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CALCULATING GROSS RECEIPTS

How do I determine gross receipts that must be reported to New Mexico?

When you file your gross receipts tax report you want to know how much tax you have to pay. The first step is to determine the amount of taxable gross receipts. The second step is to determine your total gross receipts. These 2 amounts may not be the same if you have non-taxable gross receipts - known as deductions. There are 3 types of deductions: sales to out-of-state buyers, sales from resale and exemption. The third step is to add taxable sales to total deductions. These steps are illustrated in the chart below.

It's important to know the gross receipts tax law makes the seller responsible for gross receipts tax regardless of whether the tax is added to sales invoices, bills or other sales documents. That means the money you receive from sales actually consists of 2 amounts: the sale and the gross receipts tax. To avoid paying tax on the gross receipts tax, you should report only the sales amounts. You do this by using this arithmetic formula which is illustrated in the chart below.

Total gross receipts including tax divided by 1+tax rate. 

This is known as backing out the tax. After backing out the tax from total gross receipts, you get taxable gross receipts.

Backing out the tax

The gross receipts tax law deems the tax to be included in all amounts you collect from customers, including, for example, shipping and handling charges and reimbursable expenses. The example below shows you how to determine taxable gross receipts by separating out the taxable gross receipts. That's called "backing out the tax." If you don't do this calculation, you will pay tax on the tax.


 

Example of calculating taxable and total gross receipts

Important: A separate calculation is required for each location code.

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