New Mexico gross receipts and compensating tax
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.