Effective January 1, 2005, New Mexico will no longer subject most food items to the gross receipts tax.
The items qualifying for tax exemption are those food items that meet federal eligibility as "food" for food stamp purposes.
Most retail stores are already set up to identify which items have historically qualified for food stamps, so the transition
to also make these items exempt from gross receipts tax should go smoothly.
While the tax we pay on some items is eliminated, the tax we pay on everything else increases by .5% on January 1, 2005.
This increase affects all municipalities and is due to the repeal of the municipal credit. The municipal credit has
been in place for many years to help businesses within city limits compete with their counterparts in unincorporated portions
of the county. With this repeal, the City of Las Cruces tax rate will be 7% effective January 1.
Physicians will also see some savings on their monthly gross receipts tax reports. As we move to 2005, doctors
will not be subject to tax on payments from managed care organizations. Included in this definition are payments from
HMO's and health care insurers for commercial contract services. Payments from private pay accounts are still subject
to the tax. The State's definition of 'doctor' has also expanded to include dentists, chiropractors, optometrists, podiatrists
and other health care providers.
More information can be obtained by calling our office. You can also link to the NM Taxation and Revenue
Department home page at http://www.state.nm.us/tax/home.htm
and searching for FYI-201 and FYI-202 for information on the food and medical tax deductions, respectively.