New Mexico Sales Tax Guide
Chapter 8: Understanding New Mexico sales tax rules for shipping & handling
If you operate your ecommerce business from New Mexico, or have nexus in the state, you will be hard pressed to find any information on the state’s sales tax. That’s because New Mexico doesn’t exactly have a sales tax. Instead, the state imposes a “gross receipts tax” (GRT) on businesses that sell tangible goods or services in New Mexico. Here’s a rundown of New Mexico’s GRT rules as they apply to shipping and handling.Is Shipping Taxable in New Mexico?
According to the New Mexico Taxation and Revenue Department, the gross receipts tax is imposed on businesses “for the privilege of doing business in New Mexico.” It is common for businesses to pass the tax on to purchasers by either separately stating it on invoices or by combining the tax with the selling price.
And because the GRT tax is imposed on all received income, shipping and delivery charges are included. In other words, if you charge your customers for shipping or delivery, you will have to pay GRT tax for it, which is why most business owners pass that tax onto their customers in the form of “sales tax.”Impact of Delivery Methods
Again, because the GRT tax is a tax on all receipts for sales you make in New Mexico, it doesn’t matter how you ship an item. The bottom line is that if you invoice your customer to ship or deliver the product, no matter how you do it, that charge is included in your gross receipts and you owe GRT tax on it. According to the statute, charges by the seller for delivery, postage, transportation costs, and warehouse charges are an element of the sales price.Shipping Tax Exempt Purchases
New Mexico has a wide variety of purchases that are exempt from the GRT tax, but most of them don’t affect ecommerce sellers. The exception is that if your business is located in New Mexico and you ship a product to another state, that sale is exempt from GRT taxes.
In addition, “receipts from intrastate transporting of persons or property if under a single contract for transportation in interstate or foreign commerce, which includes handling, storage, drayage or packing is exempt from the GRT tax.” In other words, if you hire movers to deliver your household goods to New Mexico, you don’t have to pay GRT.Local Taxability
In New Mexico, the rate of GRT taxes a seller must collect depends on where the seller has nexus or is located, rather than on the purchaser’s location. So no matter where you ship in New Mexico, you will only pay one GRT rate. If you don’t do business in New Mexico or have nexus there, you still have to pay GRT taxes on the products you sell there. The out-of-state GRT tax is 5.125 percent.Things To Look Out For
New Mexico changes its tax rates during January and July of each year, which is a lot to keep up with. Consider automating your collection and filing to keep up.
Finally, we asked a representative from the New Mexico Taxation and Revenue Office what sellers should watch out for when collecting GRT. She said, “It’s a common misconception that GRT is only for tangible products because the tax also applies to services.” If you are, for example, a health advisor who sells both consultations and supplements to your online clients, you’ll owe GRT taxes on both of these offerings.