Home State/Regional News State to grocery stores: Stop taxing food on deliveries

State to grocery stores: Stop taxing food on deliveries

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SANTA FE (AP) — New Mexico state taxation authorities on Wednesday urged grocery stores to stop unnecessarily collecting sales taxes on food that is delivered during the coronavirus pandemic.

New Mexico remains under a stay-at-home order that discourages unnecessary outings and public gatherings. At the same time, online shoppers have discovered gross receipts tax charges on sales of home-delivered groceries that are tax free when purchased in stores, undercutting the incentive to stay home.

“Many New Mexicans have been trying to do the right thing during the health emergency by limiting their outings, and one way to do that is to order groceries online and have them delivered,” Taxation and Revenue Department Secretary Stephanie Schardin Clarke said in a news release. “We certainly don’t want to discourage that, and we hope that this new guidance will alleviate confusion.”

State law provides a tax deduction for sales at a retail food establishment, and a memo from the tax agency outlines exact circumstances for waiving taxes on food.

Taxes are not due when “the customer orders the groceries from the retail food store online and pays the retail food store online with a credit card,” the memo states. Taxes still are due on delivery service charges and prepared food from restaurants and stores.

Gross receipt taxes on sales and services range from about 5.5% in rural Catron County to more than 9% within the city of Espanola.

New Mexico lawmakers removed the gross receipts tax from sales of most food items in 2004. Lost revenues to local governments are offset by state replacement payments each year in excess of $100 million.

The tax exemption on delivered food may not last for long. The state switches to “destination-based sourcing” on taxes come July 1, 2021, in a move that “will make the reporting location where goods are delivered the location of sale,” the taxation department said in its memo.

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