Section 10. Employer/Employee Vehicle Lease Agreement

A. When an employee is the owner of a vehicle and enters into a lease agreement with an employer who pays the employee wages which are exempt from gross receipts tax under Section 7-9-17 NMSA 1978, the receipts derived from the lease of the vehicle to perform the transportation services are not deductible pursuant to Section 7-9-50 NMSA 1978. B. Example: X, a bona fide employee of Y, a highway escort service, uses X's own vehicle and equipment to perform highway escort services for Y. X owes gross receipts tax on receipts from leasing the vehicles and equipment. Since X is a true employee of Y, X does not owe gross receipts tax on wages received from Y. If X were not a true employee of Y, X would owe gross receipts tax on the total amount received.