Section 9. Sale Of Service To A Governmental Agency

A. Receipts from the sale of a service to a governmental agency are not deductible pursuant to Section 7-9-54 NMSA 1978. Only the receipts from selling tangible personal property to a governmental agency are deductible. B. Example 1: The city contracts with E, an employment agency, to provide substitutes for vacationing city secretarial employees each summer. E deducts the receipts from the city in computing its gross receipts tax liability. This is a sale of services to a political subdivision of the state of New Mexico and not a sale of tangible personal property. The deduction cannot be allowed. C. Example 2: B is an attorney who performs legal services in New Mexico for various Indian tribes and Indian pueblos. B is not an enrolled member of any Indian nation, tribe or pueblo. B's receipts from these services are not deductible under Section 7-9-54 NMSA 1978. A deduction from gross receipts under Section 7-9- 54 NMSA 1978 is allowed only for receipts from the sale of tangible personal property to the governing bodies of 3.2.212 NMAC 2 Indian tribes or Indian pueblos for use on Indian reservations or pueblo grants. (If the services are performed on the tribe's territory, however, they may be exempt under Subsection D of Section 3.2.4.9 NMAC).