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I received a letter telling me I owe gross receipts tax for prior years. What's this all about?

The letter is usually called Notice of Intent to Assess Gross Receipts Tax. It means you're being audited. It does not mean you already owe the tax.​

 

How did this happen?

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You got this letter because the N.M. Taxation & Revenue Dept. identified your business as not having filed gross receipts tax reports or filed reports but omitted some income.

They determined this by comparing the annual sales you reported on your business income tax returns and 1099s your customers filed with the IRS to the total gross receipts for the year you reported to state. A discrepancy that indicates you may have underpaid your of gross receipts tax.

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Here is an example:

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Circumstances that often cause the mismatch

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  • The business did not register with the Taxation & Revenue Dept. 

  • The business registered but did not file gross receipts tax reports.

  • The business did not do its homework. If it had, it would have discovered the requirements for business's doing business in New Mexico to report their gross receipts and pay gross receipts tax. 

  • The business in located outside of New Mexico and has customers in New Mexico. 

  • The business is operated by individuals who moved to New Mexico and are not familiar with the gross receipts tax.

  • The business did not report sales that are not subject to gross receipts tax.

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If you don't respond to the letter

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The audit letter gives you 60 days in which to provide the department proof that some of your gross receipts are not subject to gross receipts tax. If you don't respond, the department will make the tax a legal debt (called an assessment).

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Along with the audit letter there will be an offer for you to participate in a Managed Audit and avoid penalties and interest.

 

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