Chapter 14 MUNICIPALLY IMPOSED TAXES AND FEES Some locally-imposed taxes and fees are optional, and a given municipality may have imposed all or portions of their taxing authority under that item. Other taxes and fees are mandated and must be imposed. MUNICIPAL LOCAL OPTION GROSS RECEIPTS TAXES ( 7-19D-1 through 7-19D-15) Gross receipts taxes are the major and most essential source of revenue for a municipality. In addition to receiving a distribution from the statewide gross receipts tax (See page 13-1), municipalities may impose various types of gross receipts taxes on sales of goods and services conducted within their boundaries. These gross receipts taxes may be imposed in increments of 1/4%, 1/8% or 1/16%, depending upon the particular use for which the state statutes authorize the tax. The state statute authorizing a particular type of gross receipts tax also says whether or not the question of imposing the tax is subject to an election. To impose a particular tax, a municipality must enact the gross receipts tax ordinance models supplied by the Taxation and Revenue Department. Since gross receipts taxes start being collected only on January 1st or July 1st, the ordinance must be fully enacted and the municipality must send a copy of the enacted ordinance to Taxation and Revenue at least 90 days prior to January 1st or July 1st so that the tax may be added to the reporting form. Otherwise, the tax will not be effective or start being collected until the following July 1st or January 1st. The following types of Municipal Gross Receipts Taxes are currently authorized: Regular Municipal Gross Receipts Tax ( 7-19D-1 through 7-19D-9) Municipalities can impose a maximum municipal gross receipts tax of one and one-half percent (1.50%). The tax can be implemented by adoption of one or more ordinances in tax rate increments of one-eighth of one percent (.125%). Although no election is required, municipalities may provide for voter approval of the ordinance imposing the tax. Voters also may petition for an election. Proceeds from the tax may be dedicated to a specific area of government of the municipality. The governing body can adopt an ordinance imposing the tax, as follows: a. The ordinance may call for an election (referendum) on the new tax, in which case the ordinance is not effective until it has been approved by the municipal voters. b. If the ordinance does not call for an election, it is nevertheless subject to one if a petition calling for an election on the tax and containing the required number of valid signatures (5% of the registered voters in the municipality who were registered to vote in the most recent general election) is filed with the Clerk within 30 days after enactment of the ordinance. If a valid petition is received within the 30-day period, the governing body must call an election (referendum) on the ordinance and the ordinance is not effective until after it has been approved by the municipal voters. (Obviously, if the ordinance fails to pass, it doesn't go into effect.) 14-1
If no petition is received within the 30-day period or if the petition does not contain the required number of valid signatures, an election is not called and the ordinance becomes effective upon expiration of the petition period. If an election is called on the tax, procedures in 7-19D-9D, E & F, NMSA 1978 are applicable, as well as the municipal election code (See Chapter 9 - Elections). If you hold an election on this tax, make sure you set and follow the election calendar without changes. If the outcome of the election is challenged in District Court, errors in scheduling or conducting the election could cause the results of the election to be thrown out and the election re-done. An election is not an INEXPENSIVE procedure. Municipal Environmental Services Gross Receipts Tax ( 7-19D-10) This tax of 1/16% may be imposed by ordinance, not subject to referendum. The proceeds are dedicated in the enacting ordinance and may be used only as authorized in 7-19D-10C. Municipal Infrastructure Gross Receipts Tax ( 7-19D-11) This tax may be imposed in increments of 1/16% by ordinance, up to a maximum of 1/4%. The first 1/8 th percent may be enacted in 1/16 th increments and is not subject to referendum of any kind (notwithstanding a requirement of any charter municipality), unless it is dedicated for economic development, in which case, an election is required. The second 1/8 th may also be enacted in 1/16 th increments and is subject to referendum. The proceeds of this tax may be used for infrastructure or economic development purposes listed in 7-19D-11C, or may be used for general purposes. However, if the imposing ordinance lists only infrastructure purposes, the municipality must amend the ordinance if it also wishes to use the proceeds for general purposes. TYPES OF GROSS RECEIPTS TAXES BEING PHASED OUT At one time, municipalities were authorized to impose two other types of municipal gross receipts taxes, but that authority has been repealed. However, the taxes will continue to be collected and distributed to the municipality until the deadline shown or any revenue bonds issued on the receipts from those taxes are paid off (retired), whichever is later. These two types of municipal gross receipts taxes are: Special Municipal Gross Receipts Tax ( 7-19A-1 through 7-19A-7) This tax of 1/4% was authorized to be imposed by referendum held before April 1, 1986, and collections and distributions ceased June 30, 1991, unless there were outstanding revenue bonds on this tax. If there are outstanding revenue bonds, collections and distributions cease the July 1st or January 1st following full payment of the original bond issue. This tax could be used only for infrastructure improvements ( 7-19A-3B). Supplemental Municipal Gross Receipts Tax ( 7-19-10 through 7-19-18) This tax could be imposed by referendum held before February 1, 1986, in increments of 1/4%, up to a maximum of 1%. The authorization to impose the tax required that revenue bonds be issued on this tax, and it ceases to be collected and distributed when the bonds are fully paid. Proceeds from this tax could be used only for municipal water supply systems ( 7-19-17A). 14-2
PROPERTY TAX Property taxes are those mill levies placed on real property within a county, based on the market value of the real property. These taxes are also called ad valorem taxes (ad valorem is Latin for "at value"). Property taxes on property within municipal boundaries are collected by the county, and the portion of property taxes imposed by the municipality is passed on to the municipality. The current rate for municipal taxes on property within the municipal limits is a maximum of 7.650 mills ( 7-37-7A, 7B(3)), exclusive of special assessments. The amount of municipal property tax millage is set by including in the budget resolution the amount of revenue the mill levy would produce. Since the county collects these taxes on behalf of the municipality, the county charges a collection fee for that service. This charge must show in the budget as a separate line item expense. LODGER'S TAX (OCCUPANCY TAX) A municipality may impose by ordinance an Occupancy Tax on rental of lodging within the municipality ( 3-38-13 through 3-38-24). The tax may not exceed 5% of gross taxable rent. This tax is paid by the vendors of lodging directly to the municipality, with the ordinance imposing the tax stating the amount and the times, place and method for the payment, as well as other details ( 3-38- 20). The uses to which the proceeds may be put is defined in 3-38-21. Depending upon the amount of the tax, 3-38-15 puts certain restrictions on the portion of the proceeds which must be dedicated to advertising, publicizing and promoting tourist-related attractions and facilities, and the municipality must establish an advisory board of five residents to advise the governing body on how the portion for advertising, publicity and promotion is to be spent ( 3-38-22). Revenue and refunding bonds may be issued on this tax ( 3-38-23 & 24). LIQUOR LICENSE TAX A municipality may impose, by ordinance, an annual, non-prohibitive municipal license tax upon persons holding state liquor licenses for the privilege of operating within the municipality as retailers, dispensers, canopy, restaurant, or club licensees ( 7-24-1 through 7-24-5). The amount of the tax may not exceed $250 per year. The tax year begins July 1 of any year, and the ordinance imposing the tax and any amendments increasing or decreasing the tax must be enacted before June 1 of any year. The time and place the tax must be paid and any penalty for nonpayment must be contained in the ordinance. If a municipality has imposed a liquor license tax, no retailer, dispenser or club may operate without having paid the tax. A business which has not paid the tax may be closed by any municipal police officer upon written order of the governing body and after sufficient notice to the business. 14-3
LICENSE FEES A municipality may enact an ordinance (or ordinances) requiring certain types of businesses to be licensed and pay a fee before they may do business in the municipality ( 3-38-4). The amount of the license fee on any type of business must bear a reasonable relation to the cost of municipal regulation of the business, so only those businesses which require regulation should be required to obtain a license. The ordinance may provide for pro-rating the annual license fee for periods of less than a calendar year. Examples of businesses which may require some sort of regulation include, but are not limited to: pawnshops, salvage yards, pool halls, electronic game arcades, vending machine operators, circuses or carnivals, etc. Licensing and regulation of certain businesses, such as contractors and building trades, has been preempted by the State and a municipality may not require a municipal license for those businesses. A municipality may not require a municipal license for retailing, dispensing or serving alcoholic beverages, but may impose a municipal liquor license tax on those activities (see above). If a business required to have a municipal license fails to obtain one or violates the municipal licensing ordinance covering that type of business, the municipality may take any appropriate legal action to prevent the conduct of that business; restrain, correct or abate the violation); prevent the occupancy of the building, structure or land on which the business is located; or charge a late fee of no more than ten dollars ($10.00) per year ( 3-38-5); and may impose a lien on property owned by that business to collect the license fee ( 3-38-6). BUSINESS REGISTRATION FEES A municipality is required by state law ( 3-38-3) to collect an annual business registration fee, not to exceed $35, on each place of business not required to be licensed under a municipal licensing ordinance. The business must pay the registration fee before operating in the municipality. If a business operates more than one location within the municipality, the business is required to pay a separate business registration fee for each location. This business registration fee is a condition for the privilege of doing business and applies to any business not requiring a business license, with the exception of persons officiating at athletic events who are registered with and regulated by the state ( 3-38-3B). Municipalities may also exempt artists whose sales in the previous year did not exceed $1,000 total. FRANCHISE FEES A municipality may levy a franchise fee of a percentage of the gross receipts of private utilities doing business within the municipality. The franchise fee is imposed by the ordinance authorizing the utility to provide services within the municipality, such as telephone, gas, electric, water, solid waste disposal or cable TV service. Usually the franchise agreement contained in such an ordinance is long-term; the maximum allowed by law is 25 years. For more information on franchise ordinances, including publication requirements, petitions and subsequent elections, etc., see 3-42-1 and 2. 14-4
Although state law does not specify any amount for the franchise fee, most municipalities are unsuccessful in negotiating fees of more than 2% of gross receipts of the utility. The exception is franchise fees for cable TV, which may run as high as 5%. Some franchise agreement ordinances set the maximum amount for services which may be charged to customers for solid waste disposal or cable television service. DEVELOPMENT IMPACT FEES Municipalities are authorized to impose development impact fees on land development within their corporate boundaries to pay for the increased demands on municipal services and infrastructure caused by the development. Revenues received must be used for specific purposes and are not general use fees. However, development and enactment of the fee structure is a complicated process requiring multiple public hearings and sound justification of such fees based on long-term capital improvements planning. For full particulars and restrictions, see the "Development Fees Act," 5-8-1 through 5-8-43, NMSA 1978. OTHER LOCALLY COLLECTED REVENUES Other frequently utilized sources of locally collected revenues are such things as: Building permit fees Recreation user fees Municipal Court fines or penalty assessment fees Parking fees These fees may be placed in the General Fund for general purpose use or the governing body may designate by ordinance how these fees are to be used. MUNICIPAL COURT FEES A mandatory $20 Local Government Corrections fee must be collected on penalty assessments for traffic violations and on convictions in municipal court, but this money goes into a special fund and may only be used for certain purposes ( 35-14-11). In addition, a $6 Court Automation Fee and a $23 Judicial Education Fee must be collected on every conviction or guilty plea in municipal court. The Court Automation Fee is to be remitted monthly to the State Treasurer for credit to the municipal court automation fund and shall be used for the purchase, maintenance and operations of court Center automation systems in the municipal courts ( 35-14-11H). The Judicial Education Fee is to be remitted monthly to the State Treasurer for credit to the Judicial Education Fund Judicial Education and shall be used for education and training, including production of bench books and other written materials, of municipal judges and other municipal court employees ( 35-14-11G). 14-5
DWI CONVICTION FEES A mandatory $85 testing fee and a mandatory $75 DWI prevention fee must also be imposed by each municipal court on each person convicted of violating an ordinance prohibiting driving under the influence of intoxicating liquor or drugs. Both of these fees are sent monthly to the Administrative Office of the Courts for distribution to the state Scientific Laboratory and the Traffic Safety Bureau, respectively ( 31-12-9). The testing fee may be used only for defraying the cost of chemical or other tests to determine the level of intoxication. The DWI prevention fee must be used for approved comprehensive community programs or for other traffic safety purposes ( 31-12-7). 14-6