New Mexico has become the latest state to try and provide tax relief to businesses hit hard by Covid-19. S.B. 1 provides a temporary gross receipts tax exemption to restaurants and other businesses that sell prepared food.
Note: Gross receipts tax (GRT) is what you might think of as New Mexico’s version of sales tax. For business owners, the main difference between GRT and sales tax is that while sales tax is always collected from your buyer, GRT is paid by the retailer. While the retailer can choose to, just as with sales tax, pass GRT onto the buyer this is not required. Instead, since the retailer owes GRT whether or not they pass this cost onto the buyer, they can choose to simply pay GRT out of pocket.
What is New Mexico’s temporary tax relief measure?
S.B. 1 allows many businesses in New Mexico that sell prepared food to either refrain from charging gross receipts tax or collect the gross receipts tax from their customers but keep those proceeds. This applies to prepared food for immediate consumption, whether they are served at the establishment, picked up or delivered.
The deduction applies to sales made between March 1, 2021 and July 1, 2021.
This tax relief measure is designed to help businesses that have been hit especially hard by the pandemic.
Which businesses qualify for New Mexico GRT Relief?
Restaurants, breweries, bars and mobile food businesses qualify for this tax relief. Fast food restaurants are not eligible for the deduction.
Fast food restaurants are described as “restaurants that sell food intended to be ordered, prepared and served quickly, with minimal to no table service, and prepared in quantity by a standardized method for consumption on and off premises.
How does a New Mexico business claim GRT relief?
The deduction can be claimed when filing your New Mexico gross receipts tax return. New Mexico has issued guidance on how to claim the prepared food gross receipts tax deduction here.