The short answer is technically, no. While you may see most other states utilize a sales tax, New Mexico actually has what is called a gross receipts tax on many transactions. And there is a difference between the two. A difference we are happy, as your New Mexico agent, to help you navigate.
Sales tax is a charge sellers add on top of the selling price (and is based on that amount). So, in effect, this is not an expense for the seller because that owed tax amount is passed onto and paid by the consumer. The final price the consumer pays is the selling price + the sales tax. Meanwhile, the seller reports that sales tax amount and remits it.
Gross receipts tax, on the other hand, is a percentage of revenue that a seller must pay the state. It is not required that a seller collect this amount from its buyers, and ultimately this tax amount is paid out of the seller’s earnings. In most cases, the seller will pass this amount onto the consumer, whether in the selling price or stated separately.
So, while the two are different, the similarity between them is their overall impact on the consumer. That is to say that the consumer typically pays the tax amount in one way or another.
How to Register for a New Mexico Gross Receipts Tax License
If you operate a business in the state of New Mexico, you’ll need to register with the New Mexico Taxation and Revenue Department in order to receive your Combined Reporting System (CRS) number. This is the number that you’ll use to report collected gross receipts tax.
You have the option of registering either online at the Tax and Revenue Department website or by mail with a paper application. Note that online applications are typically processed faster. To register your business, the form you must submit is ACD-31015 Business Tax Registration.
To successfully complete your registration form, you’ll need to provide the following information:
- Personal Identification Information (including SSN, address, and more)
- Business Identification Information (including EIN/FEIN, address, and more)
- Business Entity Type
- Primary Business Type
- Start of Business Date in New Mexico
- Accounting Method Used (cash or accrual)
How to Know Which Goods and Services Are Taxable
As we cover the process for obtaining your gross receipts tax license, it’s also important to understand which goods and services are taxable in the state of New Mexico. The current New Mexico state gross receipts tax rate is 5.125%.
Traditional goods like property, cars, furniture, appliances, etc. are subject to the gross receipts tax. Meanwhile, there are some tax-exempt goods, such as gasoline, groceries, and prescription medications.
When it comes to services that are performed, the state of New Mexico requires that gross receipts tax be paid on all services. The gross receipts tax also applies to any and all digital goods and services, such as an album download or movie stream.
Filing Your New Mexico Gross Receipts Tax Return
Once you have registered with the Tax and Revenue Department and begun charging gross receipts tax, you will need to begin filing tax returns. It’s important that you keep up with these filings in order to avoid late penalties and fines.
Knowing how often you must submit a gross receipts tax return is determined by the amount of gross receipts tax your business collects. The general rule in New Mexico is the following:
Semi-Annual Filing: You will file on a semi-annual basis if your business collects less than $1,200 in gross receipts tax within a 6-month period.
Quarterly Filing: You will file on a quarterly basis if your business collects less than $200 in gross receipts tax per month.
Monthly Filing: You will file on a monthly basis if your business collects more than $200 in gross receipts tax per month.
Seasonal Filing: Seasonal filings apply to businesses that operate only during a specific time of year. In this case, you will need to indicate which months you are filing for and then file for those months on a monthly basis.
Temporary Filing: Temporary filings are typically for one-time filing scenarios. You will need to list a start and end date. And note that there is a 6-month maximum in this case.
Depending on which filing type applies to your New Mexico business, here are the corresponding filing deadlines that your business must adhere to:
Months covering January – June: Due date is July 25
Months covering July – December: Due date is January 25
Quarter 1 (January – March): Due date is April 25
Quarter 2 (April – June): Due date is July 25
Quarter 3 (July – September): Due date is October 25
Quarter 4 (October – December): Due date is January 25
If filing monthly, the due date is the 25th of the following month (or next business day). For example, if filing for the month of January, the due date is February 25th.
Note that there are late penalties for missing a filing deadline. The state of New Mexico charges 2% per month of the tax reported on your return until that tax is filed (maximum of 20% of tax reported can be charged). Additionally, there is an annual 4% interest rate assessed (or, 0.33% monthly) for any unpaid tax amount.
Grabbing a seller's or reseller's permit (the name varies depending on the state) is an absolute necessity for any business involved in the selling of products. In some states, this may also include restaurants or even food stalls at local farmer's markets. Yes, it's that stringent. However, figuring out what you need to do to get one may be something of a challenge. Worse, it's a little bit different for each state; and you may need multiple ones depending on which state you travel to! Isn't business exciting? As your agent we can help assist.
Let's take a look at how to get a seller's permit in a general light. More information can be found per state in our library of articles.
Why do I Need a Permit?
Essentially, you need a permit because the government says you need to have one. It's how they keep track of who is selling what (or at least what category), where, when, and how. It's a great way for them to make sure that people aren't harmed by what you're selling or that you aren't operating outside of a licensed and approved manner. After all, there are certainly people out there that would create a poorer product if not for government legislature and checking up on these sorts of things.
That said, it also shows that you're selling a product that is deemed safe (or as safe as we are aware of it) for consumer use. That's important.
Can I Sell Without One?
If you aren't a registered business and you're just re-selling some personal items through eBay or your local Craigslist, you're unlikely to raise any eyebrows. However, if you're setting up a permanent shop at the local trade day or flea market, or you have a constant source of income via a business that sells items? You may need to look into local laws.
Many local laws state exactly how much of a certain thing (food, for example), you are allowed to sell without repercussions. However, this changes depending on what you're selling. You can't get into business making computers for people and selling hundreds of thousands of dollars in technology every year without having a selling license and, usually, at least forming an LLC to cover it all. This is largely to protect you and your buyers from any issues that may come up.
Repercussions of Selling Without Permit
These range an enormous gamut from a misdemeanor fine to even time in jail. This is especially a problem when it comes to recalls or issues with the product you're selling. Take for instance the numerous recalls with baby equipment; everything from car seats to cribs have been recalled due to parts being inappropriate for the age range or rails sliding down and trapping infants. That sort of thing is common.
Many resellers grab clearance, returned pallets, and such things. These items may be present on those pallets, causing problems. It is impossible to know every single recall based on the amount of product that stores sell both nationally and internationally. However, if a child is harmed due to your resale of an inappropriate item, even if it is done in complete innocence, your lack of a resale permit is going to be a problem. It will only compound the other issues you are about to face.
At best, you will be shut down and fined in accordance with the law for operating an unlicensed business.
Getting Your Permit
Achieving a selling permit is as simple as applying for one. So long as you have a sound background check and product to sell, most states are willing to let people have their permit.
The problems come when you actually begin applying. Your first stop should be your county tax office for further directions. You're going to need them. It gets complicated because there are so many checks involved. Stay with it and you'll be approved soon. There are also a wide variety of suites available that help you to apply for permits like these.
After You Get Your Permit
Few states have more than a 10 day wait period for inspections and approvals once you've got your permit. In fact, some have no wait at all; you could get started as soon as you have your permit in your hands.
Permits are typically renewed on a yearly basis, though this tends to be nothing more than a quick renewal slip and your fee in the mail, directed to the correct office for processing. Simple, easy, and quick to finish off.