Part 1: Ten Tax Tips to Know When You Register a Business in NM
By Bobbi Kay Nelson | October 9, 2014
New Mexico Combined Reporting System (CRS)
Part 1 of our 4-part series with REDW. REDW will cover 3 of the 10 items to be aware of when registering a business in New Mexico. REDW will also be sponsoring a WESST Lunch ‘n Learn on Wednesday, October 29th).
- What types of every day income are not subject to NM gross receipts tax?
- Available gross receipts tax deductions.
- Difference between an exemption and a deduction for CRS reporting purposes.
OK – You’ve got your great new idea. You’ve prepared a formal business plan. You even have your start-up capital and financing established. YAY! You’re all set to get your business running – Full steam ahead!
But, wait…. Did someone mention that I needed to get registered to pay taxes? Oh. I’m good. I went to the IRS website at www.irs.gov and received my Federal Employer Identification Number, aka “FEIN.” I’m ready to go, right? No. There’s this pesky clause in the U.S. Constitution called the Commerce Clause that makes sure that the Federal Government can’t interfere with each State’s rights. This includes the right to tax.
How does this impact me, you ask? Well, in New Mexico, this means you need to register for a New Mexico CRS Identification Number. “CRS” stands for Combined Reporting System. In New Mexico, taxpayers can report their gross receipts tax, compensating tax, and employees’ New Mexico state withholding on one form, hence the term “combined reporting.”
Unlike most states in the United States, New Mexico does not have a sales tax. We have a gross receipts tax. Gross receipts tax differs from sales tax in that everything sold in New Mexico – tangibles and services – are subject to tax, unless a specific exemption or deduction is available.
OK, so what’s the difference between an exemption and a deduction? Or, is there one? Yes, there is a big difference for CRS reporting purposes. If an exemption is available, the exempted amount is not included in “total gross receipts” reported. But, if a deduction is available, the deductible amount is included in “total gross receipts” reported on the CRS-1 form and then backed out in the column labeled “total deductions.” To summarize, exemptions are not reported on the CRS-1 form, but deductions are specifically identified on the report.
When you register for your CRS ID Number, you can select whether you’d like to report on a monthly basis, a quarterly basis, or a semi-annual basis. If your business has quite a bit of activity and you have employees, it’s probably best to select the monthly filer option. Once you register for your CRS ID Number, it is very important to file timely. Even if you have no activity for the period, you must file a return reporting $0 activity.
Tips to remember:
- Register your business with the IRS and the state(s) you’re doing business in.
- Make sure to understand the government’s definition of words shown on required reports.
- Don’t forget to file your reports timely!
This is Part 1 in a four-part series.
About the Author
Bobbi Kay Nelson
Bobbi Kay leads REDW’s State and Local Tax (SALT) practice. With over 25 years of public accounting experience, and as a former business owner, Bobbi Kay has become an expert in finding cost savings opportunities for clients of all sizes, industries, and complexities. By identifying and addressing sales and use tax compliance issues, income tax nexus prioritization, and optimal utilization of state and federal incentives and credits, she has generated millions of dollars in tax savings for the clients she serves.