Calculate Gross Receipts Tax in New Mexico 2021
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Introduction
Calculating gross receipts tax in New Mexico for the year 2021 is an essential task for business owners and finance professionals operating within the state. Understanding this calculation is key to compliance with local tax laws. The gross receipts tax rate varies by location within New Mexico, reflecting local and county-level taxes imposed on the sale or lease of goods and services. This guide will breakdown the step-by-step process needed to accurately calculate your gross receipts tax.
Additionally, we'll explore how Sourcetable can simplify this task using its AI-powered spreadsheet assistant. To discover the ease of managing your business taxes with advanced tools, visit app.sourcetable.com/signup.
How to Calculate Gross Receipts Tax in New Mexico 2021
Understanding the Tax Structure
In response to the South Dakota v. Wayfair, Inc. decision, New Mexico revised its Gross Receipts Tax (GRT) guidelines under H.B. 6 to enact economic nexus laws. The GRT now applies to both in-state and out-of-state businesses engaging in commerce in New Mexico. It encompasses the sale of tangible personal property, services, and certain leasing or licensing of property.
Calculation Steps
Start by determining your total and taxable gross receipts. Taxable gross receipts can include sales subject to GRT after exemptions and deductions, such as out-of-state sales and sales for resale, are applied. The formula involves adding taxable sales to total deductions to find taxable gross receipts. Document these figures carefully.
Sourcing Rules
As of 2021, New Mexico has shifted from an origin-based to a destination-based sourcing system per H.B. 6. This means that GRT is calculated based on the buyer's location rather than the seller's business location. This destination-based rule is critical for accurately determining the GRT rate to apply to each transaction.
Applying the Correct Tax Rate
The GRT rate varies between 5.125% and 9.0625%, depending on the specific location of the sale within New Mexico. It's essential to identify the correct jurisdictional rate for where each sale occurred to comply with state laws and remit the correct amount of tax.
Filing and Payment Requirements
Ensure timely filing and payment of GRT to avoid penalties and interest. The New Mexico Taxation & Revenue Department (TRD) requires sellers to file returns and remit the collected GRT. Late filings and payments can lead to escalating penalties and interest charges.
By carefully following these steps and understanding the legal requirements, businesses can accurately calculate and comply with New Mexico’s Gross Receipts Tax laws for 2021.
How to Calculate Gross Receipts Tax in New Mexico 2021
Step 1: Determine Taxable Gross Receipts
Identify the amount of taxable gross receipts. These include the total income from all sources, excluding specific deductions defined under New Mexico law.
Step 2: Understand Sourcing Rules
Following the destination-based sourcing, calculate the GRT based on where the product or service is delivered, not where it's sold. As of July 1, 2021, keep in mind the location of the consumer impacts tax rates.
Step 3: Apply the Correct Tax Rate
Different locations within New Mexico might have varying tax rates due to local GRTs. Combine the state GRT rate of 5.125% with local rates that could be up to No changes to the tax rates have occurred recently, maintaining a potential maximum of 9.25%.
Step 4: Calculate the Gross Receipts Tax
Multiply the taxable gross receipts by the applicable combined GRT rate. If there are any deductions (non-taxable gross receipts such as out-of-state sales, sales for resale, or other exemptions), subtract these first before applying the tax rate.
Tax Reporting and Deadlines
Ensure timely filing and payment of GRT to avoid penalties. GRT returns are typically due by the 25th day of the month following the reporting period, with penalties accruing at 2% per month for late payments.
By adhering to these guidelines, businesses can ensure compliance with New Mexico's GRT laws post the 2021 updates influenced by H.B. 6 and the Wayfair decision.
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Calculating Gross Receipts Tax in New Mexico 2021
Example 1: Service-Based Business
A freelance graphic designer charged $5,000 for services rendered in Albuquerque, where the combined state and local Gross Receipts Tax rate was 7.875%. To determine the tax, apply the rate to the revenue: $5,000 x 0.07875 = $393.75. Therefore, the total amount to be collected is $5,393.75.
Example 2: Product Sales
An electronics store in Santa Fe, with a Gross Receipts Tax rate of 8.4375%, sold a laptop for $1,200. Calculate the tax by multiplying the price by the tax rate: $1,200 x 0.084375 = $101.25. The total including tax is $1,301.25.
Example 3: Subscription Services
A software company based in Las Cruces offers annual subscriptions at $300 per user. With a tax rate of 8.3125%, the tax on one subscription is $300 x 0.083125 = $24.94. Hence, the total cost per subscription is $324.94.
Example 4: Multi-Location Business
A restaurant operates in both Taos (8.5% tax rate) and Clovis (7.5% tax rate). If its monthly gross receipts from both locations are $10,000 each, calculate separately: Taos—$10,000 x 0.085 = $850; Clovis—$10,000 x 0.075 = $750. The respective totals will be: Taos—$10,850, Clovis—$10,750.
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Using Sourcetable, receive precise answers displayed neatly in a spreadsheet format. The built-in AI goes further by providing a clear explanation in its chat interface on how each calculation was performed, including the use of specific formulas such as x = y * tax_rate.
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Use Cases for Calculating Gross Receipts Tax in New Mexico 2021
Business Preparation for GRT Changes |
Understanding how to calculate the Gross Receipts Tax (GRT) assists businesses in preparing for regulatory changes in the GRT regime, maximizing compliance, and reducing risks of penalties. |
Accurate Sourcing of Gross Receipts |
Knowledge of the destination-based GRT allows businesses to properly source their gross receipts, ensuring that tax calculations align with the location where sales occur rather than the business location. |
Calculation by Multiple Locations |
Businesses with multiple operating locations can calculate the GRT independently for each location according to varied local tax rates. This precision ensures accurate reporting and payment of the GRT. |
Compliance with Economic Nexus Thresholds |
Awareness of economic nexus thresholds under New Mexico's modifications allows out-of-state sellers to determine their obligation to collect GRT, adhering to state tax laws even without physical presence. |
Effective Use of Tools |
Businesses can utilize GRT calculators more effectively if they understand the underlying tax principles, leading to quicker and more accurate tax calculations. |
Engagement with Tax Professionals |
With a foundational knowledge of GRT calculations, businesses can engage more effectively with tax professionals, making discussions more productive and focused on nuanced issues. |
Ensuring Proper GRT Payments |
Understanding the nuances of GRT calculation, including exemption and deduction categories, helps businesses ensure correct GRT payments, avoiding underpayment or overpayment. |
Frequently Asked Questions
How is the gross receipts tax (GRT) calculated in New Mexico as of July 1, 2021?
As of July 1, 2021, New Mexico calculates GRT based on destination-based sourcing, which means the tax is determined by the location where the goods or services are delivered.
What changes were made to the New Mexico gross receipts tax in 2021?
In 2021, New Mexico's GRT changed from origin-based to destination-based sourcing. This change means that the tax rate applied is based on where the customer is located, rather than where the seller is located.
Are there any exceptions to the destination-based sourcing rule for GRT in New Mexico?
Yes, there are exceptions. In-person sales and professional services are sourced differently. Professional services are sourced to the seller’s place of business.
Do the changes to the GRT in New Mexico apply to out-of-state businesses?
Yes, the changes require out-of-state businesses to collect GRT based on the location where goods or services are used by New Mexico customers, allowing for economic nexus laws.
How can a business keep track of the applicable GRT rates in New Mexico?
Businesses must independently track changes to the gross receipts tax rate, which can change annually in July. Local rates, governed by county and municipal authorities, may be updated in January or July, and the schedules are issued biannually.
Conclusion
Calculating the gross receipts tax in New Mexico for 2021 requires accurate incorporation of specific tax rates and compliance with state regulations. The formula to determine the gross receipts tax is straightforward: taxable amount × tax rate. For businesses, ensuring precision in these computations is essential to maintain financial accuracy and compliance.
Sourcetable Simplifies Calculations
Sourcetable, an AI-powered spreadsheet, revolutionizes the way calculations like these are performed. This tool not only facilitates straightforward calculations but also enhances them with the ability to use AI-generated data. For any business looking to streamline their tax calculations efficiently, Sourcetable offers a dynamic and user-friendly solution.
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