WHAT IS THE NEW MEXICO GROSS RECEIPTS TAX?
Most states have what is known as a sales tax. New Mexico does not have a sales tax but they have a Gross Receipts Tax. When you engage in business in New Mexico you may be required to pay Gross Receipts Tax. This tax is paid by the selling business and can be passed on to the consumer. In general sales and/or leases of goods are taxable. On January 1, 2005 gross receipts tax was eliminated from certain food sales and certain health care services. Prescription drugs are no longer taxable either. Thanks for the relief! However the unfortunate reality is that sales and performance of services are taxable in New Mexico. This includes services performed outside New Mexico for a product initially used in New Mexico. Lets hope someday New Mexico will try to become more competitive with its neighboring states and eliminate the burden of Gross Receipts Tax on services too!
You can view the current Gross Receipts Rate Schedule at http://www.state.nm.us/tax/pubs/gr_rates_dec_05.pdf which is effective through December 31, 2005.
WHAT ARE THE GROSS RECEIPTS TAX OBLIGATIONS OF PURCHASERS IN NEW MEXICO?
If you are a purchaser of nontaxable items you may need the tax exempt certificates provided by the Department in order to avoid paying tax on these items.
WHAT ARE THE GROSS RECEIPTS TAX OBLIGATIONS OF SELLERS IN NEW MEXICO?
If you are a seller of nontaxable items, you will need the tax exempt certificate properly filled out from your purchaser. You only need one certificate for the time period specified in order to comply.
WHAT ARE EXEMPTIONS FROM GROSS RECEIPTS TAX?
There are sales which are exempt from Gross Receipts Tax. If you only have exempt receipts, you do not need to file with the Department or report this information on the CRS-1 form. Examples of exemptions include interest and dividends and receipts of 501C(3) nonprofit groups.
WHAT ARE DEDUCTIONS FROM GROSS RECEIPTS TAX?
There are also deductions from Gross Receipts Tax. If you have receipts and related deductions, you do need to file with the Department and you will need to complete the CRS-1 form. Be sure that you have the proper documentation for these deductions in case the State audits you. They charge 15% interest and that doesnt include the penalties that you will also have to pay! In most cases an NTTC Exemption Certificate is an acceptable form of documentation. These forms can be obtained by filling out the form at http://www.state.nm.us/tax/forms/year99/acd31050.pdf . Deductions include sales for resale, construction material and services sold to a construction contractor for use in a construction project and sales by suppliers of components in manufacturing processes. Please note that if you are not current on your reporting and paying of Gross Receipts Tax, the Department will not provide you with these forms and you may be forced to pay tax you might otherwise not have owed since you wont have the exemption certificates.
You will need to keep your records for up to 10 years if there is evidence of tax fraud. Normally the assessment period is 3 years back from the end of the year the tax was due. If you have under-reported by more than 25%, the Department can go back up to six years and seven years for non-filed reports. So dont forget to file those reports if you are required as the penalty could be much higher than if you had filed them.
If you have a specific question about your particular situation, e-mail me at dianne@dgoodmancpa.com and I will help you with your questions.
This article was intended to provide general information about New Mexico Gross Receipts Tax. It does not contain all the rules and exceptions that may apply to your situation. If you have further questions regarding this, I can be reached at www.dgoodmancpa.com.
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