole or in part in the State of New Mexico and for which title to such property will pass to the United States upon delivery of the property to the contractor and its subcontractors by the vendor. Therefore, the clause applies only to solicitations and contracts issued by the-
United States Defense Advanced Research Projects Agency;
United States Defense Threat Reduction Agency;
United States Department of Agriculture;
United States Department of the Air Force;
United States Department of the Army;
United States Department of Energy;
United States Department of Health and Human Services;
United States Department of the Interior;
United States Department of Labor;
United States Department of the Navy;
United States Department of Transportation;
United States General Services Administration;
United States Missile Defense Agency; and
United States National Aeronautics and Space Administration.
(2) Any other Federal agency which expects to award cost-reimbursement contracts to be performed in New Mexico should contact the New Mexico Taxation and Revenue Department to execute a similar agreement.