Isn't the New Mexico gross receipts tax the same as sales tax?
No! Gross receipts tax applies to businesses operating in New Mexico or having sales to customers in New Mexico. Gross Receipts Tax is not the same as sales taxOverlooking New Mexico Gross Receipts Tax can be a expensive mistake.

Sales taxes. In most states, sales tax applies only to sales of things.

Gross receipts tax. New Mexico gross receipts tax (GRT) applies to sales of services as well as things.  Note that construction activity is considered to be providing services. Gross receipts from construction activity, including materials, are subject to GRT. Commissions are are also subject to GRT unless the sale on which they are based is not subject to GRT.

* Here’s an example of the arithmetic for calculating GRT on a sale of $100.00 where the GRT tax rate is 6% and the seller does not add the tax to the sale amount.

Total collected from a sale 
$100.00
Formula for “backing out” GRT from total gross receipts
100.00 ÷ 1.06
Taxable gross receipts included in sale 
94.34
GRT tax rate 
     6%
GRT 
$5.66

In this case the seller reports taxable gross receipts of $94.34 and is responsible for paying the state tax of $5.66.

* Here’s what the transaction would look like if the seller adds the tax to their bill.

Payment received for merchandise or services sold
$100.00
GRT added
     6.00
Total collected from customer
106.00
Formula for “backing out” GRT from total gross receipts
$106.00 ÷ 1.06
Taxable gross receipts included in sale
100.00
GRT tax rate
       6%
GRT
 $6.00

Exemptions. NM law lists about 40 circumstances where gross receipts of a business are exempt from GRT. Exempt gross receipts are not required to be reported to the state.  

Deductions. There are about 80 types of transactions that are not subject to GRT but must be reported as total gross receipts. They are then deducted on the report to determine the amount of taxable gross receipts. A common deduction is gross receipts of a business where a customer located in New Mexico resells the product or service, as would be the case with a wholesaler or subcontractor. Another common deduction is gross receipts from the sale of goods or services to a buyer located outside of New Mexico.

Here’s an example of how to fill out the GRT report containing common deductions.

Gross receipts from sales to customers in NM, including tax

$300.00


GRT tax rate (6.00%)


Back out tax (divide by 1+tax rate)

÷ 1.06


Taxable gross receipts


$283.02

Deductions


Gross receipts from sales to customers outside of NM

$200.00


Gross receipts from sales to NM customers who resell the product

100.00


Total deductions

300.00

Total gross receipts to be reported

$583.02


Important: Deductions for determining taxable gross receipts should not be confused with deductions of business expenses income tax returns.

Tip. Even though exempt gross receipts are not reportable, it’s a good practice to report them anyway. That’s because the state matches sales businesses report to the IRS with gross receipts reported to the state. Any instance of under-reporting causes the state to conduct an audit to determine the apparent amount of GRT owed by the seller.