Current through Register Vol. 35, No. 18, September 24, 2024
A.
Qualifying sales conditions.
The seller of a service may qualify for the credit if the transaction meets
these conditions:
(1) the sale for which the
credit is sought is subject to gross receipts tax or governmental gross
receipts tax;
(2) the service is
sold for subsequent resale;
(3) the
subsequent resale is not subject to the gross receipts tax; and
(4) the buyer of the service certifies to the
seller in writing and in a form prescribed by the secretary that the subsequent
resale is in the ordinary course of the buyer's business and will not be
subject to gross receipts tax or governmental gross receipts tax.
B.
Amount of credit.
The amount of credit available for qualifying transaction si equal to 10% of
the receipts from the sale multiplied by either 5%, if the taxpayer's business
I located in the unincorporated area of the county or 3.775%, if the taxpayer's
business is located in a municipality. Examples:
(1) A's business is located in a
municipality. A sells engineering services to B. B resells the engineering
services to C. C sells the services to the final consumer, D. B accepts an nttc
pursuant to Section
7-9-48
NMSA 1978 from C because C's sale to D will be taxable. B, however, cannot
execute an nttc to A, because B's sale to C is not taxable. B provides written
documentation to A that the resale of the service (B's sale to C) is in the
ordinary course of business and will not be subject to gross receipts tax. A
pays gross receipts tax on the sale to B; but takes a credit of 10 percent of
the gross receipts from the sale to B multiplied by 3.775 percent (gross
receipts multiplied by .10 multiplied by .03775).
(2) A, located in Albuquerque, sells a
service to B for $10,000 on July 15, 2005. B provides documentation that the
next sale is in the ordinary course of business and is not subject to gross
receipts tax. A may claim a credit of $37.75 (10,000 multiplied by .10
multiplied by .03775).
(3) X, a
business located in the unincorporated part of a county, sells accounting
services which are performed on tribal land to Y (not a tribal member) who
resells those services (in connection with other services which are also
performed on tribal land) to Z, a Native American residing on tribal land of
which he is a member. Y's sale to Z is not subject to the gross receipts tax
because the service was performed on tribal land for a tribal member. Y
therefore may not execute an nttc pursuant to Section
7-9-48
NMSA 1978 to X, because a deduction for services sold for resale is only
allowed if the next sale is taxable. X, however, may reduce his tax due on the
sale to Y by the amount of the credit - 10 % of the gross receipts from the
sale multiplied by 5% - if Y provides written documentation that the resale
(Y's sale to Z) is in the ordinary course of business and will not be subject
to gross receipts tax.
C.
Claiming the sale of service for
resale credit does not preclude executing an nttc. A reseller who takes
the sale-for-resale credit for the sale of a service may execute an nttc
pursuant to Section
7-9-48
NMSA 1978 for the original purchase of that service.
D.
Example: N purchases drafting
services from M and resells them to O who resells them outside New Mexico for
initial use outside New Mexico. N can reduce the tax due on his sale to O by
the amount of the credit and N may execute an nttc to M for the purchase of the
drafting services.
E.
Sale of
service for resale credit; documentation. In order to take the
sale-for-resale credit, the seller must obtain from the buyer a completed form
RPD-41305 Declaration of Services Purchased for Resale
certifying that the service is purchased for resale in the ordinary course of
business and stating the reason or reasons why the resale is not subject to
gross receipts tax or governmental gross receipts tax.
