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New Mexico Clarifies Gross Receipts Tax on Food


Instead of a sales tax, New Mexico has a gross receipts tax. A gross receipts tax is imposed on persons engaged in business in the state. It is generally passed on to the consumer, either by including it in the selling price or by separately stating it on an invoice. In the way the consumer experiences it, it is similar to a sales tax.

Gross receipts tax rates vary throughout the state. As of this writing, the lowest rate is 5.125%, for out-of-state business (R&D Services). The highest rate is currently 8.6875%, in the Taos Ski Valley.

The New Mexico Taxation and Revenue Department has recently released general information regarding the gross receipts tax on food sold in the state. FYI-201 reminds that in 2004, the New Mexico Legislature "repealed the general gross receipts tax on food for home consumption and tied the terms directly to the federal Supplemental Nutrition Assistance Program." At the same time, it repealed a ".5% credit that businesses within municipal boundaries were using to remain competitive with similar businesses in unincorporated areas… ." The repeals took effect January 1, 2005.

Certain foods are eligible for a gross receipts tax deduction, as outlined in Part 271 of the Federal Supplemental Nutrition Assistance Program and Section 7-9-92 NMSA 1978, provided they are sold at a Retail Food Store as defined by 7 USCA 2012(k)(1).

Eligible Foods Include, But Are Not Limited to:

  • Any food or food product intended for human consumption;
  • Seeds and plants to grow foods for personal consumption of households;
  • Most staple grocery food items;
  • Most cold, prepared foods packaged for home consumption.

Ineligible Foods and Sundries Include, but Are Not Limited to:

  • Receipts from the sale of food already exempt or preempted by federal law or exempt or deductible under the New Mexico Gross Receipts and Compensating Tax Act;
  • Nonfood items including but not limited to soaps, paper products, cosmetics, and household supplies;
  • Alcoholic beverages;
  • Tobacco and tobacco products;
  • Hot foods and hot food products prepared for immediate consumption;
  • Any food eaten in the store;
  • Pet foods, accessories, and medicines;
  • Vitamins and over-the-counter medicines;
  • Restaurant food;
  • Any food purchased at establishments that do not meet the definition of retail food store found in 7 USCA 2012(k)(1).

At issue is not only whether or not the food is purchased for home consumption, but also where the food is purchased. FYI-201 gives several examples to clarify what is, and is not, eligible for a deduction in the gross receipts tax.

Examples:

  1. Doughnuts sold in packages at a retail grocery store are eligible for the deduction from gross receipts tax. Doughnuts sold at a doughnut shop that sells nothing but doughnuts are not.
  2. Apples sold at a retail grocery store are eligible for the deduction from gross receipts tax. Apples sold at a roadside stand are not.
  3. Milk sold at a retail grocery store is eligible for the deduction from gross receipts tax. Milk sold at a gas station convenience store is not.

Clarified?

Read more about New Mexico Gross Receipts Tax here.

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Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.