Today, Governor Susana Martinez was joined by New Mexico lawmakers, business leaders, and local contractors as she signed into law a major tax reform package that tackles the unfair and burdensome double and triple taxation of goods and services in New Mexico's construction and manufacturing sectors (a problem known as "tax pyramiding"). House Bill 184/256, sponsored by Rep. David Doyle (R-Albuquerque), Rep. Conrad James (RAlbuquerque), and Sen. Stuart Ingle (R-Portales) will exempt from the gross receipts tax specific products and services necessary for construction and manufacturing businesses to build their products, reducing the financial burden on thousands of small businesses, allowing them to take on new projects and hire more workers. In addition, this legislation will also reduce the cost that consumers pay for manufactured projects and new construction, while making New Mexico a more attractive place for companies to build facilities and expand.
"This tax reform package shows our strong commitment to support New Mexico's small businesses and compete for jobs," said Governor Martinez. "New Mexico has been imposing one of the highest burdens in the country on local contractors and small businesses - driving up construction and manufacturing costs in a way that deters companies from building and expanding in our state. With this legislation, we can stop the double and triple taxation that has hurt many New Mexico businesses and allow them to hire more workers and compete with other states. I am thankful for the sweeping bipartisan support that these important tax reforms received."Pyramiding occurs when businesses in the manufacturing and construction sectors are forced to pay gross receipts taxes on the various goods and services required to make a final product, which is then also taxed. For example, a small construction contractor building additions to a home or office complex would be taxed on a myriad of items and/or services that would
contribute to the final project - such as any necessary architectural or design work, large trash hauling, portable toilets at the work site, and scaffolding. New Mexico is one of the only states in the country that imposes such a high level of pyramiding in its tax system, and the gross receipts tax has been identified as a key reason for New Mexico's lack of competitiveness with surrounding states.
"With the right policies, we can get New Mexico's economy back on track," said Rep. Doyle.
"Greatly reducing the tax burden on these industries that have seen truly hard times will help us to revitalize two important sectors of the state's economy and allow businesses to hire again. I thank Governor Martinez for her leadership on these important tax reforms and her efforts to make New Mexico a better place to do business."
New Mexico's construction sector, in particular, has recently experienced the largest decline in construction employment of any state in the country, according to the Associated General Contractors of America.
"When New Mexico businesses face a less burdensome tax system, they have an easier time growing and hiring," added Rep. James. "Businesses in New Mexico are still struggling, particularly in the fields of manufacturing and construction. Removing these burdens will help put those businesses back on the right track and I am proud to work with Governor Martinez to help create an business environment in which New Mexicans can succeed and thrive."
HB 184, sponsored by Rep. Doyle specifies that construction-related services such as architecture, surveying, engineering, and environmental testing are not subject to GRT when the project on which they are used is also subject to GRT upon completion. It also allows for a GRT deduction for leasing of construction equipment such as trash containers or scaffolding. HB 256, sponsored by Rep. James, removes the GRT from manufacturing consumables -- products like electricity, fuels, raw materials, and chemicals used in the manufacturing process -- which can be major expense for manufacturing companies. Both bills were combined and passed as a single package during the recent legislative session; Senator Ingle carried the bill in the Senate and was instrumental in ensuring its passage.
"With this bill, New Mexico is stating loudly that we're ready to compete for jobs," said Sen. Ingle. "This is important tax relief for our small businesses and manufacturers throughout the state."