Is Your Business Compliant with Gross Receipts Tax?
We have discovered that one of the issues facing small business owners in New Mexico is compliance with the state’s Gross Receipts and Compensating Tax Act. (NMSA 1978 §§7-9-1 et seq.) New Mexico is one of the few states that imposes what is essentially a sales tax (called “GRT” or “NMGRT”) not only on goods, but also on services. If you are engaged in any type of business activity in New Mexico that involves the sale of goods or services, you must register with the New Mexico Taxation and Revenue Department, obtain a Taxpayer Identification Number, and designate a reporting schedule that might be semi-annually, quarterly, or, most frequently, monthly. The non-monthly reporting options are generally available only to those whose receipts are small or sporadic.
Once you are registered with the Taxation and Revenue Department, you are required to submit CRS-1 reports of your gross receipts and any claimed deductions in accordance with the reporting option you have chosen or that has been designated for you. Failure to file timely will result in penalty and interest charges being added to your gross receipts taxes (GRT) due. Failure to file CRS-1 reports, whether because of lack of understanding or negligence, is likely to result in a large and unexpected tax bill for your business when the non-filings are discovered by the Department.
FAQs on Gross Receipts Tax
The question most frequently asked by business owners or providers of services in New Mexico is whether receipts from the sale of their product is subject to GRT. If the sale is to an in-state person, the answer is generally yes. However, even though a sale meets this test, some sales may be deductible from receipts subject to GRT. For instance, if the purchaser presents the seller with a nontaxable transaction certificate, or NTTC. This is a certificate available to purchasers of products that will be included in a final product upon which the ultimate seller will pay GRT.
And as with many rules, there are exceptions to the general rule stated above. Some sales, specified in statute, are “EXEMPT” (in contrast to “DEDUCTIBLE”) from GRT. An example is receipts from occasional sales — “yard” sales and some others. If your income is only from exempt sales, you are not even required to register or obtain a tax ID number from the Taxation and Revenue Department. On the other hand, even if all your sales are subject to a “deduction”, you are required to register. And you are required to file CRS-1 reports on the required date, even if you had no gross receipts at all for a reporting period.
This brief description of New Mexico’s laws and regulations regarding Gross Receipts taxes is far from comprehensive, but it is intended to alert the reader to some of the issues to be aware of and pitfalls to avoid.
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