What is Gross Receipts Tax?
Gross receipts are the total amount of money recovered from selling taxable goods and services to New Mexico’s residents.
Gross Receipts Tax (GRT) is the tax paid on the sale of such goods and services. GRT also applies to delivery and shipping charges. Currently in New Mexico, the GRT rates range from 5.125 to 9.0625 percent.
Your business is responsible for collecting this tax and then passing it along to the New Mexico Taxation and Revenue Department. Any tax collected belongs to the state and it is your responsibility to manage the taxes that you collect. For this reason, it is important that you set up tax collection at the time you make the sale. This can be set up on your Point-of-Sale (POS) system or on your invoice.
As of July 1, 2021, New Mexico is considered a destination-based sales tax state.
This means that businesses are required to pay GRT based on the rate at which their goods or services are delivered. Stores, where customers walk into a physical location to purchase goods, will need to use a GRT rate based on where the store is located. It is important to note that these rates change twice a year, once in January and once in July. If you sell to multiple locations within the state, finding the right rate can prove to be tricky. I have found the Gross Receipts Location Code and Tax Rate Map to be one of the easier ways to find the correct tax rate for the location that you are delivering to. Here is the link to the map: https://www.tax.newmexico.gov/governments/gross-receipts-location-code-and-tax-rate-map/.
Scroll down, and once you see the map, you can enter the zip code of the destination you are trying to find the tax rate for. Once you enter this, the map will zoom in to the location you entered, and then all you need to do is click on the area it brought you to. A textbox will appear with the area’s location code and tax rate. Voilá, easy as pie !!
You can also use the link below to upload a file that matches multiple street addresses to their respective GRT location codes and tax rates.
While you will need to charge most NM residents Gross Receipts Tax, you may have some customers who are tax-exempt. You will not need to charge tax to other merchants who purchase goods for resale. However, they will need to present you with a Non-Taxable Transaction Certificate (NTTC) before you are able to exclude the tax from the purchase.
File and Pay GRT
To file a Gross Receipts Tax Return, you will need to first register with the New Mexico Taxation and Revenue Department. You can register using the NM Tax and Rev Taxpayer Access Point (TAP). This link can be used to create a TAP login https://tap.state.nm.us/TAP/_/. Once you have a login, you can use the TAP site to register your business and receive an 11-digit New Mexico Business Tax Identification Number (also known as a CRS number) for your GRT. You will also be able to use the TAP site to file and pay your Gross Receipts Taxes.
During the registration process, you will be required to select a filing frequency based on your average tax amount. Here are your options:
Monthly – if combined taxes average more than $200 per month, or if you wish to file monthly regardless of the amount due Quarterly – if combined taxes for the quarter are less than $600 or an average of less than $200 per month in the quarter Semiannually – if combined taxes are less than $1,200 for the semiannual period or an average less than $200 per month for the 6-month period Seasonal – businesses doing business only during a specific time of year Temporary – usually set up for one-time filing
Filing is a 2-step process.
1. You must submit your sales data. This includes detailing your total sales in the state, the amount of GRT collected, and the location of each sale. This is called filing your return. Filings are due on the 25th of the month following the end of the reporting period.
2. You must remit your collected tax dollars. When you do this on the TAP site, you will want to pay a few days before the 25th to allow time for the payment to process.
* Once you have an NM seller’s permit, you are required to file returns at the end of each period even if no GRT was collected. When no tax is collected, you need to file a “zero return.”
QuickBooks Online Automated Sales Tax
QuickBooks Online now offers an automated sales tax for users. The software will automatically calculate your GRT for each sale based on your customer’s sales tax status (exempt or non-exempt), the location of your sale or where your goods are being delivered, and your service or product’s sales tax category. You will need to add a tax agency, which is the agency where you file and pay your taxes. For businesses with a nexus in New Mexico, it is the New Mexico Taxation and Revenue Department. It is important to make sure your customers’ information is correct because QuickBooks will use that information to calculate the tax. QuickBooks will use your customer’s shipping address to calculate the GRT rate and charge them according to their sales tax status (exempt or non-exempt). When editing the invoice, there is a “See the Math” button you can click, to make sure QuickBooks is accurately calculating the GRT. Below is an image of the box that pops up when you click “See the Math”. I love to double-check numbers, so this is a great capability for people wanting to make sure their numbers are correct!
Once everything is set up correctly, you can start using the automated sales tax feature. When taxes are due, you can pull a Sales Tax Liability report in QuickBooks to help you with your filing. After you file, you can track the payment in QuickBooks to keep your records up to date.
Compensating Tax
There is one more type of “sales tax” that retailers should be aware of. In New Mexico, it is called Compensating Tax, but in most states, it is called Use Tax. This is a tax that buyers must pay to their state. It is a tax imposed on persons who make a purchase of goods or services from outside of the state. Its purpose is to protect New Mexico businesses from unfair competition from out-of-state businesses that are not subject to GRT. The responsibility of reporting and paying for Compensating Tax falls on the consumer. The Compensating Tax is imposed at a rate determined by the location where the goods are used and is the same as the GRT rate for that location.
If you are buying goods or services for your business from another state, you will need to figure out if you need to be reporting and paying Compensating Tax to the New Mexico Taxation and Revenue Department.
Resources used in the research done for this post:
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