Internet sales, not-for-profit health services may be taxed

House bill contains provisions passed last year but vetoed by governor

SANTA FE — With just nine days left in this year’s 30-day legislative session, lawmakers haven’t given up on the idea of big changes to the state’s tax code.

A late-developing House bill could include imposing a tax on internet sales and not-for-profit hospital services — proposals that were passed last year but ultimately vetoed by Gov. Susana Martinez.

House Speaker Brian Egolf, D-Santa Fe, said Monday that the tax bill’s details have not been completed, but he suggested legislation could move quickly out of the House by the end of this week.

“There seems to be a desire to do something,” he told the Journal.

However, the tax legislation is far from a done deal, and it’s unclear whether it might include an overhaul of the state’s gross receipts tax system, which Martinez has pushed for over the past year.

The two-term Republican governor — who is in her final year in office — has indicated she is open to raising revenue, but only by closing tax loopholes as a part of a broad overhaul of the tax code.

“As the governor has repeatedly said, she will only sign comprehensive tax reform,” Martinez spokesman Michael Lonergan said Monday.

Both online sales and not-for-profit hospital services have been on lawmakers’ radar for years.

Amazon began collecting gross receipts tax on New Mexico purchases last year, but only on direct sales from the online retail giant, and not on thirdparty sales.

Imposing a tax on all online sales could bring more revenue to the state, but backers also describe the push as aimed at leveling the playing for New Mexico retailers.

“It seems like it’s a big issue of fairness to our local businesses,” Egolf said Monday.

Meanwhile, lawmakers have also been looking at a loophole that exempts not-for-profit and government hospitals and health care providers from paying state gross receipts taxes. For-profit hospitals, such as the ones owned by Lovelace Health Systems, do pay state tax.

Much of last year’s tax discussion was spurred by a persistent revenue shortfall. That’s not the case anymore, as lawmakers have an estimated $292 million in “new” money available for the budget year that starts in July, thanks primarily to skyrocketing oil production in southeastern New Mexico.

Combined, last year’s vetoed proposals involving online sales and not-for-profit hospitals would have generated an estimated $117 million in annual revenue for the state general fund.

Although the state’s budget outlook has improved, some legislators say that they would like to see less volatility in revenue collections — and that changes to the tax code could accomplish that.

Rep. Jim Trujillo, D-Santa Fe, chairman of the House Taxation and Revenue Committee, touted a separate bill Monday that would create new high-end personal income tax brackets.

For married individuals filing jointly, the tax rate would rise from 4.9 percent to 6.2 percent for couples making more than $240,000 per year. It would be even higher for couples making more than $480,000 annually.

“I just think we need to be more progressive on our income tax,” Trujillo told the Journal. “People who earn (more) money should be a little more responsible for funding our government.”

He also said 2003 personal income tax cuts signed into law by then-Gov. Bill Richardson were a “big mistake.”

However, several lawmakers expressed opposition to the proposal, House Bill 272, which was not voted on Monday and appears unlikely to end up in a final tax package.

“I think there’s probably a better solution to (revenue volatility) than changing our income tax brackets,” said Rep. Jason Harper, a Rio Rancho Republican who spearheaded last year’s tax overhaul effort.