NM’s Latest Plan to Make Money From Spaceport America: Stop Treating SpaceShipTwo Passengers as Freight
After waiting 16 years for Virgin Galactic to begin space tourism flights from Spaceport America, New Mexico legislators have hit upon a new idea to try to get some revenues out of the place once the company begins commercial service later this year. The Las Cruces Sun-News reports
A bipartisan bill introduced in the state Legislature seeks to close a loophole that excluded spaceflight passenger tickets from gross receipts taxes. The move aims to harvest revenue from ticket sales as Virgin Galactic prepares to begin regular commercial service later this year.
H.B. 72 would amend a statute that excludes receipts “from launching, operating or recovering space vehicles or payloads in New Mexico” from gross receipts taxes, clarifying that sales “for transporting any person into or near space” would be taxable.
A 2019 ruling by the state Taxation and Revenue Department on the question of taxing flights to space essentially treated passengers as freight, stating: “… it seems reasonable to consider passenger revenues as receipts received for the operation of a space vehicle.”
“When those exemptions were drafted, it was not in anyone’s mind that people would be a payload,” state Rep. Jason Harper, R-Rio Rancho, told the Las Cruces Sun-News. Harper is a co-sponsor of the bill.
Virgin has sold about 700 tickets to customers at three different prices: $200,000 (until 2013); $250,000 (2013-2021); and $450,000 (2021-present). The amount of the tax would depend upon where it was leveled in Dona Ana County (where Virgin Galactic has its headquarters) or Sierra County (home of Spaceport America).
| County | Ticket Price | Gross Receipts Tax | Total Tax | Total Cost |
|---|---|---|---|---|
| Dona Ana County | $450,000 | 8.3125 | $37,406.25 | $487,405.25 |
| Sierra County | $450,000 | 6.9375 | $31,218.75 | 481,218.75 |
The state government would receive most of the tax revenues, with the county receiving a smaller portion.
After more than a decade of delay, Virgin Galactic says it plans to complete flight test of its SpaceShipTwo VSS Unity spacecraft this summer. Commercial suborbital tourism flights are set to begin in the fourth quarter of this year.
46 responses to “NM’s Latest Plan to Make Money From Spaceport America: Stop Treating SpaceShipTwo Passengers as Freight”
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So since 2007 VG has said it intended to fly people from Spaceport America and now State Representative Harper is saying, with a straight face, that no one thought the payload VG would be flying out of Spaceport America would be people…
Also the vast majority of those 700 ticket sales were made years ago and secured with deposits, so this is basically a retroactive tax on sales made years ago. Sound ripe for a good lawsuit.
Or VG could just move over to the Midland International Air and Spaceport where there are no taxes.?
As always the business sector demanding that they not pay taxes. NM paid for this facility, then kept everyone out from using it and held it for Virgin for 16 years, now after all that, Virgin is being cheated for the state demanding they pay taxes? You people and your demand for government venture capital, and then refusal to pull your own weight is amazing. Business people are the very slouches they accuse the public sector of being.
It’s not the issue of taxes, it is because NM lured VG there from California by exempting space tourism from sales taxes that California was going to charge them. Now that they hooked them they have reversed themselves. And claiming they never expected VG to be flying passengers into space like this State Representative is claiming is pure nonsense. But I guess you are one of those you feel it’s OK for governments to be deceptive.
I’ll bet it has much more do to with the fact that Virgin kept delaying and the NM state government rightly wants to make back not only all the fresh startup money they put into the place, but also the 16 years of doing nothing, or next to nothing. Had Virgin been operating all these years all the side enterprise would have generated enough taxes to keep things going. Virgin dropped the ball. It’s time for them to pay taxes to pay for the government that was an integral part of keeping their enterprise going.
The spaceport has not been inactive as there has been over 300 suborbital launches since 2006 as well as balloon flights and STEM activities, including the Spaceport America Cup. These activities that have bough millions to the local economy are largely the result of the visibility of having Virgin Galactic as an anchor tenant.
Also most of the revenues collected are not going to go to the counties that are paying off the bond issue to build it, but to those in northern New Mexico that have contributed nothing to it.
Granted, but the main function of the facility is crewed suborbital flights with lots of people cycling thru the facility like an airport. The other activities are what was supposed to have been the secondary money makers. The main function of the facility was for Virgin to operate.
But State Representative Harper is saying that the legislature had no idea the Virgin Galactic would be sending people into space as payload when they passed the tax exemption for the spaceport…
You and I know that’s a load of carp.
Then why is the press giving him a free ride on it? They should be laughing at him for saying it… Asking him what rock he has been living under the last 17 years since VG started selling flights.
Because they’re not well researched on the subject, and can see themselves being fooled given the esoteric nature of the subject. However, having consumed many of the same briefings the NM legislature and executive branch were presented we know that they know better. If not the legislator at least their staff. And for the most part the press does not care, I doubt that they’re even curious about the subject. I am ready to believe that most of the NM legislators and staff cannot fathom the difference between a Virgin hop and going to orbit. I’m ready to believe they might be expecting satellites to be launched from Spaceport America, but Virgin was very explicit that this was about taking people for joy rides. Unlike Blue Origin Virgin has not been pushing suborbital hops for hardware.
As to what rock he’s been sitting under …. He’s been politicking. He doesn’t care about this. If there is something he cares about, it likely is not space.
Bingo! He just sees the spaceport as a source of tax revenue to steer into his district, which is far away from it. Now you are getting the motive driving it.
Rental cars and hotels sometimes have venue taxes that help pay for local sports stadiums and the like. Talk about literal highway robbery as they essentially extort money from out of state visitors who innocently wander into town not realizing that they are in for a shakedown to help locals pay for their shiny new stadium.
In this case if something like that is possible it seems like it could be used to get VG customers to help pay for the spaceport. Not saying that is necessarily ethnical but at least the money would be going to the right place.
Except that most of the tax, except for the small portion the county is allowed to keep, will just go into the general fund. The bond issue is being paid off by an add on to the sales tax, but it is only for the three counties that are located by the spaceport.
I’m not quite following, are you saying that only a small portion of the venue taxes that rental car companies and hotels collect goes to pay for the new stadium, the majority of the money goes into general fund? Understandably sales tax on VG spaceflight participants would work that way, but I wouldn’t think the same would be true of a venue type of tax.
Those do go for the purposes you mention. This one is not that type of tax.
Not sure what I said that indicated that I didn’t understand that the venue tax that I brought up is not the same type of tax as what is being proposed. Which by the way what is being proposed is a gross receipts tax not a sales tax, which means that it is assessed to the company not the customer. Of course VG could pass that cost onto customers through higher prices, but that’s only possible for future ticket sales.
Whether they would do a venue tax I have no idea, that gets into all of the political and legal complications. I was only responding to what you said is a drawback with the proposed tax that most of the funds would not go to the counties that paid for the spaceport, so I brought up another type of tax that would.
I agree that assessing any kind of tax at this time has the potential to end what is already a tenuous business attempt, thus drying up whatever revenue they might have hoped for. Once (or if) it eventually becomes a thriving business bringing in all sorts of revenue, then sure we would expect the state and local governments to try and get a part of that action.
They are paying off the bonds used to build the spaceport with a venue tax only collected in Sierra, Dona Ana and Otero counties.
I don’t think the out-of-state visitors are usually all that “innocent.” And in the case of sports stadia, there is a certain justice in having fans of other teams pay extra for attending games in the home team’s shiny new facility.
People coming in to attend games at the stadium will be a tiny fraction of annual rental car customers and hotel guests. Most people fly into a city for vacation, to visit friends or family, or for business. Everyone understands that there will be sales tax. And perhaps an airport tax. But why would anyone anticipate an additional tax on top of all of this to pay for a local sports stadium?
Even those coming in to attend games at the stadium are already donating a lot of money to a city/county/state that they don’t reside in by paying sales tax on their rental car, hotel, food and drinks, game tickets, etc.
That “most” depends on the city. Plenty of people do visit really big cities like NYC, Houston, Chicago or L.A. for reasons other than viewing sportsball games. In much smaller cities, this is much less true – e.g., Green Bay, WI. In any event, with nearly everyone now making their own lodging and transportation reservations on-line, it’s not like the prices of these things in any given city are some sort of “gotcha” foisted on unknowing visitors as they arrive. If one does not like the prices one sees on one’s screen, one can simply choose not to go.
I just went online with several rental car companies for IAH airport in Houston which I know has a sports venue fee. I took it as far as final checkout. Avis and Budget just said “taxes and fees”, Hertz only showed a total and said “taxes included”. Although Alamo did have a little arrow next to “Taxes surcharges and fees”, someone who notices the arrow can get to a breakdown. Although even then it’s not always clear what a particular tax or fee is unless you go online and research it. No one is going to do that because there is nothing anyone can do about it, the taxes are not optional, you either go to that city or you don’t. Which seems to be your recommendation, don’t go to that city if you don’t want to contribute to their sports facility.
You indicate that not very many people travel to Green Bay for business or to visit friends or relatives, that most of their annual visitor traffic is just people coming in for games. That seems unlikely to me, but even if true for Green Bay I doubt if that’s the norm for most small to midsize cities. Sure on game weekends you see several passengers on your flight wearing game gear, but it’s not like the planes are flying empty when there are no games.
You seem to feel that most people visiting a city either know ahead of time while planning their trip that they will be paying for a local sports facility, or if they don’t know that’s their fault they should have researched it. I contend that most people don’t know, and I don’t expect people planning a trip to research where all of their taxes and fees are going. Local authorities know that and can thus easily fleece out of towners, most of whom won’t even realize it’s happening. Sure they know they are paying taxes, but I am quite sure that the vast majority of visitors have no idea that they are paying for stadiums.
Does Green Bay have a stadium tax? One would think not, given that they’ve been playing at Lambeau since 1957.
On an unrelated note, what’s up with Disqus?? I used to get emails that said “Reply to ….” which took me to the comment in question. Now all I get is a button in the emails that says “View Post” which takes me to a notifications page which is dang near useless… Is there some setting somewhere I can’t find that I need to to change? Thanks.
Somehow I was thinking NM lured VG with the spending of Dirksen plus on a new facility. These projected taxes may be different from the original concept, and still far less than what it would take to break even.
I think the bigger issue is that the proposal is on the order of taxing a bankrupt corpse. If there is a true and vibrant market in suborbital after all these years, it is likely to be exploited by someone else operating somewhere else. VG has not demonstrated an ability to execute.
My personal dislike is for different locations to spend taxpayer money building facilities for profit making enterprises. If the local businesses are going to profit from the side enterprises, then they should put up the funds for new facilities. Sports stadiums are my personal peeve that also extends to Florida luring space enterprises here.
I am aware that I have blinders on here. A couple of decades ago I had opportunities to join different start ups that would have been focused on SBIR work while getting going. I probably should have overcome my prejudice on the matter.
Yes, the majority of the ticket sales were done many years ago, as long ago as 2005, with security deposits taken to secure the price. It will be hard, if not impossible, to change those contracts now to include this new sales tax. That means a huge hit to the cash flow of Virgin Galactic as they will have to pay them, perhaps enough to push them into bankruptcy and end any money flowing to the state.
It is typical of the short sightedness that has kept the state poor by driving business away.
It’s not a sales tax that is being proposed, it’s a gross receipts tax. VG would be the one that has to pay it.
The concept has its merits, the idea that local economies, local businesses, and even the taxpayer will ultimately benefit from the enterprise, and so the argument goes that it’s worth incentivizing. Especially in situations where there is a level of financial risk potentially hindering development, or where there is competition between cities as happens with sports teams, and seems to have happened to some extent with spaceports. Of course things don’t always work out as hoped for and taxpayers sometimes wind up putting money into corporate pockets while getting little to nothing in return.
Yes. Even private-sector players are hardly infallible when it comes to picking winners and losers. The fact that political entities are demonstrably even worse would, one might think, induce at least a bit of caution in the latter, but that seems rarely to be the case.
I think the fair-minded would likely agree that, even if this latest tax proposal is “deceptive,” VG has indulged in more than a bit of deception too. This is like the Iran-Iraq War, a contest between two thoroughly unappetizing foes. I got no dog in this fight.
For what it’s worth, I doubt state Rep. Harper and his colleagues will ever see a penny of revenue from this tax. I don’t think VG is going to begin service this year. In fact, there’s quite a decent probability that VG will no longer be a going concern by year’s end.
They have made it this far with no revenue, so being this close to finally starting to get some revenue I think there is a good chance that they will keep going. Some of that may depend on whether Branson is willing to put at least some of the money that he took out of VG back into it if needed. If he is determined to stay out of it at least financially, then that may very well hasten its demise. But if as revenue starts to come in, even if they have trouble turning much if any of a profit, he may be willing to keep it going at least long enough to fulfil the original goal of carrying tourists into space.
How long it will go after that depends on whether they can get their act together and get a higher flight rate going, which will depend on completing the next two spacecraft in a timely manner, and also streamlining their operations for faster turnaround.
Then again things seem quiet at Blue Origin, I don’t think they have have announced their next flight. Even if they announce it soon that will mean nearly two months between flights like it has been for the last few flights. When can we expect to see that pace pick up?
You’re more optimistic anent VG than I am and, this early in the year, it’s hardly obvious which of us is going to prove the more correct. That VG has managed to defy gravity for as long as it has is certainly some kind of borderline miracle and I tend to be skeptical that such things can continue. That said, VG could still prove a revivable going concern for its new owners after a notional bankruptcy and liquidation even if never likely a very profitable one.
About Blue, who knows? Blue reminds me a bit of an old saying about grizzly bears – “If you know what the bear is going to do next, you know more than he does.”
Very well put.
Business people, politicians, and unions are all, for the most part, greedy bastards, as far as I can tell.
Which of those greedy bastards create productive jobs? Greed is one of the fundamental human traits. It can be expressed as ambition, desire for control, or just grasping for anything not red hot or nailed down. Without people that have a certain amount of ambition, nothing happens while we cower in the cave waiting for the hyenas.
I have known a lot of greedy people that were none of the ones you mentioned, primarily because obvious naked greed makes people not want to deal with you. As such they become employees at best and parasites at worst. It is noted in the ones you mention due to success in their field. That success can be good, bad, or indifferent depending on the person, not the field of endeavor.
Right. My point was that Andrew likes to beat exclusively on business people, which is a bit one-sided. Agreed?
Agreed, I missed your points. Business, unions, and politics demonstrate Bastiats’ seen and not seen. The costs to the business of dealing with unions and bureaucracy are often hidden while the raised prices are highly visible, as are the lower wages caused by bureaucratic overhead.
I will say that Andrew has more integrity in his posting than some here. Though I disagree quite strongly with some of his positions, I don’t see him as constantly changing facts to suit his agenda.
the only filter through which these deals ever work out is in the auxillary things that they attract to the “area” which without the main attraction would not be there under any circumstances. and in large measure that depends on how big the deal was.
For the most part Business people are as you describe them “slouches”. they particular at the higher end, dont want to pay the social cost that they cause.
Well, if they had been successful early on that would have been one thing.
Doing some research shows that the sponsors of this legislation are State Representative Harper (Rio Rancho) and State Representative McQueen (Santa Fe), both from northern New Mexico. Northern New Mexico has been opposed to the spaceport since the start, which is why only Sierra, Dona Ana and Otero County are paying off the bond issue by an increase on their sales taxes.
Now that it looks like significant revenue is going to start flowing and they want too tax it and will take the bulk of the new tax revenue to spend in northern New Mexico. It is an example of the “Little Red Hen” of no one wanting to help her make the bread, but everyone wanting to eat it.
After 16 years, I have no issues with a state reversing the nature of a tax like that.
Of course, you believe the government may never do anything wrong.
Would you feel the same way if Arizona decided they should tax your glider flights for using the state’s airspace, and make those taxes retroactive to when you started flying gliders? It’s a good analogy to what New Mexico is doing, trying to tax tickets sold many years ago, as early as 2005 when VG started selling flights.
If the state could regulate air travel and paid for controlling the airspace yes. This is how it’s done in Europe and soaring is even more popular there. I’m sorry in this case the state paid the bill. Virgin has failed to keep up their end of the bargain, resulting in NM changing the deal just as Virgin has changed the deal. In this case it is just fine with me. I love you guys, public investment is owed you, and taxes are theft. Why not just ride in on horses and demand tribute?
If it were not for private enterprise and entrepreneurs we would still be riding horses, at least those few who could afford them. The rest would just be serving the government as serfs as they did during the Medieval era.
China looks to put money into space…not take it out like our politicos do.
NASA during the Apollo era “put money into space.” How’d that work out?
We beat the Soviets?
Every dollar spent on space had a seven dollar return
We did beat the Soviets. But that x7 return thing has always seemed pretty dubious to me. If an actual “return” had relly been that large and that obvious, the program would have been kept in operation.