New Mexico tax law unintentionally cuts city revenue

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HOBBS, NM (AP) — The town of Hobbs is pushing to change a state law that town officials say is causing an unintended loss of gross tax revenue to the community.

The measure passed by the New Mexico Legislature and enthusiastically signed by Governor Michelle Lujan Grisham in 2019 included complex changes to state tax laws. Among other things, it has been touted as a way to help communities by requiring a business to pay tax on gross receipts where the services are provided rather than where the business is located.

Hobbs Town Commissioner Dwayne Penick told the Hobbs News-Sun that Hobbs could potentially be looking at losing $20,000 to $25,000 a month from destination tax.


“Oil companies that operate outside of Hobbs city limits, county, or whatever, the state gets the majority of that tax base,” Penick said.

Hobbs Mayor Sam Cobb said state lawmakers except Republican Rep. Larry Scott of Hobbs — the only lawmaker who owns and operates an oil and gas services company — voted for the legislation. because they were looking for taxes on Internet business gross receipts.

Cobb said the loss in gross revenue taxes for municipalities equals a gain for the state.

“The intent of the legislation was to ensure that the Amazons of the world paid taxes to the local communities to which they delivered goods,” Cobb said at a recent commission meeting. “They didn’t realize that a community like ours, which is so service-oriented, had a negative impact.”

Hobbs hired lobbyists to help push for an amendment during the legislative session.

Hobbs Commissioner Chris Mills said the original legislation should have gone through a more thorough vetting process by residents and communities across the state.

“But that’s not the way we do things here in New Mexico. We do it in the middle of the night, we do everything we can to get the little wording out without caring what it’s doing. to the people,” Mills said.

In 2019, the legislation began as a proposal by Democrats to raise more than $300 million in revenue through increased personal income taxes, increased tax rates on things like new vehicles and electronic cigarettes and levying a gross receipts tax on Internet sales. It was reduced, but Republicans still expressed concerns about tax increases given that the state enjoyed a budget surplus.

This year, New Mexico is again awash with money. Lujan Grisham, a Democrat, has offered tax breaks as she seeks re-election. Among the proposals is one to reduce the statewide gross receipts tax rate.


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