Gravel mines do not pay severance tax like oil and natural gas that contribute to about one third or our state’s income. Gravel mines pay little to no tax to the counties and municipalities where they reside. Fisher Sand and Gravel claimed at a recent Town of Bernalillo Council meeting, that as their office resides in Bernalillo, if they could re-open their illegal gravel mine by annexing it into Bernalillo, it would generate up to $60,000 per month in New Mexico Gross Receipts Tax (GRT) for the Town. The Fisher testimony was mistaken.
Fisher’s statement would only be true if all of their sales went to construction projects within the Town. Most of the gravel from our area is used in concrete, roads, etc. in Albuquerque and therefore only generates GRT for Albuquerque.
Materials used in construction are taxed at the point-of-sale. The NM Tax and Revenue Department (TRD) has always considered the construction point-of-sale, or business location, to be the location of the final product: [excerpt from TRD directions] “You provide construction services – Your business reporting location is the location of each construction site…. All phases of a construction project are considered a service, including materials that become components of the completed project”. [see link –NM FYI BUSINESS LOCATION]
Using the new Bernalillo High School as an example, if the cement used to make the concrete is manufactured in the Tijeras plant located in Bernalillo County, the gravel and sand comes from the Lafarge quarry east of Santa Ana in Sandoval County, and is mixed and trucked from Albuquerque in Bernalillo County, no GRT tax will be paid at any of those locations, but will be paid at the location where the school is built. The Town will get GRT on all labor and material and profits used to build the school. Only the general contractor, otherwise known as the prime, will pay the GRT and on the total cost of construction. All other vendors will be issued Non-taxable Transaction Certificates to prevent double taxation.