Understanding GRT and NTTCs for New Mexico Trades and Resellers

Are you a business in the trades or resale industry and unsure how resale purchases are treated for tax purposes in New Mexico? If your profit margins feel tighter than expected and you cannot quite tell why, you are not alone. Many small business owners eventually find themselves asking the same question: Where is the money going? 

One thing to look at here is the Gross Receipts Tax. New Mexico’s GRT works differently than traditional sales tax systems in most other states, which can make it confusing at first. In my work as a tax expert for small businesses here in New Mexico, I see this happen with many clients. This article is meant to help you become more familiar with how GRT and NTTC work and how understanding them can help protect your profits. 

Understanding GRT and NTTCs in New Mexico

To make sense of how this impacts your business, it helps to start with two key terms you will see referenced throughout this blog. 

Gross Receipts Tax (GRT)

Gross Receipts Tax is imposed on businesses based on the total amount received from selling or leasing property, performing services, and selling products used throughout New Mexico. Although GRT is imposed on the business itself, it is common for businesses to pass the tax on to their customers. When this happens, the tax must be separately stated on the invoice, as outlined by the New Mexico Taxation and Revenue Department. 

Non-Taxable Transaction Certificates (NTTCs)

Non-Taxable Transaction Certificates, or NTTCs, are specific to New Mexico and allow certain transactions to be deducted from gross receipts. For businesses that resell goods or materials, NTTCs may allow qualified purchases to be made without paying Gross Receipts Tax at the time of purchase.  Learn more about it on their website.  

A Common Issue Trades and Resellers Run Into 

One common way profits can be affected is misunderstanding how GRT applies to resale purchases. For example, consider an interior designer who purchases materials or furniture from a vendor and then bills a client for the completed project. In many cases, the designer should only be responsible for GRT on what the client pays them, not on what the vendor charged. 

What often happens instead looks like this: 

• GRT is paid when materials are purchased. 

• GRT is then charged again to the customer. 

This creates double taxation, which quietly reduces profit margins, especially in businesses where material costs are significant.  

The Proper Way This is Handled: 

In general, New Mexico’s Gross Receipts Tax is designed to be paid once, at the final point of sale to the customer. Here’s how a resale transaction should be handled to avoid paying tax multiple times on the same goods. 

• Use an NTTC when buying materials or goods for resale. 

• Charge GRT once to your customer on the final sale. 

• Report and pay GRT based on what the customer pays you. 

A Result From Our Client

One New Mexico painter we worked with had not been using NTTCs for resale purchases. Before working with Oddo Financial Services, they had asked their previous CPA whether NTTCs were required, but didn't receive clear guidance. Over time, this resulted in paying GRT on materials that likely qualified as non-taxable resale purchases. After working with our team for about a year and reviewing how GRT applied to their business, we help them save over $80,000 by correcting erroneous  GRT payments. 

Every business is different, and New Mexico’s tax rules can be nuanced. Gaining a clearer understanding of how Gross Receipts Tax applies to your specific situation can help explain where your money is going and support better planning moving forward. If you have questions on how this applies to your business, feel free to reach out to our team. We can help provide clarity through our expertise in New Mexico’s tax system.