I sell towable rock-crushing and screening plants for road work — do those sales qualify for New Mexico's 50% gross receipts deduction for unregistered vehicles?

Plain-English summary

Builder's Equipment Co., an Albuquerque heavy-equipment dealer, sells portable rock-crushing ("spokane"/jaw-crusher) plants and gravel-screening plants used to build roads. Sold in portable form, these giant machines (some 29–81 feet long and up to 109,000 pounds) sit on strong steel chassis with double or triple axles, truck wheels and tires, and air brakes, so they can be towed over highways from jobsite to jobsite (with a special permit). They are not self-propelled — they are drawn.

On its gross receipts tax returns, the company took the 50% deduction in Section 7-9-62, which lets a seller deduct half the receipts from selling "vehicles that are not required to be registered under the Motor Vehicle Code." On audit (1988–1993), the Department disallowed the deduction and issued Assessment No. 1819354 for $16,565.32. The company protested. (Its president had, back around 1973–74, been told by the then-Commissioner of Revenue that the deduction applied — but the hearing officer decided the case on the statutes, not on that old conversation.)

Hearing Officer Gerald Richardson granted the protest:

• The machine must be a "vehicle" first. Following Kaiser Steel and Gibbons & Reed (which construed the identical compensating-tax deduction), a device qualifies only if it meets the Motor Vehicle Code definition of a vehicle.
• These plants are vehicles. A "vehicle" is broadly "every device in, upon or by which any person or property is or may be transported or drawn upon a highway" (Section 66-1-4.19(B)). The plants are property being drawn on the highway. The Department's two objections failed: a vehicle need not be self-propelled (the definition covers devices "drawn upon a highway," unlike "motor vehicle"), and nothing requires that carrying persons or property be its primary purpose.
• They are "special mobile equipment," a kind of vehicle. Section 66-1-4.16(J) defines special mobile equipment as a vehicle "not designed or used primarily for the transportation of persons or property and incidentally operated or moved over the highways," expressly including road construction machinery. The plants fit, and such equipment is exempt from registration (Section 66-3-1).
• Consistent with the mining cases. In Kaiser Steel (dragline, continuous miner) and Gibbons & Reed (a 100-ton mining "mole" on rails), the equipment couldn't travel a highway without severely damaging it, so it wasn't a vehicle. These plants, by contrast, are specifically designed to move on the road between jobsites.

Result: the sales qualified for the Section 7-9-62 50% deduction, and the Department was ordered to abate the part of the assessment based on denying it.

What this means for you

Dealers and buyers of heavy, towable machinery

New Mexico's 50% gross receipts deduction (Section 7-9-62) reaches more than farm tractors and aircraft — it also covers vehicles not required to be registered, and large towable road-construction machinery like crushing and screening plants can qualify as special mobile equipment. If you sell (or buy) this kind of equipment, the deduction can cut the gross receipts (or compensating) tax on the sale in half.

The two-part test to keep in mind

For the deduction, the machine must (1) be a vehicle — a device by which property may be drawn on a highway (self-propulsion is not required) — and (2) be exempt from registration, typically as special mobile equipment (road-construction or similar machinery only incidentally moved on highways). The key practical line: gear that is built to travel the road between jobs qualifies; gear that can't use the highway without destroying it (like a rail-bound mining machine or a dragline) does not.

Accountants and tax professionals

The compensating-tax deduction in Section 7-9-77(A) mirrors Section 7-9-62, so Kaiser Steel and Gibbons & Reed apply to both. Note two clarifications this decision makes: "vehicle" does not require self-propulsion, and it does not require that hauling persons or property (other than the device itself) be the primary purpose — the Department's narrower readings were rejected.

Common questions

Q: My equipment isn't self-propelled — can it still be a "vehicle" for the deduction?
A: Yes. The Motor Vehicle Code's definition of "vehicle" includes devices drawn upon a highway, not just self-propelled ones. Only "motor vehicle" requires self-propulsion.

Q: The machine's job is to crush rock, not carry cargo. Does that disqualify it?
A: No. There's no requirement that transporting persons or property be the machine's primary purpose. In fact, "special mobile equipment" is defined as a vehicle not primarily used to transport persons or property, and it includes road-construction machinery.

Q: How is this different from a dragline or mining machine that didn't qualify?
A: Those machines couldn't travel a highway without severely damaging it, so they weren't "vehicles." Towable crushing and screening plants are built to be moved on the road between jobsites, so they qualify.

Citations and references

Statutes:

• § 7-9-62 NMSA 1978 — 50% deduction for receipts from selling agricultural implements, farm tractors, aircraft, or vehicles not required to be registered under the Motor Vehicle Code
• § 66-1-4.19(B) NMSA 1978 — definition of "vehicle" (a device by which persons or property may be transported or drawn on a highway)
• § 66-1-4.16(J) NMSA 1978 — definition of "special mobile equipment," including road-construction machinery incidentally moved over highways
• § 66-3-1 NMSA 1978 — special mobile equipment is exempt from vehicle registration
• § 7-9-77(A) NMSA 1978 — the parallel compensating-tax deduction
• § 7-1-24 NMSA 1978 — a taxpayer's right to file a written protest (basis for jurisdiction)

Cases cited:

• Kaiser Steel Corp. v. Revenue Division, 96 N.M. 117, 628 P.2d 687 (Ct. App.), cert. denied, 96 N.M. 116, 628 P.2d 686 (1981) — the equipment must be a "vehicle" to qualify; a dragline and continuous miner did not
• Gibbons & Reed Co. v. Bureau of Revenue, 80 N.M. 462, 457 P.2d 710 (1969) — a rail-bound mining "mole" was not a "vehicle"

Source

• Listing: New Mexico Decisions & Orders
• Decision post: Builder's Equipment Co.
• Decision PDF: D&O 95-02

Original ruling text

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

IN THE MATTER OF THE PROTEST OF
BUILDER'S EQUIPMENT CO., INC., NO. 95-02
I.D. NO. 01-731747-00 9, PROTEST
TO ASSESSMENT NO. 1819354.

DECISION AND ORDER

This matter came on for hearing before Gerald B. Richardson, Hearing Officer, on March 2,

1995. Builder's Equipment Co., Inc. (hereinafter "Taxpayer") was represented by Paul S.

Wainwright, Esq. and by its accountant, Curt D. McGill. The Taxation and Revenue Department

(hereinafter "Department") was represented by Margaret B. Alcock, Special Assistant Attorney

General. The parties have granted the Hearing Officer additional time to issue his decision in this

matter.

Based upon the evidence and the arguments presented, IT IS DECIDED AND ORDERED

AS FOLLOWS:

FINDINGS OF FACT

1. The Taxpayer is in the business of selling heavy equipment and machinery and is
   located in Albuquerque, New Mexico.

2. Among other equipment, the Taxpayer sells portable screening plants used to screen
   gravel and portable spokane plants which are used to crush rock. Both types of equipment are used

for the construction of roads. Both types of machinery are available from the manufacturer as
stationary equipment or portable equipment. When sold as portable equipment, the equipment is

mounted on a frame with axles and wheels so that it may be towed.

3. Portable spokane plants, also called portable jaw crusher plants are large rock

crushing plants which are designed to be moved over roads and highways so as to be able to be
transported from jobsite to jobsite. The ones sold by the Taxpayer vary in length from 29 to 45
feet and weigh between 41,000 and 109,000 pounds. The plant is mounted on a strong chassis

constructed of steel I-beams and feature double or triple axles, large truck wheels and tires (like

those on semi-trailers) and air brakes.

4. The portable screening plants sold by the Taxpayer vary in length from

approximately 73 to 81 feet and are designed to be drawn on roads or highways by tractor trailer

rigs from jobsite to jobsite. The plants are mounted on double axles mounted with large truck tires

and wheels.

4. When portable screening plants and portable spokane plants are transported, a

special permit is needed to move them on the highway because they are not "highway legal"

without such a permit.

5. Portable screening plants and portable spokane plants are not self-propelled, but are

built so that they may be towed.

6. Sometime in 1973 or 1974, Frank Touloumis, the Taxpayer's President, attended a

tax workshop put on by the Department. At that time Mr. Fred O'Cheskey was the Commissioner

of Revenue, the top position at the Department. Mr. Touloumis had a conversation with

Commissioner O'Cheskey about whether the portable screening plants and spokane plants qualified

for the 50% deduction from gross receipts tax provided in the former version of what is now §

7-9-62 NMSA 1978. Commissioner O'Cheskey informed Mr. Touloumis that the deduction

applied.

7. Pursuant to an audit of the Taxpayer for the period of January 1, 1988 through

August 31, 1993, on June 30, 1994 the Department issued Assessment No. 1819354 to the

Taxpayer assessing a total of $16,565.32 in gross receipts tax, compensating tax, penalty and

interest.

8. On July 28, 1994 the Taxpayer mailed to the Department a written protest of

Assessment No. 1819354

2
DISCUSSION
The issue to be determined herein is whether the Taxpayer is eligible to claim the deduction,

found at § 7-9-62 NMSA 1978, with respect to the Taxpayer's receipts from selling portable

spokane plants and portable screening plants. The Taxpayer had claimed the deduction in filing its

gross receipts tax returns, and upon audit, the Department had disallowed the deduction.

Section 7-9-62 provides as follows:
Fifty percent of the receipts from selling agricultural implements, farm tractors,
aircraft or vehicles that are not required to be registered under the Motor Vehicle
Code may be deducted from gross Receipts. Any deduction allowed under Section
7-9-71 NMSA 1978 must be taken before the deduction allowed by this section is
computed. (emphasis added).

The Taxpayer claims that the portable plants qualify as vehicles not subject to registration under the

Motor Vehicle Code because they meet the definition of "special mobile equipment." Section

66-3-1 NMSA 1978 of the Motor Vehicle Code addresses the types of vehicles which are subject to

registration. Specifically, it provides:
Every motor vehicle, trailer, semitrailer and pole trailer, when driven or moved upon a
highway, shall be subject to the registration and certificate of title provisions of the
Motor Vehicle Code except:

D. any special mobile equipment as herein defined; . . . .

Special mobile equipment is defined in the Motor Vehicle Code at § 66-1-4.16(J) NMSA 1978 as

follows:
"special mobile equipment" means every vehicle not designed or used primarily for
the transportation of persons or property and incidentally operated or moved over
the highways, including but not limited to farm tractors, road construction or
maintenance machinery, ditch-digging apparatus, well-boring apparatus and
concrete mixers;

The Taxpayer argues that the portable screening plants and spokane plants meet this

definition because they are road construction machinery, they are incidentally moved over the

3
highways (when being moved from jobsite to jobsite), and they are not designed or used primarily

for the transportation of persons or property.

The Department does not dispute these matters but rests its denial of the deduction upon its

contention that these portable plants must first meet the definition of a "vehicle" before one

considers whether the plants are vehicles not subject to registration, such as special mobile

equipment. The Department contends that the portable plants do not qualify as vehicles and so the

deduction does not apply. Section 66-1-4.19(B) of the Motor Vehicle Code defines a vehicle as

follows:
"vehicle" means every device in, upon or by which any person or property is or may
be transported or drawn upon a highway, including any frame, chassis or body of
any vehicle or motor vehicle, except devices moved exclusively by human power or
used exclusively upon stationary rails or tracks;

The Department contends that the portable plants do not meet the definition of vehicle because the

purpose of this machinery is to screen and crush road materials. As such it is not designed to carry

persons or property, but rather, it is designed to carry only itself.

In support of this contention the Department relies upon Kaiser Steel Corporation v.

Revenue Division, 96 N.M. 117, 628 P.2d 687, cert. den. 96 N.M. 116, 628 P.2d 686 (1981) and

Gibbons & Reed Company v. Bureau of Revenue, 80 N.M. 462, 457 P.2d 710 (1969). Both cases

involved whether the taxpayer was eligible for the 50% deduction from compensating tax for

vehicles not required to be registered under the Motor Vehicle Tax. This deduction, now found at

§ 7-9-77(A) NMSA 1978, is the compensating tax equivalent of the deduction at issue herein for

gross receipts tax, and the reasoning of the courts is thus applicable to the issue herein. Both cases

held that the equipment for which the deduction was claimed must meet the definition of a vehicle

to qualify for the deduction. Gibbons & Reed, 80 N.M. at 465, Kaiser Steel, 96 N.M. at 123.

In Gibbons & Reed, the Supreme Court determined that a 100 ton mining "mole" used to

transport employees, supplies and excavated materials in and out of a mine and which ran on rails

4
was not a vehicle and thus would not qualify for the compensating tax deduction. The Court based

its conclusion that the mole cannot be classified as a "vehicle" because it was not a device upon, or

by which persons or property may be transported upon a highway. Id. 80 N.M. at 465. Kaiser

Steel involved the question of whether a huge dragline used to remove overburden for coal surface

mining and a continuous miner, which is a mobile coal cutting and loading machine on caterpillar

type treads, qualified for the compensating tax deduction comparable to the deduction at issue

herein. In determining the matter, first the court analyzed whether the dragline and continuous

miner were vehicles. It concluded that they were not because although they might be "capable" of

being moved on the highways, they could not do so without severely damaging the highway, and

thus did not meet the criteria of being a machine which moves on the highway. Additionally, it

found that the equipment did not qualify because it was not self-propelled because it was powered

by a trailing electrical cable powered from an outside source. With respect to this issue, the

Department has conceded for purposes of this case that the equipment need not be self-propelled to

qualify as a vehicle. This is correct. While "motor vehicles" as defined in the Motor Vehicle

Code at § 66-1-4.11 refers to self propelled vehicles, the definition of "vehicle" is not so narrow. It

includes devices which are "drawn upon a highway." See, § 66-1-4.19(B).

The second part of the court's analysis in Kaiser Steel involved the determination of

whether the dragline and continuous miner could still qualify for the deduction by meeting the

definition of "special mobile equipment" not subject to the registration requirements of the Motor

Vehicle Code. The court concluded they did not qualify. First, the court rejected the taxpayer's

argument that the devices need not meet the definition of a "vehicle" if they could meet the

definition of "special mobile equipment." Although it did not explain the basis for rejecting this

argument, it is apparent from the definition of "special mobile equipment" that it must also be a

vehicle, since it is defined as, "every vehicle not designed or used primarily for the transportation of

persons or property and incidentally operated or moved over the highways, . . . ." (emphasis

5
added). The court then went on to conclude that the dragline and continuous miner also didn't

meet the portion of the definition that they be incidentally operated or moved over the highways.

Id. 96 N.M. at 123. Presumably the court based this determination upon the evidence about the

damage which would be caused to the highways by moving such machinery.

Turning now to the Department's arguments, the Department is correct in its contention that

the portable plants at issue herein must be vehicles to qualify for the deduction. Kaiser Steel,

supra. The Department argues that the portable plants are not vehicles because their primary

purpose is for screening or crushing materials, not for carrying persons or property. Additionally,

the Department argues that the portable plants cannot be vehicles because it argues that to be a

vehicle, a device must be used to transport persons or other property, not to transport just itself.

With respect to the first argument, the Department reads the definition of vehicle more

narrowly than it is written. There is no stated requirement that the primary use of a vehicle is to

transport persons or property. The definition of a vehicle is fairly broad, ". . . every device in,

upon or by which any person or property is or may be transported or drawn upon a highway, . . . ."

(emphasis added). Section 66-1-4.19(B). Additionally, the definition of "special mobile

equipment," a subset of "vehicles," specifically eschews any such requirement that the primary

purpose is to transport persons or property. Special mobile equipment is defined to mean, "every

vehicle not designed or used primarily for the transportation of persons or property. . . ."

(emphasis added) Section 66-1-4.16(J).

The Department's second argument, that to be a vehicle, a device must transport persons or

other property than itself is not supported by the definition of "vehicle." It speaks broadly of a

vehicle being a "device in, upon or by which any person or property is or may be transported. . . ."

(emphasis added). Section 66-1-4.19(B). There can be no argument that portable screening and

spokane plants are not property. It is also noteworthy that in Kaiser Steel, although the Director's

decision from which Kaiser appealed had adopted the view argued herein by the Department, the

6
court, in affirming the Director's decision did not reach or decide this matter, but based its

determination that the equipment did not meet the definition of a vehicle based upon other

considerations.

From all of the foregoing, it thus appears that the portable screening and spokane plants

meet the definition of "special mobile equipment" and are "vehicles" not subject to the registration

requirements of the Motor Vehicle Code. They are "vehicles" because they are a "device in, upon

or by which any . . . property may be transported or drawn upon a highway." They meet the

definition of "special mobile equipment because they are not designed or used primarily for the

transportation of persons or property, they are incidentally operated or moved over the highways,

and they fall within the enumerated category of road construction machinery. This result is

consistent with the court's ruling in Kaiser Steel. As opposed to the dragline and continuous miner

which could not be moved upon a highway without doing substantial damage to the highway itself,

the portable plants at issue herein are specifically designed to incidentally be moved on the

highway, so that they may be moved from jobsite to jobsite.

CONCLUSIONS OF LAW

1. The Taxpayer filed a timely, written protest to Assessment No. 1819354, pursuant to

Section 7-1-24 NMSA 1978 and jurisdiction lies over the parties and the subject matter of this

protest.

2. In order to qualify for the deduction from gross receipts tax found at § 7-9-62

NMSA 1978 for the receipts from selling a vehicle not required to be registered under the Motor
Vehicle Code, the machinery sold must meet the definition of a "vehicle" under the Motor Vehicle

Code.

3. Special mobile equipment as defined in the Motor Vehicle Code is a category of

vehicles.

4. The portable screening plants and portable spokane plants sold by the Taxpayer are

7
"vehicles" which qualify as "special mobile equipment" as those terms are defined in the Motor

Vehicle Code and as such, the Taxpayer's receipts from selling those portable plants are subject to

the 50% deduction from gross receipts found at § 7-9-62 NMSA 1978.

For the foregoing reasons, the Taxpayer's protest is hereby granted. The Department is

hereby Ordered to abate that portion of Assessment No. 1819354 which assessed gross receipts tax,

penalty and interest based upon the Department's denial of the Taxpayer's claim of deduction

pursuant to § 7-9-62 NMSA 1978.

Done, this 12th day of April, 1995.

8