SeeSALT Blog
A New Mexico Hearing Officer found that Gross Receipts Tax does not apply to a taxpayer’s markup for services performed outside New Mexico, but the taxpayer’s reimbursements for payroll to New Mexico employees are taxable New Mexico receipts. In Protest of Talbridge, the taxpayer was a Texas employment agency with no offices in New Mexico that was the legal employer of individuals providing services to a client in New Mexico. The client recruited and interviewed candidates and, if hired, provided the employee a list from which to select their desired payroll provider. If the employee chose the taxpayer, the taxpayer charged the client the payroll expense plus a percentage (“markup”) as compensation for its services.
The legislation modifies the corporate income tax in three ways: (1) adopts a bright-line economic nexus standard; (2) adopts market sourcing for receipts from intangibles; and (3) reduces the corporate tax rate and gradually continues to reduce the rate over the next eight years. 
was not a facial violation of the U.S. Constitution but remanded the matter to create a factual record to evaluate an as-applied challenge to the tax.
The Texas Supreme Court issued a decision holding that service receipts are sourced to the physical location of the taxpayer’s personnel or equipment that performed the service for which the customer paid. The decision resolves disagreement regarding the proper interpretation of a Texas franchise tax apportionment statute that addresses the sourcing of service receipts. The statute sources a service provider’s receipts to Texas to the extent the service is “performed” in Texas. The taxpayer argued that its receipts from sales of satellite radio programming subscriptions were properly sourced to the location where its personnel and equipment performed the radio production and transmission services necessary for its radio programming (“origination sourcing”). The Comptroller interpreted the apportionment statute to source service receipts to Texas if the “receipt-producing, end-product act” takes place in Texas, which the Comptroller argued occurred where each subscriber’s radio received and decrypted the taxpayer’s radio signal (“destination sourcing”).
