Does New Mexico motor vehicle excise tax apply when a resident buys a vehicle in another state without paying that state's sales tax and then titles and registers it in New Mexico?

Plain-English summary

A New Mexico resident owed motor vehicle excise tax when he titled two vehicles bought outside the state, even though the sales occurred in Georgia and California. The taxable event was the later application for a New Mexico certificate of title.

Derek Larson bought a 2002 Corvette in Georgia in October 2001 and drove it home to New Mexico. He paid no Georgia sales tax. When he titled and registered it in New Mexico, he paid $1,499.91 of motor vehicle excise tax.

In August 2002, he bought a Weekend Warrior travel trailer in California and towed it home. He paid no California sales tax and then paid $822.63 of New Mexico motor vehicle excise tax when titling and registering the trailer.

Larson sought full refunds, arguing that Section 7-14-3 imposed tax only on a vehicle sale occurring in New Mexico.

A New Mexico title counted as a sale for tax purposes

Section 7-14-3 presumed that issuance of every original or subsequent title for a vehicle required to be registered in New Mexico constituted a sale for tax purposes. The presumption did not apply when a statutory exemption covered the transaction or when the vehicle came to the applicant without consideration or by operation of law.

Reading the Motor Vehicle Excise Tax Act as a whole, the decision held that the Legislature intended tax to apply whenever a purchaser sought a New Mexico title, including for a vehicle bought in another state.

Section 7-14-5 reinforced that reading by placing the tax on the applicant at the time of the title application.

The out-of-state exemption and credit confirmed the result

Section 7-14-6(A) exempted certain people who acquired a personal-use vehicle outside New Mexico at least 30 days before establishing domicile here. That exemption would have no purpose if every out-of-state purchase were already outside the tax.

Section 7-14-7 also allowed a credit for gross receipts, sales, compensating, or similar tax paid to another state or political subdivision on the same vehicle. That out-of-state credit likewise showed that such purchases could be subject to New Mexico tax.

Larson paid no Georgia or California sales tax, so the decision identified no similar state tax to credit. The federal luxury tax paid on the Corvette did not change the stated outcome.

The structure treated in-state and out-of-state purchasers alike

The decision found the taxing scheme consistent with the federal Commerce Clause. The event taxed was the New Mexico title application, not the earlier out-of-state sale, and the credit prevented duplicative state-level tax up to the New Mexico amount.

It also noted that paying motor vehicle excise tax supported an exemption from New Mexico compensating tax under Section 7-9-23. Larson's interpretation could instead expose an out-of-state vehicle to the higher compensating-tax rate cited in the decision.

Result: both refund protests DENIED.

What this means for you

New Mexico residents buying vehicles elsewhere

An out-of-state purchase does not by itself avoid New Mexico motor vehicle excise tax. Applying for the New Mexico title can trigger the tax.

Buyers who paid another state's tax

Keep proof of any qualifying sales or similar tax paid on the same vehicle. The Act described in this decision allowed a credit against the New Mexico amount.

People moving into New Mexico

The decision identifies a specific exemption for certain personal-use vehicles acquired outside the state at least 30 days before establishing domicile. Eligibility depends on the statutory facts.

Buyers receiving a vehicle without a normal sale

The title presumption also contained exceptions for qualifying transfers without consideration or by operation of law.

Common questions

Q: Was the Georgia Corvette subject to New Mexico tax?
A: Yes. Larson paid $1,499.91 when he titled and registered it in New Mexico.

Q: Was the California travel trailer subject to the same rule?
A: Yes. He paid $822.63 when obtaining its New Mexico title and registration.

Q: Why did an out-of-state sale lead to New Mexico tax?
A: The Act presumed that issuance of a New Mexico title constituted a sale for tax purposes.

Q: Can tax paid to another state reduce the New Mexico tax?
A: The decision cited a credit for gross receipts, sales, compensating, or similar tax paid on the same vehicle.

Q: Did Larson receive either refund?
A: No. Both protests were denied.

Citations and references

Statutes:

• NMSA 1978, § 7-14-3 — imposition of motor vehicle excise tax and title presumption
• NMSA 1978, § 7-14-5 — tax imposed on the title applicant
• NMSA 1978, § 7-14-6 — motor vehicle excise tax exemptions
• NMSA 1978, § 7-14-6(A) — personal-use vehicle acquired before New Mexico domicile
• NMSA 1978, § 7-14-7 — credit for similar tax paid on an out-of-state transaction
• NMSA 1978, § 7-14-7.1 — motor vehicle excise tax credit provisions
• NMSA 1978, § 7-9-7 — compensating tax rate cited in the decision
• NMSA 1978, § 7-9-23 — compensating tax exemption after motor vehicle excise tax payment

Cases cited:

• Roth v. Thompson, 113 N.M. 331, 825 P.2d 1241 (1992)
• State v. Davis, 2003-NMSC-022, 74 P.3d 1064
• Team Specialty Products v. New Mexico Taxation & Revenue Department, 2005-NMCA-020, 107 P.3d 4
• State ex rel. Helman v. Gallegos, 117 N.M. 346, 871 P.2d 1352 (1994)
• State v. Rivera, 2004-NMSC-001, 82 P.3d 939
• In re Portal, 2002-NMSC-011, 45 P.3d 891

Source

• Listing: New Mexico Decisions & Orders
• Decision post: Derek V. Larson
• Decision PDF: D&O 05-09

Original ruling text

BEFORE THE HEARING OFFICER
OF THE TAXATION AND REVENUE DEPARTMENT
OF THE STATE OF NEW MEXICO

IN THE MATTER OF THE PROTESTS OF
DEREK V. LARSON TO 2/28/2002 AND 2/10/2003 05-09
DENIALS OF CLAIMS FOR REFUND OF
MOTOR VEHICLE EXCISE TAXES

DECISION AND ORDER

A formal hearing on the above-referenced protests was held on April 27, 2005, before

Margaret B. Alcock, Hearing Officer. The Taxation and Revenue Department ("Department")

was represented by Bruce J. Fort, Special Assistant Attorney General. Derek V. Larson

(“Taxpayer”) represented himself. Based on the evidence and arguments presented, IT IS

DECIDED AND ORDERED AS FOLLOWS:

FINDINGS OF FACT

2002 Corvette

1. In October 2001, the Taxpayer purchased a 2002 Corvette in Georgia and drove it

back to New Mexico, which is the Taxpayer’s state of residence.

2. The Taxpayer paid no Georgia sales tax, but did pay a $479.88 federal luxury tax.

3. Upon applying for a certificate of title and registering the Corvette in New

Mexico, the Taxpayer was required to pay New Mexico’s motor vehicle excise tax in the amount

of $1,499.91.

4. On February 19, 2002, the Taxpayer submitted a request for refund of the full

amount of the excise tax paid on the Corvette.

5. On February 28, 2002, the Department denied the Taxpayer’s refund request.
6. On March 19, 2002, the Taxpayer filed a written protest to the denial.

Travel Trailer

7. In August 2002, the Taxpayer purchased a “Weekend Warrior” travel trailer in

California and towed the trailer back to New Mexico.

8. The Taxpayer paid no California sales tax.

9. Upon applying for a certificate of title and registering the travel trailer in New

Mexico, the Taxpayer was required to pay New Mexico’s motor vehicle excise tax in the amount

of $822.63.

10. On November 5, 2002, the Taxpayer submitted a request for refund of the full

amount of the excise tax paid on the travel trailer.

11. On February 10, 2003, the Department denied the Taxpayer’s refund request.

12. On April 7, 2003, the Taxpayer filed a written protest to the denial.

DISCUSSION

The issue to be addressed is whether a person who purchases a vehicle outside New Mexico

but applies for a certificate of title and registers the vehicle in this state is liable for payment of the

motor vehicle excise tax. NMSA 1978, § 7-14-3 reads as follows:

7-14-3. Imposition of motor vehicle excise tax.
An excise tax, subject to the credit provided by Section 7-14-7.1, is imposed upon
the sale in this state of every vehicle, except as otherwise provided in Section 7-14-
7.1 NMSA 1978 and manufactured homes, required under the Motor Vehicle Code
to be registered in this state. To prevent evasion of the excise tax imposed by the
Motor Vehicle Excise Tax Act and the duty to collect it, it is presumed that the
issuance of every original and subsequent certificate of title for vehicles of a type
required to be registered under the provisions of the Motor Vehicle Code constitutes
a sale for tax purposes, unless specifically exempted by the Motor Vehicle Excise
Tax Act or unless there is shown proof satisfactory to the department that the
vehicle for which the certificate of title is sought came into the possession of the

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applicant as a voluntary transfer without consideration or as a transfer by operation
of law. The excise tax imposed by this section shall be known as the “motor vehicle
excise tax.”

The Taxpayer relies on language in the opening sentence that an excise tax “is imposed upon the

sale in this state of every vehicle.…” to argue that no tax is due on the sale of vehicles outside the

state, even when those vehicles are subsequently titled and registered in New Mexico. The

Department relies on the statutory presumption that “the issuance of every original and subsequent

certificate of title…constitutes a sale for tax purposes” to support its position that all vehicles titled

and registered in New Mexico are subject to tax.

It is a fundamental rule of statutory construction that all provisions of a statute, together

with other statutes in pari materia, must be read together to ascertain legislative intent. Roth v.

Thompson, 113 N.M. 331, 334, 825 P.2d 1241, 1244 (1992). “The rule that statutes in pari

materia should be construed together has the greatest probative force in the case of statutes

relating to the same subject matter passed at the same session of the Legislature.” State v. Davis,

2003 NMSC 022, ¶ 12, 134 N.M. 172, 74 P.3d 1064. See also, Team Specialty Products v. New

Mexico Taxation & Revenue Department, 2005 NMCA 20, ¶ 9, 107 P.3d 4.

Reading the Motor Vehicle Excise Tax Act as a whole, it becomes clear that the

legislature intended the excise tax to be paid whenever the purchaser of a motor vehicle applies

for a New Mexico certificate of title, regardless of whether the vehicle is purchased within or

without the state. For example, NMSA 1978, § 7-14-6 sets out several exemptions from the

motor vehicle excise tax, the first of which reads as follows:

A. Persons who acquire a vehicle out of state thirty or more days before
establishing a domicile in this state are exempt from the tax if the vehicle was
acquired for personal use.

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If the excise tax applied only to vehicles sold within New Mexico, the exemption provided in §

7-14-6(A) would be meaningless. The same is true for the credit allowed in § 7-14-7:

7-14-7. Credit against tax.
If a vehicle has been acquired through an out-of-state transaction upon which a
gross receipts, sales, compensating or similar tax was levied by another state or
political subdivision thereof, the amount of the tax paid may be credited against
the tax due this state on the same vehicle.

The credit is limited to taxes paid on vehicles “acquired through an out-of-state transaction.”

Again, this provision of the Motor Vehicle Excise Tax Act would be meaningless if vehicles

acquired outside the state were not subject to tax.

Although the Taxpayer insists that the plain language of the first sentence of § 7-14-3

limits imposition of the tax to vehicles sold in New Mexico, the other provisions of the Act

indicate otherwise. In State ex rel. Helman v. Gallegos, 117 N.M. 346, 353, 871 P.2d 1352, 1359

(1994), the New Mexico Supreme Court noted that courts “must exercise caution in applying the

plain meaning rule,” explaining that:

Its beguiling simplicity may mask a host of reasons why a statute, apparently clear
and unambiguous on its face, may for one reason or another give rise to legitimate
(i.e., nonfrivolous) differences of opinion concerning the statute's meaning. In
such a case, it can rarely be said that the legislation is indeed free from all
ambiguity and is crystal clear in its meaning. While—as in this case—one part of
the statute may appear absolutely clear and certain to the point of mathematical
precision, lurking in another part of the enactment, or even in the same section, or
in the history and background of the legislation, or in an apparent conflict between
the statutory wording and the overall legislative intent, there may be one or more
provisions giving rise to genuine uncertainty as to what the legislature was trying
to accomplish. In such a case, it is part of the essence of judicial responsibility to
search for and effectuate the legislative intent—the purpose or object—underlying
the statute.

In State v. Rivera, 2004 NMSC 1, ¶ 13, 134 N.M. 769, 82 P.3d 939, the court held that "a

statutory subsection may not be considered in a vacuum, but must be considered in reference to

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the statute as a whole and in reference to statutes dealing with the same general subject matter,"

quoting from 2A Norman J. Singer, Statutes and Statutory Construction § 46:05, at 165 (6th ed.,

rev. 2000). See also, In re Portal, 2002 NMSC 11, ¶ 5, 132 N.M. 171, 45 P.3d 891 (an

interpretation of statutes must be consistent with legislative intent, and must not render a statute's

application absurd, unreasonable, or unjust).

These rules of statutory construction require a reading of the Motor Vehicle Excise Tax

Act that gives effect to each of its provisions and does not render application of the statutory

exemptions and credits provided by the legislature meaningless or absurd. Such a reading can be

achieved by applying the presumption in § 7-14-3 that “the issuance of every original and

subsequent certificate of title for vehicles of a type required to be registered under the provisions of

the Motor Vehicle Code constitutes a sale for tax purposes….” The only circumstances in which

the presumption does not apply is when the applicant qualifies for one of the exemptions in § 7-14-

6 or establishes that the vehicle was transferred to the applicant without consideration or by

operation of law. This interpretation is consistent with the other provisions of the Motor Vehicle

Excise Tax Act, including § 7-14-5, which places the incidence of the tax on “the applicant for the

certificate of title at the time of application for issuance of the certificate.”

This interpretation is also consistent with the requirements of the commerce clause of the

federal constitution. The taxable event is not the out-of-state sale of the vehicle, but the owner’s

subsequent application for a New Mexico certificate of title, which can only occur within this state.

If the owner paid a similar tax to another state at the time the vehicle was purchased, that amount

would be credited against the New Mexico tax. This taxing scheme insures that someone who

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purchases a vehicle outside New Mexico pays exactly the same amount of tax as someone who

purchases a vehicle within the state.

Accepting the Taxpayer’s argument that no excise tax is due on vehicles purchased outside

New Mexico would cause the purchaser to lose the exemption provided in NMSA 1978, § 7-9-23

of the Gross Receipts and Compensating Tax Act, which states: “Exempted from the compensating

tax is the use of vehicles on which the tax imposed by the Motor Vehicle Excise Tax Act has been

paid….” Under this scenario, the purchaser of an out-of-state vehicle who applied for a New

Mexico certificate of title would be subject to compensating tax at a rate two percent higher than

the three percent motor vehicle excise tax imposed on the purchaser of an in-state vehicle. See,

NMSA 1978, § 7-9-7 (imposing a five percent excise tax for the privilege of using tangible

personal property in New Mexico).1 Such a result would more likely violate the commerce clause

than the imposition of a uniform three percent tax on all owners seeking to title their vehicles in

New Mexico.

CONCLUSIONS OF LAW

A. The Taxpayer filed timely, written protests to the Department’s denials of the

Taxpayer’s claims for refund of motor vehicle excise taxes, and jurisdiction lies over the parties and

the subject matter of this protest.

B. Except for specifically stated exemptions, the Motor Vehicle Excise Tax Act

imposes on every applicant for a New Mexico certificate of title an excise tax equal to three percent

of the price paid for the vehicle, including vehicles purchased outside the state.

1
The assertion in the Taxpayer’s brief (at page 2) that the legislature has not levied a compensatory tax on the use of
vehicles purchased outside the state is incorrect. Unless an exemption or deduction applies, someone who purchases
a vehicle outside the state for use in New Mexico is subject to the compensating tax.

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C. The Taxpayer was liable for the motor vehicle excise tax at the time he applied for

New Mexico certificates of title for the Corvette he purchased in Georgia and the travel trailer he

purchased in California.

For the foregoing reasons, the Taxpayer's protests ARE DENIED.

DATED April 29, 2005.

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