New Mexico Administrative Code
Title 3 - TAXATION
Chapter 2 - GROSS RECEIPTS TAXES
Part 227 - DEDUCTION - GROSS RECEIPTS TAX - REFUNDS - UNCOLLECTIBLE DEBTS
Section 3.2.227.10 - GENERAL EXAMPLES

A. The deduction for refunds and allowances made to buyers is applicable to taxpayers reporting gross receipts or governmental gross receipts on either a cash or an accrual basis, but the deduction for uncollectible accounts is available only to taxpayers who report gross receipts or governmental gross receipts on an accrual basis. The transaction or transactions which gave rise to either the refund or allowance or to the amount written off the books as an uncollectible account must have originally been subject to the gross receipts tax or governmental gross receipts tax.

B. Example 1: C operates an appliance store. C sells D an air conditioner for $200. D returns the air conditioner and C credits D's account with $150. C may deduct $150 from gross receipts. However, C must include the remaining $50 in gross receipts.

C. Example 2: A buys goods for $100. A sells them for $25. A wishes to deduct the loss from gross receipts. The loss may not be deducted. A must pay tax on the $25 or the fair market value of the item sold, whichever is greater.

D. Example 3: X is an accrual basis taxpayer. Y buys a suit from X but does not pay for it. X reports the receipts from the sale on X's return. X then discovers that X cannot collect the sales price of the suit. X may take the deduction upon proper proof of the bad debt. This rule, however, would not apply if X had never reported the receipts from the sale.

E. Example 4: U is a university bookstore which reports governmental gross receipts on an accrual basis. U sells books and other materials to a student on account, reporting governmental gross receipts in the month of sale. The student subsequently leaves the university without fully settling the account. Because the receipts from the sale had already been reported, U may take the deduction upon proper proof of the bad debt.