New Mexico Court Reverses GRT Ruling Against Out-of-State Staffing Firm

Summary: The New Mexico Court of Appeals reversed a gross receipts tax judgement against an out-of-state staffing company, concluding that the company services were performed outside the state and therefore, the company’s revenues were eligible for an exclusion from the tax.

In June 2023, we published an article about a decision made by the New Mexico Administrative Hearings Office (AHO) that subjected an out-of-state medical staffing company to New Mexico gross receipts tax (GRT). However, on May 30, 2025, the New Mexico Court of Appeals (Court) issued an opinion that overturned the AHO’s decision, concluding that the taxpayer qualified for the state’s GRT exemption because the services were performed outside New Mexico.[1]

Understanding the AHO Decision

The taxpayer, Vista Staffing Solutions, Inc. (Vista or the Taxpayer) is a medical staffing agency based in Utah, and it did not have an office or any employees in New Mexico. Vista provides medical staffing services to hospitals and health care facilities located across the country, including in New Mexico.[2]

The AHO ruled that Vista owed over $2 million in GRT, penalties, and interest for services rendered to New Mexico healthcare facilities from January 2010 through May 2017. The AHO decision was based on the premise that Vista engaged in business and provided services in New Mexico by placing medical professionals at facilities in the state, who performed medical services for those facilities, and received compensation for those placements.

The Ruling on New Mexico’s GRT Statue Explained

The GRT statute, as relied on by the Taxpayer for the period in question, provides an exemption from the GRT for “receipts from selling services performed outside New Mexico the product of which is initially used in New Mexico.”[3]

Addressing the first part of the exemption: The services were performed outside New Mexico 

The Court disagreed with the state’s position that the primary service contracted by the facilities with the Taxpayer was for the medical services performed at the in-state facilities. Instead, the Court concluded that Vista’s core services consisted of recruiting, credentialing, onboarding, and billing, all of which were conducted electronically from offices outside New Mexico. Specifically, the Court noted that the medical professionals placed in New Mexico were independent contractors who independently contracted with the healthcare facilities to provide medical services. Therefore, their in-state activities could not be attributed to Vista.

Addressing the second part of the exemption: The “product” of Vista’s services (i.e., the placement of medical professionals) was “initially used” in New Mexico

The AHO had concluded that the “product” of the service must be tangible personal property for the exemption to the apply. However, the Court disagreed, explaining that the product of a service is “the direct result or consequent flowing from the service” and that services “may produce tangible and intangible results or products.”

Ultimately, the Court concluded that the “product” of the service was “initially used” in New Mexico based on the fact that the “first employment of the selected medical professionals took place upon their arrival at a New Mexico facility to provide medical services on behalf of the healthcare operators.”

Final Thoughts: The Importance of Properly Documenting Transactions 

As previously noted, due to the statute’s 2019 amendment, the outcome of this case would likely not apply today. However, what is notable about this case is a common issue that arises in many state tax disputes. Aside from the disagreement over whether the “product” of the service needed to be tangible, the main issues were not focused on the interpretation of the statutory language.

Rather, this dispute arose mainly because the parties characterized the transaction differently. Vista (and the Court) viewed its services as recruiting, credentialing, onboarding, and billing, while the state (and AHO) focused more on the placement of the medical professionals in the state and their performance of medical services for the healthcare facilities. 

Therefore, when documenting a transaction, it’s important to consider how others (like the state) may characterize it for state tax purposes and to prepare those documents to maximize the chances of the desired outcome.  

[1] Vista Staffing Solutions, Inc., v. New Mexico Taxation & Revenue Dep’t, No. A-1-CA-41090, (N.M. Ct. App., May 30, 2025).

[2] More detailed information about the Taxpayer’s activities can be found in our June 2023 article.

[3] N.M.S.A. § 7-9-13.1(A) (2006).  In 2019, this statute was amended to remove this exemption, although the statute still provides an exempt for certain research and development services performed outside of New Mexico.  The current version of the statute can be found here.