Current through Register Vol. 35, No. 18, September 24, 2024
A.
Receipts which are deductible under the Gross Receipts and Compensating Tax Act
can be deducted only if documentation justifying the deduction is maintained so
it can be verified upon audit.
B.
The following examples illustrate the documentation requirements.
(1) Example 1: X sells tangible personal
property to Y, a governmental agency. X may deduct the sale if the government
purchase order is retained or a copy of the check, the check stub or voucher
identifying the source of payment is retained for audit purposes.
(2) Example 2: A, a grocer, makes a cash sale
to C, a cafe. C has issued the appropriate type nontaxable transaction
certificate (nttc) to A. A may deduct the receipts from the sale if a sales
ticket is prepared identifying the property purchased, the name of the customer
and the date and amount of the transaction.
(3) Example 3: M, a motor parts store,
deducts receipts for sales made over the counter to cash customers who have
delivered proper nttcs. A sales ticket is prepared by M indicating the date,
the amount and the items purchased. "CASH" is written in the space provided for
the customer's name. If M is audited, the deduction would be disallowed; the
transaction could not be related to a specific nttc.
C. A taxpayer claiming the deduction under
Section
7-9-47
NMSA 1978 has the burden of proving that the sale was in fact a nontaxable sale
for resale. If the sale was made to a person who was an active registered
retailer or wholesaler at the time of the sale and the property purchased was
of the type or types ordinarily purchased for resale by that purchaser, the
presumption that the deduction of the receipts from the sale should be
disallowed can be overcome during an audit or upon reconsideration. A taxpayer
claiming a deduction pursuant to Section
7-9-47
NMSA 1978 who is unable to provide a nttc within the sixty-day period specified
in Subsection A of Section
7-9-43
NMSA 1978 will be allowed to submit other evidence, as specified in Subsection
F of this section. Such other evidence is meant to provide the department with
sufficient information to verify that the deduction under Section
7-9-47
NMSA 1978 is appropriate and will only be accepted if the conditions of
Subsection E of Section
7-9-43
NMSA 1978 are met.
D. For purposes
of Subsection C of this section, "unable to provide a nttc" means the inability
to obtain a nttc within the sixty-day period specified in Subsection A of
Section
7-9-43
NMSA 1978 because:
(1) the buyer of the
property is no longer engaged in business in New Mexico;
(2) the buyer was authorized by the
department to execute nttcs at the time of the transaction but since then the
authority to obtain or issue nttcs has been suspended by the department because
the buyer is not in compliance with the department for the payment of their
taxes;
(3) an act of God caused
physical damage to the taxpayer's records or place of business; or
(4) there are other circumstances that
reasonably justify a determination that the taxpayer is unable to provide a
nttc.
E. The following
are examples of when a taxpayer would be "unable to provide a nttc" as that
phrase is used in Subsection C of this section:
(1) Example 1: X, a New Mexico retailer,
sells tangible personal property to Y, another small retailer located in a
rural part of New Mexico. Y purchases the tangible personal property with the
intent of reselling it in the ordinary course of business but fails to provide
X with the proper nttc to support the resale deduction. Two years later X is
selected for an audit by the taxation and revenue department. At the beginning
of the audit, X is given a sixty-day letter that requires X to obtain all
necessary nttcs to support any deductions taken during the periods being
audited. X attempts to obtain a nttc from Y, but is unable to do so because Y
is no longer in business in New Mexico. If X can show that Y is no longer in
business, X will be considered unable to provide a nttc within the sixty-day
period.
(2) Example 2: L, a small
lighting company, receives a notice that an audit is to be conducted by the
department. L has been instructed to have in its possession all nttcs that
support any deductions for the period in questions within sixty days. While
compiling the documentation requested by the department, L realizes it does not
have the proper nttc for a number of transactions with D, a retail customer. L
calls D to obtain the proper nttc but is told by D that the department will not
issue nttcs to D because D has an outstanding tax liability and that it is not
in compliance. Because D's ability to execute a nttc has been suspended, the
department will consider L as being unable to provide a nttc within the
sixty-day period specified in Subsection A of Section
7-9-43
NMSA 1978.
F. A taxpayer
who is unable to provide a nttc, as provided in Subsection D and E of this
section, can provide the department with other evidence, pursuant to the
requirements of this section, that will provide the department with sufficient
information to verify that the deduction under Section
7-9-47
NMSA 1978 is appropriate. Such other evidence must include one of the
following:
(1) information identifying the
buyer (i.e., name, address, identification number, etc.) that can be used to
verify against department records that the buyer is no longer engaged in
business and that the deduction under Section
7-9-47
is appropriate;
(2) a letter sent
to the buyer inquiring as to the buyer's disposition of the property purchased
from the seller; the letter shall include the following information:
(a) seller's name and combined reporting
system (CRS) identification number;
(b) date of invoice(s) or date of
transaction(s);
(c) invoice
number(s) (copies of actual invoices may be attached);
(d) copies of purchase order(s), if
available;
(e) amount of
purchase(s);
(f) a description of
the property purchased or other identifying information; and
(g) a section completed and signed by the
buyer that includes:
(i) the buyer's name,
combined reporting system (CRS) identification number, and printed
name;
(ii) title of the
signor;
(iii) a statement as to the
nature of the purchase; and
(iv) a
statement of the buyer or signor indicating that the buyer sold or intends to
resell the tangible personal property purchased from the seller, either by
itself or in combination with other tangible personal property in the ordinary
course of business; or
(3) any other documentary evidence that has
been approved by the department in writing prior to any assessment of tax or a
protest that has been acknowledged by the department prior to December 31,
2011.
