September 8, 2003
FOR IMMEDIATE RELEASE
Throughput Services Provided at a Bulk Storage Facility Excluded from New Mexico Gross Receipts Tax.
The Taxation and Revenue Department of the State of New Mexico ("Department")
recently affirmed Ryan & Company's position that receipts from the storage
of jet fuel at a bulk liquid storage terminal were for leases of real property.
Accordingly, the taxpayer was entitled to a deduction from taxable gross
receipts as provided in NMSA 1978 § 7-9-53.
The Taxpayer owns and operates a bulk liquid storage terminal in New Mexico.
The Taxpayer's only customer is the United States Government ("Government"),
for whom the Taxpayer stores jet fuel under contract. During audit, the
Department determined that the intent of the Government storage contract
was actually to provide services and receipts from these services were subject
to New Mexico gross receipts tax. Ryan & Company, through legal counsel,
contended that the receipts under the storage contract were for the lease
of real property and were deductible from New Mexico gross receipts tax
under NMSA 1978 § 7-9-53.
During the protest hearing, the Department contended that the Government
contract solicitation to the Taxpayer contained references to "services"
sought by the Government. Testimony by the Taxpayer revealed that there
was no intent by the Taxpayer to provide services for the Government under
the terms of the storage contract. The hearing officer cited that New Mexico
law holds that the character of contract is not controlled by its form,
but from the intentions of the parties (Hueschen v. Stallie, 98 N.M.
696, 698, 652 P.2d 246, 248 (1982)).
The Department also argued that the Government had a license to use the
storage tanks at the taxpayer's facility and the Government's control over
the facility was not sufficient to constitute a lease of real property.
In this case the Taxpayer had one (1) employee at the terminal. The employee
was responsible for maintenance and providing access to the facility. The
Government also has an employee on premises to oversee the operations and
the Government owned jet fuel. The hearing officer ruled that the presence
of the Taxpayer's employees at the terminal was not sufficient to negate
the presence of a real property lease.
The Department did not appeal the Decision and Order of the hearing officer.
If you have any questions regarding New Mexico gross receipts tax, please
contact Mr. G. Brint Ryan, Managing Principal of Ryan & Company, or Mr.
Dennis Kolumber, Manager of Ryan & Company, at 972.934.0022. You may also
contact Mr. Ryan and Mr.
Kolumber by e-mail.
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