The New Mexico State Film Office encourages the growth of infrastructure for the film, television and emerging media industry in New Mexico; and, supports local vendors established to conduct business in-state who provide services and inventory to recruited productions.
7-2F-2, K. "physical presence" means a physical address in New Mexico from which a vendor conducts business, stores inventory or otherwise creates, assembles or offers for sale the product purchased or leased by a film production company.
7-2F-2, N. "vendor" means a person selling goods or services that has a physical presence in New Mexico and is subject to gross receipts tax pursuant to the Gross Receipts and Compensating Tax Act and income tax pursuant to the Income Tax Act or corporate income tax pursuant to the Corporate Income and Franchise Tax Act...
Scroll to this bottom of page for the published regulations or visit 18.104.22.168 NMAC.
For the purposes of this incentive, vendors of the qualifying production company must meet the physical presence requirements. In addition to "bricks and mortar," critical elements of the vendor services must be conducted at the place of the registered business, an owner or an employee must be a NM resident, and there must be some related inventory at the place of business for vendors who lease or sell goods and equipment to industry craft departments. It is highly recommended that production companies request a W-9 and CRS NM tax identification number (when applicable) from each potential contractor for their records. Productions may also contact the New Mexico Tax and Revenue Department (NM TRD) to determine if the business is registered in-state. Vendors are welcome and encouraged to contact the Film Office with questions about the physical presence requirement.
Other Vendor-Related Links:
Search Support Services in the Industry Directory
Information for Vendors New to the Industry
Goods & Equipment from Out-of-State
Vendors acting as "pass-through entities" are not recognized for the purposes of this incentive, meaning that expenses will not qualify for the tax credit when paid to vendors that only invoice for services and goods without directly providing them and without taking on the liability. Critical elements of the services must take place as the designated business location including standard practices like receiving shipments and processing invoices. This is required in addition to the vendor leasing a local space and registering the business in New Mexico, and whether or not the vendor is utilizing subcontractors. Pass-throughs do not meet the physical presence requirements.
On the other hand, when services or inventory are not available in-state, outsourcing through vendors, with physical presence and of like-business and inventory to the subcontractor, is not considered acting as a pass-through. Outsourcing is an accepted and standard industry practice. Regardless, it is up to the Production Company to determine if a vendor qualifies at the time of the expenditure in order for that expenditure to apply to the tax credit.
TIP: When a Production Company requests a local vendor to subcontract with an out-of-state entity, the vendor's available credit line, ability to meet deadlines, insurance policies and shipping capabilities are additional, important considerations for the Production Company.
To qualify an expense for outsourced goods or equipment, the Production Company would need to contract with a local business that already provides similar services and leases like-inventory, related to what the subcontractor would provide, at their local location.* "Like-inventory" means the goods or equipment provided by the subcontractor relate to the local vendor’s ordinary course of business and inventory; and, both the outsourced and local inventory are used by and for the same craft department. Here are a few examples of acceptable outsourcing requests: (1) The local vendor rents "rolling equipment," for Transpo so any type of "rolling equipment" could then be subcontracted from any state; (2) The vendor has a rack of consigned western-wear but is requested to subcontract 1950s poodle skirts from LA; or, (3) The vendor specializes in theatrical make-up but subcontracts for a specialized, cosmetic air-brush system from New York for a Production as it is otherwise unavailable in New Mexico. Note: if a vendor requests inventory from another branch of their company in another state, this is not considered outsourcing as there is no subcontract. However, the local vendor must still sell or lease like-inventory to that of their other branch from their local New Mexico location.
Tip: Invoices, insurance and shipping paperwork that do not reference the local business as the contractor will likely be flagged by NM TRD, and they may require backup documentation via the Production Company or that expenditure may be disqualified. Local vendors should consider receiving shipments directly at their place of business and delivering them to the production locale when at all possible.
*There may be two exceptions to the requirement of the local vendor having like-inventory to that of the subcontractor at one’s local place of business:
- If the contracted vendor is providing services by subcontracting local vendors with physical presence, and the local subcontractors are providing equipment or goods, then the primary vendor does not have to have related equipment or goods (i.e. like-inventory) at their place of business.
- If the local vendor is a general production services vendor, whose primary mission and ordinary course of business supports and services this industry; and, (a) the outsourced goods and/or equipment they will be providing are described in their established service contract with the Production Company; and, (b) local businesses with like-inventory (to the request) are not available or do not exist in-state, then the vendor may not have to have like-inventory at their local place of business provided that a NM Vendor Form is completed and reviewed by the NMFO (see next section below entitled "NM Vendor Form.")
NM TRD may request information about of the vendor's contracts and subcontracts when reviewing the submitted expenditures to confirm the primary vendor is providing services and/or inventory in their ordinary course of business. They may also check that the subcontractor is local when/if applicable.
How is industry inventory monitored by the State? A vendor's inventory may be reviewed by a site visit by either NM TRD or the NMFO. Site visits may occur when there is a complaint from the private sector, upon review of a submitted expenditure, because the vendor requests one, or the vendor is randomly selected during a periodic check. Although no minimum amount of local inventory is required, here is a general guideline to consider for bringing in goods and equipment from out-of-state: if the subcontracted inventory relates to the local business's mission and the local inventory is actually used by the industry for a similar purpose or by the same craft department, then it is likely to be considered a qualifying expenditure when paid to the primary vendor with physical presence. (And a NM Vendor Form would not be required.)
NMFO Vendor Form
The NM Vendor Form was established to assist Production Companies applying for the Refundable Film Production Tax Credit with vendor qualifications.
Per statute, the Film Office must determine if a participating Production Company has made reasonable efforts to contract with local vendors with physical presence and with vendors that provide services related to their ordinary course of business. For the Film Office to determine this and to support standard industry practices, the Film Office categorizes qualifying vendors in two ways: as a specialized vendor or as a general production services vendor. A specialized vendor provides one specific service or type of inventory, often catering to one craft department or providing related types of equipment. A general production services vendor: (a) does not specialize in one industry service; (b) provides goods/equipment to more than one craft department; and, (c) may or may not lease or sell any type of production equipment or goods. The first section of this form relates to physical presence for both specialized and general services vendors. (It is may be useful for vetting vendors with branches in more than one state.) The second section of this form is for general production services vendors outsourcing goods or equipment (e.g. subcontracting with an out-of-state business).
The Film Office asks that this form is submitted when the Production Company contracts with a general production services vendor specifically when the local vendor does not have like-inventory at their local place of business. If (a) the outsourced goods and/or equipment they will be providing are referred to or described in their established service contract with the Production, and (b) local businesses with like-inventory (to the request) were not available as needed or do not exist in-state, then upon review of this form and the "bids" within by the NMFO, it will likely be determined that the Production Company made reasonable efforts to contract with local specialized businesses (with related inventory) for the outsourced inventory.
As noted on the registration form, the Production will be asked to provide a list of vendors subcontracted during production that provided outsourced inventory to better determine the support services needed in-state.
Tip: If the types of services, goods or inventory are not obvious by the vendor's name or the vendor has multiple branches, consider requesting a NM W-9 and NM Vendor Form from the vendor. Consider submitting NM Vendor Forms (alphabetized) to the State Film Office prior to issuing a contract or P.O., or upon submission of the Film Credit Tax Application after all qualifying NM production expenditures have been made.