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Online sales tax gaining momentum in New Mexico


 New Mexico lawmakers explore taxing remote sellers.

The revenue outlook for New Mexico isn’t good, and expanding the state’s gross receipts tax to out-of-state vendors doing business in the state could help improve it.

New Mexico’s bipartisan Revenue Stabilization & Tax Policy Committee is exploring the possibility of taxing out-of-state companies that do business in New Mexico. A discussion draft introduced earlier this month would expand the definition of “engaging in business” to include certain businesses lacking a physical presence in the state. The proposal excludes from taxation those businesses with “less than one hundred thousand ($100,000) of gross receipts in the state, based on receipts during the prior calendar year.”

This isn’t the first time the New Mexico legislature has explored ways to level the playing field between noncollecting out-of-state sellers and collecting in-state vendors. However, former Taxation and Revenue Department Secretary Demesia Padilla during her tenure urged state lawmakers to “wait for the U.S. Congress to create a national policy” rather than impose a state law that could be found unconstitutional.

Yet federal lawmakers have thus far been unable to come up with a solution to the problem, in spite of the fact that three different bills await consideration: the Marketplace Fairness Act, the Remote Transactions Parity Act, and the Online Sales Simplification Act. As a January 2016 report on FY 2017 by the legislative finance committee notes, “It is unclear whether these bills will pass or how their specific provisions would affect New Mexico.”

In the absence of a federal solution, a number of states are taking matters into their own hands by taxing certain remote sales. New Mexico may soon seek to do the same: “The imposition of New Mexico tax on remote sellers could generate new revenue for the state." The  finance committee report states that the impact of a remote sales tax would be "limited because major online retailers are already collecting and remitting sales tax.” However, Amazon.com doesn't tax New Mexico transactions.

Enforcement

If enacted as written, the policy would take effect July 1, 2018. The New Mexico Department of Taxation and Finance would not enforce collection of gross receipts tax “for a tax period prior to July 1, 2018 on persons engaging in business if, for those tax periods, those persons:

  1. Lacked physical presence in this state; and
  2. Did not report taxable gross receipts”

Learn more about state and federal efforts to tax remote sales.


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.