Throughput Services Provided at a Bulk Storage Facility Excluded from New Mexico Gross Receipts Tax

The Taxation and Revenue Department of the State of New Mexico ("Department") recently affirmed Ryan & Company's position that receipts from the storage of jet fuel at a bulk liquid storage terminal were for leases of real property. Accordingly, the taxpayer was entitled to a deduction from taxable gross receipts as provided in NMSA 1978 § 7-9-53.

The Taxpayer owns and operates a bulk liquid storage terminal in New Mexico. The Taxpayer's only customer is the United States Government ("Government"), for whom the Taxpayer stores jet fuel under contract. During audit, the Department determined that the intent of the Government storage contract was actually to provide services and receipts from these services were subject to New Mexico gross receipts tax. Ryan & Company, through legal counsel, contended that the receipts under the storage contract were for the lease of real property and were deductible from New Mexico gross receipts tax under NMSA 1978 § 7-9-53.

During the protest hearing, the Department contended that the Government contract solicitation to the Taxpayer contained references to "services" sought by the Government. Testimony by the Taxpayer revealed that there was no intent by the Taxpayer to provide services for the Government under the terms of the storage contract. The hearing officer cited that New Mexico law holds that the character of contract is not controlled by its form, but from the intentions of the parties (Hueschen v. Stallie, 98 N.M. 696, 698, 652 P.2d 246, 248 (1982)).

The Department also argued that the Government had a license to use the storage tanks at the taxpayer's facility and the Government's control over the facility was not sufficient to constitute a lease of real property. In this case the Taxpayer had one (1) employee at the terminal. The employee was responsible for maintenance and providing access to the facility. The Government also has an employee on premises to oversee the operations and the Government owned jet fuel. The hearing officer ruled that the presence of the Taxpayer's employees at the terminal was not sufficient to negate the presence of a real property lease.

The Department did not appeal the Decision and Order of the hearing officer.

If you have any questions regarding New Mexico gross receipts tax, please contact Mr. G. Brint Ryan, Managing Principal of Ryan & Company, or Mr. Dennis Kolumber, Manager of Ryan & Company, at 972.934.0022. You may also contact Mr. Ryan and Mr. Kolumber by e-mail.