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December 22, 2023

New Mexico tax department adopts rules clarifying when receipts from digital advertising services are taxable

On December 19, 2023, the New Mexico Taxation and Revenue Department (NM TRD) adopted final rules clarifying when receipts from digital advertising services are taxable.1 The final rules also clarify the sourcing for those receipts and modify the definition of "engaging in business." The new and amended rules took effect December 19, 2023.

Specifically, new rule NMAC Section "Receipts of a Digital Platform that Displays Digital Advertising," clarifies when receipts from digital advertising services are taxable under the Gross Receipts and Compensating Tax Act. Adopted amendments to NMAC Section "General Rules for Determining Reporting Location" and NMAC Section "Engaging in Business" (1) detail which receipts from those services are taxable and which are deductible, (2) clarify the sourcing rules for receipts from digital advertising services and (3) clarify what "engaging in business" means for taxpayers that only have an economic nexus with the state.

Taxation of digital advertising services receipts

NMAC Section clarifies that the gross receipts tax applies to receipts of digital platform providers if (1) the digital platform can be accessed or viewed in New Mexico, and (2) the providers display digital advertising services from the sale of those services to advertisers within and outside New Mexico. The rule defines key terms, including the following:

  • "Digital advertising services" means "advertisement services on digital platforms, including advertisements in the form of banner advertising, search engine advertising, interstitial advertising, and other comparable advertising services."
  • "Digital platform" means "any type of website, including part of a website, or applications, that a user is able to access or view."
  • "Device" means "any medium through which a digital platform may be accessed or viewed, including stationary or portable computing devices, tablets, phones, and smart devices, or similar equipment capable of accessing the internet and displaying a digital platform."

Amendments to NMAC Section add an example for determining the proper reporting location for gross receipts from digital advertising services and the related deduction. Under the example, a company provides digital advertising services to a customer. The digital advertisement can be viewed in New Mexico, and is intended to be viewed only in New Mexico, via the company's digital platform. Under this fact pattern, the NM TRD determined that the product of the digital advertising services is delivered to the locations of all persons in New Mexico that can view or access the advertising. Under NMAC Section,2 the reporting location of the gross receipts from this digital advertising service and the related deduction from this service is "the location from which the product of the digital advertising service was transmitted to the purchaser."

Engaging in business

Adopted amendments to NMAC Section clarify the term "engaging in business" for taxpayers that only have an economic nexus with the state. Under the amended rule, a taxpayer that only has an economic nexus with the state may close its gross receipts tax account following any calendar year in which it no longer meets the economic nexus threshold. In addition, the amended rule subjects an unidentified taxpayer (i.e., a person who has not registered or been otherwise identified) to the provisions of the Tax Administration Act.


The adopted changes to the reporting location, which take into consideration where the digital advertising is transmitted, could impact taxpayers that have data centers or rent rack space or servers at data centers in New Mexico, creating a gross receipts tax liability that previously did not exist. Accordingly, affected taxpayers should review the new provisions and determine whether they now have a tax liability.


Contact Information
For additional information concerning this Alert, please contact:
State and Local Taxation Group
   • Edward Corts (

Published by NTD’s Tax Technical Knowledge Services group; Andrea Ben-Yosef, legal editor



1 N.M. Register, Vol. XXXIV, Issue 24 (Dec. 19, 2023).

2 This method applies when one of the four other methods for determining the reporting locations for gross receipts and related deduction under NMAC Section through (d), does not apply. Under NMAC Section, "the reporting location of gross receipts and related deductions is the location from which the property or product of the service was shipped or transmitted to the purchaser."