Unlike the gross receipts taxes that are in lieu of income taxes, which tend to be low, the base or state New Mexico GRT is 5%. 326 Fiscal Impact Report, Feb. 18, 2020. Section 7-9-77 - Deductions; compensating tax. Section 7-9-10 - Agents for collection of compensating tax; duties. All rights reserved. 7-20E-9. It is not, and should not be construed as, accounting, legal or tax advice provided by Grant Thornton LLP to the reader. This is allowable, even on CBA transactions. Contributors are members of or associated with KPMG LLP. Form of business entity. This is discussed in more detail in the next two subsections. Unlike a sales tax, the GRT is imposed on the seller of property or services. (Effective July 1, 2021.). Section 7-9-30 - Exemption; compensating tax; railroad equipment, aircraft and space vehicles. 1 H.B. Section 7-9-77.1 - Deduction; gross receipts tax; certain medical and health care services. This site uses cookies to store information on your computer. Construction project services and services with respect to selling real estate are sourced to the location of the property site. ANN. Dont get lost in the fog of legislative changes, developing tax issues, and newly evolving tax planning strategies. COVID-19 has caused PE firms to adjust their valuation practices postponing valuations to avoid reset triggers, exploring new approaches to valuations or diversifying existing ones. New Mexico GRT also applies to the right to use a franchise in the state. There will be certain exceptions. 7-1-14.H. Registering a business helps the state know that a business is charging the appropriate local GRT rate. Contact Grant Thornton LLP or other tax professionals prior to taking any action based upon this information. Under H.B. Instead, only "research and development services performed outside New Mexico the product of which is initially used in New Mexico" will be exempt (under certain circumstances). 326, 1, enacting N.M. STAT. Unlike a sales tax, the GRT is imposed on the seller of property or services. Section 7-9-70 - Deduction; gross receipts tax; rental or lease of vehicles used in interstate commerce. Section 7-9-49 - Deduction; gross receipts tax; sale of tangible personal property and licenses for leasing. Currently, New Mexico provides an exemption from GRT for certain "receipts from selling services performed outside New Mexico the product of which is initially used in New Mexico." Section 7-9-85 - Deduction; gross receipts tax; certain organization fundraisers. But they exclude GRT billed to the buyer, as that would constitute taxing a tax. Section 7-9-16 - Exemption; gross receipts tax; certain nonprofit facilities. 6 (Ch. 326, 1, enacting N.M. STAT. From a practical point of view, sales in those categories might be thought of as "exempt;"sd but, each has different rules on whether and how to report them. ANN. Section 7-9-33 - Exemption; gross receipts tax; products subject to Oil and Gas Emergency School Tax Act. Section 7-9-52 - Deduction; gross receipts tax; sale of construction services and construction-related services to persons engaged in the construction business. Transportation services are sourced to the location where the person or property being transported enters the vehicle. Tax - Director Compensating Tax 3. Here are the 38 non-taxing states -- and you can add the District of Columbia to the list as well. The law conforms the compensating tax sourcing rules to those governing the gross receipts tax. Section 7-9-79.2 - Gross receipts tax; compensating tax; biodiesel blending facility tax credit. H.B. Two tours. For further discussion of H.B. 7-9-117. H.B. The potential is great what to know before taking action. Section 7-9-69 - Deduction; gross receipts tax; administrative and accounting services. The information in these articles is not intended to be written advice concerning one or more federal tax matters subject to the requirements of Section 10.37(a)(2) of Treasury Department Circular 230 because the content is issued for general informational purposes only. Section 7-9-17 - Exemption; gross receipts tax; wages. For a workshop schedule, visit http://www.tax.newmexico.gov/workshop-schedule.aspx. Some merchants, however, may require a Type 9 (purchase of tangible personal property by a governmental entity) nontaxable transaction certificate. Section 7-9-7.1 - Department barred from taking collection actions with respect to certain tax liabilities. While an RST is a transaction tax imposed on the sale of tangible personal property and certain enumerated services, the GRT is imposed on the privilege of doing business in New Mexico. 16 H.B. Section 7-9-79 - Credit; compensating tax. 2 H.B. Alabama. Its state income tax ranges from 1.7% to a maximum of 4.9%. The combined tax rate in some towns is now or is about to go over 9 percent. In other words, items and services delivered to a customer will begin to be sourced to the location of the delivery rather than to the seller's business location. However, you may have to register for withholding tax or to obtain nontaxable transaction certificates.You do not have to report nontaxable receipts on the CRS-1 Form. Grant Thorntons latest State of Work in America survey reveals trends companies must heed to attract and retain talent, including supporting mental health and wellbeing, creating flexible hybrid schedules and ensuring a quality company culture. 6 will primarily affect businesses that perform services outside of New Mexico for customers in New Mexico, because more services of this type will be subject to the GRT. Property. How we work matters as much as what we do. Information needed to register includes the: Business name. GRT-PV Gross Receipts Tax Payment Voucher. Section 7-9-79.1 - Credit; gross receipts tax; services. 0:04. Section 7-9-38.1 - Exemption; gross receipts tax; interstate telecommunications services. The information contained herein is general in nature and is based on authorities that are subject to change. For gross receipts tax managed audits, taxpayers are allowed a credit against gross receipts tax of any compensating tax paid relating to the transaction. The following receipts are exempt from the NM gross receipts tax & sales tax: Agricultural Exemptions 6, New Mexico's own economic nexus threshold for the GRT took effect on July 1, 2019. Deduction; gross receipts tax; certain medical and health care services. Private company boards should bring the backgrounds and insights to understand risks and opportunities and drive the business forward. 6 will soon bring additional substantial changes to the New Mexico GRT and compensating tax regime. GTIL does not deliver services in its own name or at all. New Mexico's gross receipts tax is admittedly confusing, but the state still expects businesses to follow the law and pay what they owe from the sale of property or . Section 7-9-23 - Exemption; compensating tax; vehicles. Section 7-9-41 - Exemption; gross receipts tax; religious activities. 326, 3, amending N.M. STAT. California. Minnesota introduces Colorado-style retail delivery fee. Basic structure of New Mexico's GRT and compensating tax, Tax changes for out-of-state sellers of services, M&A pitfalls for deferred research expenditures, Impact of business interest expense limitation regs. For businesses in New Mexico, gross receipts tax is based on the business location. Common exemptions are receipts of a 501(c)(3) nonprofit and governmental entities, receipts from isolated or occasional sales, employee wages, interest and dividends and insurance company receipts. Learn how. As of July 1, 2019, New Mexico redefined the term "property" to include digital goods and defined the term "digital good" to mean a digital product delivered electronically, including software, music, photography, videos, reading material, applications, and ringtones. Section 7-9-13.1 - Exemption; gross receipts tax; certain services. Section 7-9-103.2 - Deduction; gross receipts; electricity exchange. ANN. 7-9-117. Do independent contractors owe New Mexico gross receipts taxes? This includes income from self-employment and independent contractor income. Certain key changes, as well as effective dates, are summarized in this tax alert. Anyone who operates a business in New Mexico is familiar with the gross receipts tax, or GRT a tax not on sales but on companies and people who do business here. If a business isnt required to collect, which is unusual today given the 2018 U.S. Supreme Court decision in South Dakota v. Wayfair, Inc., the consumer is liable for the tax and must remit it directly to the appropriate tax authority, usually in the form of a consumer use tax. 3. In general, the gross receipts tax rate is origin-based determined by the business location of the seller or lessor, not the location of the buyer or lessee. The legislation also expands the gross receipts tax deduction for marketplace sellers to include both gross receipts tax and governmental gross receipts tax. 7-4-10.E(3). I'm keeping my social battery full and making a name for myself. Section 7-9-94 - Deduction; gross receipts; military transformational acquisition programs. Section 7-9-54.4 - Deduction; compensating tax; space-related test articles. Determine tax obligations across the U.S. Find out where you may have sales tax obligations, Understand how economic nexus laws are determined by state, See which nexus laws are in place for each state, Look up rates for short-term rental addresses, Find DTC wine shipping tax rates and rules by state, Learn about sales and use tax, nexus, Wayfair, Get answers to common questions about each step of the tax compliance process, Our annual guide to nexus laws and industry compliance changes, U.S. transaction data insights for manufacturing, retail, and services sectors, Join us virtually or in person at Avalara events and conferences hosted by industry leaders, Watch live and on-demand sessions covering a broad range of tax compliance topics, Opportunity referrals and commission statements, Technology partners, accounting practices, and systems integrators, Support, online training, and continuing education. 17 H.B. It is not a tax the seller collects from the buyer and delivers to the state; its due even if the seller doesnt charge the buyer. Section 7-9-32 - Exemption; gross receipts tax; oil and gas or mineral interests. Section 7-9-58 - Deduction; gross receipts tax; feed; fertilizers. You already receive all suggested Justia Opinion Summary Newsletters. June 14, 2023 With interest in energy supply and security at an all-time high, governments, corporations and individuals are rethinking the role that energy plays as a critical resource, as a driver of growth and as a catalyst for change. Who do I contact if I have questions?New Mexico Taxation and Revenue Department Section 7-9-24 - Exemption; gross receipts tax; insurance companies. Section 7-9-114 - Advanced energy deduction; gross receipts and compensating taxes. Are Travel IBA (6th digit 1, 2, 3, 4) transactions sales tax exempt? And if this seems like semantics, it's because it is. Cybersecurity can never rest. Section 7-9-105 - Credit for penalty pursuant to Section 7-1-71.2 NMSA 1978 [repealed]. Withholding Tax* 4. 15 H.B. GTIL and each member firm of GTIL is a separate legal entity. 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. Section 7-9-29 - Exemption; gross receipts tax; certain organizations; exceptions. 6, see GT SALT Alert: New Mexico Enacts Omnibus Tax Bill, Adopting Mandatory Combined Reporting and Market-Based Sourcing. 326, 1, enacting N.M. STAT. He has 22 years of broad-based SALT consulting experience at the national and practice office levels in large public accounting firms. A business ordinarily bases its GRT on the rate that applies to its physical base of operations, but many companies transact business online or in multiple places and thus register each site separately and pay different GRT rates. May 26, 2016 New Mexico Gross Receipts Tax (NMGRT) By Larry Donahue / Taxes / 21 comments Is Your Business Compliant with Gross Receipts Tax? GRT applies to the gross receipts of businesses or people who sell property, perform services, lease or license a property or franchise in New Mexico, and sell certain services delivered outside New Mexico when the resulting product is initially used here. As a result, many out-of-state service providers selling to New Mexico customers will be required to collect GRT, and some in-state businesses may be required to accrue and remit compensating tax if GRT was not collected by the service provider. Section 7-9-93 - Deduction; gross receipts; certain receipts for services provided by health care practitioner. commonly controlled entity that is exempt; and o Subtract: Income from US obligations, other tax -exempt income, 100% of subpart F . The rules specify that gross receipts are to be reported to the proper business location, depending on the type of property of service being sold.3 For sales of tangible property, the business location is determined by a hierarchy of sourcing rules.4 Sales of most services will now generally be sourced to the location where the product of the service is delivered.5 Sales of professional services performed in the state are sourced to the location of the performer or seller of the service.6 The new sourcing rules become effective July 1, 2021.7
For example, centrally billed accounts are not subject to gross receipts taxes on tangible property. Potentially affecting more businesses than the nexus provisions, this second set of changes implements a regime of substantially uniform GRT and compensating taxes for both in-state and out-of-state businesses. 105-164.13E(a) reads as rewritten: 14 " 105-164.13E. There are 2 categories of sales that are not subject to N.M. gross receipts tax: exemptions and deductions. Section 7-9-20 - Exemption; gross receipts tax; certain receipts of homeowners associations. The move to a local compensating tax regime will primarily affect persons that purchase goods, services, or licenses from out-of-state sellers. Section 7-9-99 - Deduction; gross receipts tax; sale of engineering, architectural and new facility construction services used in construction of certain public health care facilities. Section 7-9-36 - Exemption; gross receipts tax; oil and gas consumed in the pipeline transportation of oil and gas products. But perhaps its a step in the right direction. The TRD will be charged with enforcing the collection of the local compensating taxes in the same manner as the statewide GRT and compensating tax. For in-state businesses, the GRT can be seen as easier to apply than an RST. In most cases, the tax revenue benefits the municipality in which the business is physically based. CFOs remain optimistic about growth even in a turbulent economy, but theyre also looking to cut costs and prioritizing ESG. New Mexico amends gross receipts sourcing rules. 7 H.B. Over the years, though, cities and counties have responded to reductions in local revenues caused by state-allowed exemptions and deductions by loading on their own assessments. Receipts from construction projects, however, are taxed at the rate in effect where the construction is being done, not where the construction companies are based. Both in-state and out-of-state sellers that make sales throughout the state will need to prepare to collect and report GRT at new rates based on the location of their customers. For example, the tangible personal property sourcing rules provide a cascade of location determinations to provide clearer guidelines for the transition to a destination sourcing principle. Businesses in New Mexico receiving income from services provided to buyers located within New Mexico are subject to N.M. The new compensating taxes will apply to sales of tangible personal property, services, licenses, and franchises that are used in the municipality or county. And because the tax is on the business rather than the consumer, businesses are permitted toabsorb New Mexico gross receipts tax (i.e., they can pay the tax themselves and not pass it on). The gross receipts tax rate varies throughout the state from 5% to 9% and frequently changes. If not received at the sellers business location, the location is generally established by the buyers delivery address as per the buyers instructions. Section 7-9-22.1 - Exemption; gross receipts tax; boats. If the business is based in a municipality, the business pays municipality and county GRT. We can harness the power of people, process, data and technology to transform your companys tax operating model into a strategic function of the business. 7-1-14.K(4). ANN. Double-click a form to download it. - A qualifying farmer is a person who has an annual income from farming 16 operations for the preceding taxable year of ten thousand dollars ($10,000) or more or who has Section 7-9-78.1 - Deduction; compensating tax; uranium enrichment plant equipment. Section 7-9-109 - Deduction; gross receipts tax; veterinary medical services, medicine or medical supplies used in medical treatment of cattle. Beyond the initial changes affecting economic nexus, marketplaces, and digital goods, H.B. The Gross Receipts Tax rate varies throughout the state from 5.125% to 9.4375%. It should be noted that tax rates and the rules governing them change frequently. On April 4, 2019, New Mexico Gov. Section 7-9-101 - Deduction; gross receipts; equipment for certain electric transmission or storage facilities. 6, enacting major changes in the state's corporate income tax and gross receipts tax (GRT) regimes. In short, changing the name of the New Mexico gross receipts tax wont eliminate all complexity for businesses. As a consequence the IRS will expect you to file a Schedule C, Profit or Loss from Business, with your Federal Individual Income Tax Return. Businesses that evade GRT by dodging registration should understand that laws allow government entities to assess stiff penalties. It leads people to believe its like the Ohio commercial activity tax or the Washington B&O tax, when in fact, those two taxes are very different from the New Mexico gross receipts tax. 11 N.M. STAT. Section 7-9-51 - Deduction; gross receipts tax; sale of construction material to persons engaged in the construction business. All references to Section, Sec., or refer to the Internal Revenue Code of 1986, as amended. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. Additional changes to the GRT regime will take effect July 1, 2021, when New Mexico moves to destination-based sourcing and a comprehensive system of local compensating taxes. Sourcing for professional services will continue to be the seller's place of business. Some are essential to make our site work; others help us improve the user experience. Vendors have the ability to pass the cost of the gross receipts tax to card holders. By using the site, you consent to the placement of these cookies. Local GRTs in New Mexico are subject to change twice annually, on January 1 and July 1. To understand why New Mexico would do this, and what the change would mean for businesses, it helps to understand what gross receipts tax is and how it's similar to, and different from, sales tax. Pursuant to section, Sec., or licenses from out-of-state sellers ( purchase of personal. On authorities that are subject to N.M. gross receipts tax ; certain medical and health care services to certain liabilities! To the right direction tax rate in some towns is now or about... 7-9-58 - Deduction ; gross receipts ; electricity exchange for marketplace sellers to include both gross receipts ; certain for... Or other tax professionals prior to taking any action based upon this information organizations exceptions. 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The name of the gross receipts tax is based on authorities that are subject to change twice annually on... Mexico Enacts Omnibus tax Bill, Adopting Mandatory combined Reporting and Market-Based sourcing tax based... Changes, developing tax issues, and newly evolving tax planning strategies of compensating tax will... Reporting and Market-Based sourcing location is generally established by the buyers delivery address as the!, changing the name of the New Mexico are subject to N.M. gross receipts ;! The pipeline transportation of oil and gas products 4, 2019, New are...