Practice Management Member Conversations

My firm is in Arizona but my partner is registered in New Mexico, so we recently received a request to provide a proposal for a project there. It is my understanding that New Mexico is one of the few States that taxes professional services. Can anyone share their experience? Is design work done in Arizona for a project in New Mexico taxable? In the short term all I need to know if we need to account for the tax in our proposal. I am aware that if we get the proposal and the tax is applicable to our work we need to consult an accountant for real advice. Thanks.

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Yumiko Ishida AIA
Architect
Athena Studio
Phoenix AZ
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This is not quite relevant, but similar, years ago, when I had a practice in New York and performed professional services on projects in Connecticut, I was charged taxes on the fees received for the work designed in Connecticut.
Thanks, Mark

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Mark Smith AIA
Vice President
Gobbell Hays Partners, Inc.
Palm Beach Gardens FL
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Original Message:
Sent: 07-21-2015 14:35
From: Yumiko Ishida
Subject: Tax on architectural services?

My firm is in Arizona but my partner is registered in New Mexico, so we recently received a request to provide a proposal for a project there. It is my understanding that New Mexico is one of the few States that taxes professional services. Can anyone share their experience? Is design work done in Arizona for a project in New Mexico taxable? In the short term all I need to know if we need to account for the tax in our proposal. I am aware that if we get the proposal and the tax is applicable to our work we need to consult an accountant for real advice. Thanks.

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Yumiko Ishida AIA
Architect
Athena Studio
Phoenix AZ
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South Dakota also requires that sales tax be collected on professional services....or at least did 7 years ago when we had a senior housing project there. In that case (oddly) the tax was based on our client's office location in Sioux Falls while the project was an hour away in Mitchell (home of the Corn Palace). We registered as a foreign corporation with their Dept. Of Revenue and submitted quarterly reports on fees collected. The tax rate was calculated with local option sales tax, so it differed from city to city, which is why the location mattered. Wasn't brain surgery, but certainly a cost of doing business there that was incorporated into our fees. Good luck. ------------------------------------------- Peter Franks AIA The Franks Design Group, P.C. Glenwood IA -------------------------------------------
Original Message: Sent: 07-22-2015 17:31 From: Mark Smith Subject: Tax on architectural services? This is not quite relevant, but similar, years ago, when I had a practice in New York and performed professional services on projects in Connecticut, I was charged taxes on the fees received for the work designed in Connecticut. Thanks, Mark ------------------------------------------- Mark Smith AIA Vice President Gobbell Hays Partners, Inc. Palm Beach Gardens FL -------------------------------------------
Original Message: Sent: 07-21-2015 14:35 From: Yumiko Ishida Subject: Tax on architectural services? My firm is in Arizona but my partner is registered in New Mexico, so we recently received a request to provide a proposal for a project there. It is my understanding that New Mexico is one of the few States that taxes professional services. Can anyone share their experience? Is design work done in Arizona for a project in New Mexico taxable? In the short term all I need to know if we need to account for the tax in our proposal. I am aware that if we get the proposal and the tax is applicable to our work we need to consult an accountant for real advice. Thanks. ------------------------------------------- Yumiko Ishida AIA Architect Athena Studio Phoenix AZ -------------------------------------------

NM does not tax, or did not based on my experience, professional services if provided from out of state, or by an out of state firm.  They only tax professionals for work performed by an in-state firm. This has been an issue for NM firms for a long time. However as you noted you will want to consult an accountant or attorney

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Christopher Larsen AIA
Principal
PGAL
Las Vegas NV
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Original Message:
Sent: 07-21-2015 14:35
From: Yumiko Ishida
Subject: Tax on architectural services?

My firm is in Arizona but my partner is registered in New Mexico, so we recently received a request to provide a proposal for a project there. It is my understanding that New Mexico is one of the few States that taxes professional services. Can anyone share their experience? Is design work done in Arizona for a project in New Mexico taxable? In the short term all I need to know if we need to account for the tax in our proposal. I am aware that if we get the proposal and the tax is applicable to our work we need to consult an accountant for real advice. Thanks.

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Yumiko Ishida AIA
Architect
Athena Studio
Phoenix AZ
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I recommend you contact the New Mexico Taxation and Revenue Department to ask your question.

http://www.tax.newmexico.gov/all-nm-taxes.aspx

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Larry Whitlock AIA, CSI/CCS/CCCA, NCARB
An Independent Architectural Specifications Consultant
Pflugerville TX
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Original Message:
Sent: 07-21-2015 14:35
From: Yumiko Ishida
Subject: Tax on architectural services?

My firm is in Arizona but my partner is registered in New Mexico, so we recently received a request to provide a proposal for a project there. It is my understanding that New Mexico is one of the few States that taxes professional services. Can anyone share their experience? Is design work done in Arizona for a project in New Mexico taxable? In the short term all I need to know if we need to account for the tax in our proposal. I am aware that if we get the proposal and the tax is applicable to our work we need to consult an accountant for real advice. Thanks.

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Yumiko Ishida AIA
Architect
Athena Studio
Phoenix AZ
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Hi Yamiko,

In an attempt to answer your question, If the Architect performs the services in New Mexico they would be subject to NMGRT.  If the services are performed in Arizona they would not be subject to NMGRT.  Basically, any trips to NM that result in time and expenses being charged to the client for the trip would be subject to NMGRT.  If they did everything from Arizona and nothing was done in New Mexico they would not add NMGRT to their invoices.  This does not address any potential state income tax issues.   I would suggest that you consult with your CPA and/or tax attorney for confirmation of my understanding of the New Mexico Taxes on professional services, just to follow the letter of the law.   We use REDW for our CPA firm and would be happy to give you their number and a contact if you would like.   Hope this gives you an understanding of New Mexico's tax laws. 

 

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Van Gilbert FAIA
Van H. Gilbert Architect PC
Albuquerque NM
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Original Message:
Sent: 07-21-2015 14:35
From: Yumiko Ishida
Subject: Tax on architectural services?

My firm is in Arizona but my partner is registered in New Mexico, so we recently received a request to provide a proposal for a project there. It is my understanding that New Mexico is one of the few States that taxes professional services. Can anyone share their experience? Is design work done in Arizona for a project in New Mexico taxable? In the short term all I need to know if we need to account for the tax in our proposal. I am aware that if we get the proposal and the tax is applicable to our work we need to consult an accountant for real advice. Thanks.

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Yumiko Ishida AIA
Architect
Athena Studio
Phoenix AZ
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Hi Yamiko,

Van Gilbert has responded with excellent advice and consistent with my understanding except for just one point. To help you understand more I can suggest that the only thing you need to remember is to keep in mind that NMGRT is invoiced to your client based on the location (city/county/unincorporated land in NM) of services performed. As a design professional it will be your office location where you designed the project. As a construction professional the rate is based on the actual construction site location. As an out of state design professional it is my understanding that you will be invoicing your client at 5.125% NMGRT based on the current NMGRT rates.

Hope this helps!

My $0.02 :)


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Joe Payyapilly, AIA, NCARB
Principal Architect
AZ Facilities Architecture, LLC
Chandler, Arizona
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Original Message:
Sent: 07-23-2015 13:38
From: Van Gilbert
Subject: Tax on architectural services?

Hi Yamiko,

In an attempt to answer your question, If the Architect performs the services in New Mexico they would be subject to NMGRT.  If the services are performed in Arizona they would not be subject to NMGRT.  Basically, any trips to NM that result in time and expenses being charged to the client for the trip would be subject to NMGRT.  If they did everything from Arizona and nothing was done in New Mexico they would not add NMGRT to their invoices.  This does not address any potential state income tax issues.   I would suggest that you consult with your CPA and/or tax attorney for confirmation of my understanding of the New Mexico Taxes on professional services, just to follow the letter of the law.   We use REDW for our CPA firm and would be happy to give you their number and a contact if you would like.   Hope this gives you an understanding of New Mexico's tax laws. 

 

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Van Gilbert FAIA
Van H. Gilbert Architect PC
Albuquerque NM
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Original Message:
Sent: 07-21-2015 14:35
From: Yumiko Ishida
Subject: Tax on architectural services?

My firm is in Arizona but my partner is registered in New Mexico, so we recently received a request to provide a proposal for a project there. It is my understanding that New Mexico is one of the few States that taxes professional services. Can anyone share their experience? Is design work done in Arizona for a project in New Mexico taxable? In the short term all I need to know if we need to account for the tax in our proposal. I am aware that if we get the proposal and the tax is applicable to our work we need to consult an accountant for real advice. Thanks.

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Yumiko Ishida AIA
Architect
Athena Studio
Phoenix AZ
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WA state charges a tax based on total revenue for all A/E projects to be built in WA.
   If the project is in WA, all A/E firms have to pay it, regardless of where their office is.
   If the project is not in WA, WA-based A/E firms do not have to pay any tax.
So, the 'playing field' is flat.
If you submit, and include any allowance for taxes in a fee proposal, try to make sure everyone else has, also, including your subs.
However, if the owner is using QBS (quality-based selection), as you should hope they do, fees - and the tax question - do not come up until later.

Good luck.

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