When a business purchases inventory to resell, it can do so without paying gross receipts tax. In order to do so, the retailer will need to provide a New Mexico Non-Taxable Transaction Certificate (NTTC), which is sometimes referred to as a Resale Certificate or Sales Tax Exemption Certificate, to their vendor.
Learn more about how a New Mexico Non-Taxable Transcription Certificate works, how to get one, and more.
Table of ContentsWhen retailers purchase products to resell, they often don’t pay sales tax to the supplier on the purchase. The state sales tax will still be paid, but instead of the retailer paying sales tax, the retailer charges sales tax to their customer on the final value of the merchandise.
For instance, when a bookstore in New Mexico orders books to sell in their shop, by having a non-taxable transaction certificate, the bookstore owner won’t be charged state sales tax on that transaction. When a customer comes to the store to purchase a book, the bookstore will charge sales tax to the final user based on the full price of the book.
The bookstore gathers the sales tax from all its transactions and, typically once a month, sends the accumulated sales taxes to the New Mexico Taxation & Revenue Department.
The sales tax exemption is only intended for inventory that will be resold and is not intended for the tax-free purchase of items used in normal business operations, such as paper, pens, etc.
Before a business starts to sell products or provide taxable services, it must first register for a New Mexico CRS Identification Number (sometimes called a sales tax permit) from the New Mexico Taxation and Revenue Department. After receiving the number, the NTTC can be filled out and used with vendors to purchase tax-free.
Step 1: Begin by downloading the New Mexico Non-Taxable Transaction Certificate Form ACD-31050 or logging into the New Mexico Taxation & Revenue website and completing an electronic certificate.
Step 2: Identify the name, business address, and phone number of the buyer
Step 3: Enter the New Mexico CRS Identification Number of the buyer
Step 4: Choose the type of NTTC
Step 5 – Indicate the number of certificates being requested. The Department will only issue a maximum of 5 NTTCs to be used at a later date.
Step 6 – The purchaser will print and sign the certificate.
There is no cost for a Non-Taxable Transaction Certificate in New Mexico.
Most new businesses are set up to file and pay sales and use tax monthly, but depending on the amount of tax collected, your business may have a quarterly filing frequency instead.
The Non-Taxable Transaction Certificate does not expire.
In New Mexico, the certificate is not filed with any government agency. Instead, it is kept by the seller (the business selling the merchandise for resale).
Sellers are not required to accept this certificate; however, most do. If the vendor doesn’t accept the certificate for a tax-exempt purchase, the buyer will have to pay gross receipts tax on the merchandise being purchased. In most cases, they will be able to get a credit for the gross receipts taxes paid.
When a business is presented with a resale certificate, the seller has the burden of proof to verify that the buyer’s information is correct and to keep these records. Failing to verify this information may result in the seller being liable for paying New Mexico gross receipts taxes.
Before accepting a resale certificate, a seller should:
– Review the resale certificate to make sure it is completely filled out.
– Verify the purchaser’s CRS number is valid by logging into the Taxation and Revenue Department’s website and clicking on Check CRS Status.
– Sellers are also responsible for examining the certificate and evaluating whether the goods sold are reasonably consistent with the purchaser’s line of business. For example, if the buyer’s business is a car dealership, but they want to purchase office supplies tax-free, the seller should investigate further.
– Keep a file of resale certificates.
