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August 12, 2022

New Mexico Taxation and Revenue Department proposes regulations "clarifying" that state's Gross Receipts Tax applies to digital advertising services

  • The New Mexico Taxation and Revenue Department’s proposed regulations would clarify that digital advertising services are subject to the state’s gross receipts tax (GRT).
  • The proposed regulations would treat receipts from digital advertising services in the same manner as broadcast and print advertising receipts.
  • If the Department’s proposed regulations are adopted as currently proposed, New Mexico would become the second state, after Maryland, that taxes digital advertising services.
  • Interested parties should consider submitting comments by September 8, 2022.

On August 9, 2022, the New Mexico Taxation and Revenue Department (Department) issued proposed regulations "clarifying" how receipts from the sale of advertising services to advertisers within and outside New Mexico are subject to the state's GRT. The proposed regulations explain that the tax applies to providers of digital advertising services whose digital platform may be accessed or viewed from within New Mexico, and specifically note that the GRT levied on those advertising receipts "does not impose an unconstitutional burden on interstate commerce." A public hearing will be held on the proposed regulations on September 8, 2022.If approved, the regulations will be effective after publication in the New Mexico Register or later. The Department indicated that the final regulations could be filed around October 11, 2022.

The GRT and compensating tax, which function as New Mexico's sales and use tax, are based on gross receipts; accordingly, most service transactions are subject to the GRT. Currently, broadcast and print advertising are expressly subject to the GRT. During the Multistate Tax Commission meeting on August 3, 2022, a representative of the Department said that digital advertising services were already subject to the GRT and that the proposed regulations would ensure that receipts from such activity are treated in the same manner as broadcast and print advertising receipts.1 The proposed regulations would clarify the Department's position that digital advertising services receipts are taxable.

Under the proposed regulations, "digital advertising services" would be defined as "advertisement services on digital platforms, including advertisements in the form of banner advertising, search engine advertising, interstitial advertising, and other comparable advertising services." A "digital platform" would be defined as "any type of website, including part of a website, or application, that a user is able to access or view." The proposed regulations indicate that receipts from digital advertising services would be sourced based on the location of the server "hosting the digital platform from which the advertising is accessed."

The proposed regulations would allow providers of digital advertising services to deduct receipts attributable to the provision of digital advertising services if the receipts (1) are from a national or regional advertiser that does not have its principal place of business in New Mexico or is not incorporated under the laws of New Mexico; or (2) are from an advertising agency that purchases the display of advertisements on the platform on behalf of, or for subsequent sale to, a seller defined in (1). Commissions derived by advertising agencies from performing digital advertising services within the state would not be deductible.


The proposed regulations purport to clarify the current application of the GRT to digital advertising services revenue. Given recent national interest in the subject following Maryland's adoption of its digital advertising services tax (DAT), which became effective on January 1, 2022, the Department's timing in proposing the regulation is interesting. Since Maryland first proposed the DAT in 2020, more than 10 states have either introduced or considered legislation that would either impose a new excise tax on digital advertising services or expand the sales and use tax to cover such services. The Maryland DAT has been the subject of two lawsuits, one at the federal level and one at the state level, challenging the constitutionality of the tax, as well as its legality under the federal Internet Tax Freedom Act (P.L. 114-125). By noting that digital advertising services already are subject to the GRT, and that such services are taxed the same as other advertising services, the Department appears to be attempting to forestall any legal challenges to the regulation.

The proposed regulations do not specify when the "clarifications" would take effect or the period to which the clarifications would apply. Lack of a such date, along with the Department's statement that digital advertising services are already subject to the GRT, raises the question as to whether the Department will seek to collect GRT for tax periods occurring before the proposed regulations are finalized.

The Department is conducting a hearing on the proposed regulations on September 8, 2022. Interested parties should consider participating in the hearing and submitting comments on the proposed regulations.


Contact Information
For additional information concerning this Alert, please contact:
State and Local Taxation Group
   • Robert Wehr (
   • David Yerkes (
   • Karl Nicolas (


1 See Bloomberg, "New Mexico Floats Regulations Taxing Digital Advertising" (Aug. 4, 2022); Law360, "New Mexico Rules Taxing Digital Advertising Service" (2022 Law360 215-178, Aug. 3, 2022).