Isn't New Mexico gross receipts tax the same as sales tax?

It is a sales tax - but there are important differences that can cause problems for people who move their business to New Mexico and for out-of-state businesses with a New Mexico connection.

The main difference is that New Mexico gross receipts tax applies to sales of services as well as things, whereas most other state's sales tax applies only to sales of tangibles.

If the business owners don't do their due diligence, the lack of familiarity can result in getting an audit letter for apparent under-reporting GRT as much as 3-1/2 years after the sales were reported to the IRS.

Another important difference is that New Mexico gross receipts tax is the responsibility of the seller. With many other states' sales tax the seller is a conduit who collect the tax from their customers and pay it over to the state. On the other hand, New Mexico sellers must pay the tax whether or not they add it to their price.

Tip. Even though exempt gross receipts are technically not reportable, they should be reported. That’s because the N.M. Taxation & Revenue Dept. (TRD) compares gross receipts reported to the IRS with gross receipts reported to the TRD. Any apparent under-reporting results in an audit to determine the amount of gross receipts tax owed by the seller. To prevent exempt sales from being taxed, they are deducted from total sales.

Important: The term "deductions" for determining taxable gross receipts are revenues that are not subject to GRT, is not the same as business expenses reported on business income tax returns. In other words, business profits are not relevant to the determination of gross receipts tax.