FAR 52.229-10—State of New Mexico Gross Receipts and Compensating Tax.
Plain-English Summary
FAR 52.229-10 addresses how federal contractors handle New Mexico gross receipts tax and compensating tax when contract performance occurs in New Mexico. It requires the contractor to register the contract with the New Mexico Taxation and Revenue Department within 30 days of award, identify the contract number, and pay New Mexico gross receipts taxes assessed against contract fee and costs for work performed in the state. The clause also explains how tax allowability is treated under the contract’s Allowable Cost and Payment clause, and it creates a special process for obtaining and using Type 15 Nontaxable Transaction Certificates (NTTCs) so vendors do not improperly charge gross receipts tax on qualifying purchases. It further requires the contractor to provide NTTCs to New Mexico vendors, pay compensating use tax when property bought under an NTTC is not used for federal purposes, and follow special rules for out-of-state purchases of tangible personal property. The clause also allows the agency to receive information from the state tax authority and participate in related proceedings, requires flowdown of the clause to certain subcontracts, and states that the clause becomes void if the underlying state agreement is terminated, except for obligations already incurred. In practice, this clause is about tax compliance, cost allowability, vendor documentation, and coordination between the contractor, the agency, and New Mexico tax authorities.
Key Rules
Register the contract promptly
Within 30 days after award, the contractor must notify the State of New Mexico of the contract by registering with the Taxation and Revenue Department and identifying the contract number. This is a mandatory administrative step tied to the state tax regime.
Pay applicable gross receipts tax
The contractor must pay New Mexico gross receipts taxes assessed against the contract fee and costs for performance in New Mexico. Whether those taxes are allowable costs is determined under the contract’s Allowable Cost and Payment clause, except where paragraph (d) changes the result.
Use Type 15 certificates correctly
The contractor must apply for Nontaxable Transaction Certificates and use issued Type 15 NTTCs only as authorized by the contract and the agreement with the state tax department. The certificates are intended to support tax-exempt or nontaxable treatment for qualifying transactions.
Provide certificates to vendors
For tangible personal property purchased from New Mexico vendors for use in contract performance, the contractor must give the vendor a Type 15 NTTC. If the contractor fails to do so, the vendor may be liable for gross receipts tax and any tax passed through to the contractor is not reimbursable as an allowable cost.
Pay compensating tax when required
If tangible personal property is purchased under an NTTC but is not used for federal purposes, the contractor must pay New Mexico compensating user tax. The same principle applies to otherwise taxable out-of-state purchases of tangible personal property.
Agency participation is optional
The named agency may receive information from the New Mexico Taxation and Revenue Department and may, at its discretion, participate in matters or proceedings related to the clause or the state agreement. However, the agency is not required to represent the contractor, and the contractor may have its own representative.
Flow down to covered subcontracts
The contractor must insert the substance of the clause, including paragraph (h), into each subcontract that meets the criteria in FAR 29.401-4(b)(1) through (3). This ensures subcontractors follow the same tax and certificate rules where applicable.
Clause ends if state agreement ends
If the referenced agreement between the agency and the New Mexico Taxation and Revenue Department is terminated, paragraphs (a) through (h) become void. Even then, obligations already incurred before termination remain enforceable.
Responsibilities
Contracting Officer / Agency
Insert the clause when prescribed by FAR 29.401-4(b), identify the correct agency name in the blanks, and decide whether to receive information from the state tax authority or participate in proceedings. The agency may also choose whether to represent the contractor, but it is not obligated to do so.
Contractor
Register the contract with New Mexico within 30 days, pay applicable gross receipts and compensating taxes, apply for and properly use Type 15 NTTCs, provide NTTCs to New Mexico vendors, ensure taxes are treated correctly for allowability, and flow the clause down to covered subcontracts.
Subcontractors
Comply with the flowed-down substance of the clause when the subcontract meets the FAR criteria, including any applicable tax documentation and compliance obligations tied to the work.
New Mexico Taxation and Revenue Department
Receive contract registration, issue NTTCs, administer the state tax rules referenced by the clause, and provide information or proceedings related to the contractor as permitted under the agreement.
Vendors in New Mexico
Accept valid Type 15 NTTCs when properly provided and apply the state tax rules to sales of tangible personal property used in contract performance.
Practical Implications
Contractors need a post-award compliance checklist: register the contract, request NTTCs, and distribute them to the right vendors quickly. Missing the 30-day registration deadline or failing to provide certificates can create avoidable tax costs.
The biggest cost risk is tax passed through by vendors when NTTCs are not used correctly. If the contractor does not give the vendor a valid Type 15 certificate, the resulting gross receipts tax may be nonreimbursable.
Contractors should track whether purchased tangible personal property is actually used for federal purposes. If it is diverted to non-federal use, compensating tax may become due even if the item was originally bought under an NTTC.
The clause requires careful subcontract management. If a subcontract falls within FAR 29.401-4(b)(1) through (3), the prime must flow down the clause substance or risk inconsistent tax treatment and compliance gaps.
Because the clause depends on the underlying state agreement, contractors and contracting officers should monitor whether that agreement is still in force. If it ends, the tax procedures in the clause may stop applying prospectively, but already incurred obligations remain.
Official Regulatory Text
As prescribed in 29.401-4 (b) , insert the following clause: State of New Mexico Gross Receipts and Compensating Tax (Apr 2003) (a) Within thirty (30) days after award of this contract, the Contractor shall advise the State of New Mexico of this contract by registering with the State of New Mexico, Taxation and Revenue Department, Revenue Division, pursuant to the Tax Administration Act of the State of New Mexico and shall identify the contract number. (b) The Contractor shall pay the New Mexico gross receipts taxes, pursuant to the Gross Receipts and Compensating Tax Act of New Mexico, assessed against the contract fee and costs paid for performance of this contract, or of any part or portion thereof, within the State of New Mexico. The allowability of any gross receipts taxes or local option taxes lawfully paid to the State of New Mexico by the Contractor or its subcontractors will be determined in accordance with the Allowable Cost and Payment clause of this contract except as provided in paragraph (d) of this clause. (c) The Contractor shall submit applications for Nontaxable Transaction Certificates, FormCSR-3 C, to the: State of New Mexico Taxation and Revenue Dept. Revenue Division PO Box 630 Santa Fe, New Mexico 87509 When the Type 15 Nontaxable Transaction Certificate is issued by the Revenue Division, the Contractor shall use these certificates strictly in accordance with this contract, and the agreement between the (* ________________ ) and the New Mexico Taxation and Revenue Department. (d) The Contractor shall provide Type 15 Nontaxable Transaction Certificates to each vendor in New Mexico selling tangible personal property to the Contractor for use in the performance of this contract. Failure to provide a Type 15 Nontaxable Transaction Certificate to vendors will result in the vendor’s liability for the gross receipt taxes and those taxes, which are then passed on to the Contractor, shall not be reimbursable as an allowable cost by the Government. (e) The Contractor shall pay the New Mexico compensating user tax for any tangible personal property which is purchased pursuant to a Nontaxable Transaction Certificate if such property is not used for Federal purposes. (f) Out-of-state purchase of tangible personal property by the Contractor which would be otherwise subject to compensation tax shall be governed by the principles of this clause. Accordingly, compensating tax shall be due from the contractor only if such property is not used for Federal purposes. (g) The (* _______________ ) may receive information regarding the Contractor from the Revenue Division of the New Mexico Taxation and Revenue Department and, at the discretion of the (* _________________ ), may participate in any matters or proceedings pertaining to this clause or the abovementioned Agreement. This shall not preclude the Contractor from having its own representative nor does it obligate the (* ______________ ) to represent its Contractor. (h) The Contractor agrees to insert the substance of this clause, including this paragraph (h), in each subcontract which meets the criteria in 29.401-4 (b)(1) through (3) of the Federal Acquisition Regulation, 48 CFR Part 29 . (i) Paragraphs (a) through (h) of this clause shall be null and void should the Agreement referred to in paragraph (c) of this clause be terminated; provided, however, that such termination shall not nullify obligations already incurred prior to the date of termination. [*Insert appropriate agency name in blanks.] (End of clause)