Everything You Should Know About New Ecommerce Sales Tax Laws in New Mexico
Online shopping seemed like it could be a passing trend at first. Too many consumers were worried about sharing their financial information on the internet and possible quality issues with items they might purchase. Aggressive marketing, measures to protect consumer information, and quality control of products has changed all of that.
Ecommerce has moved to the forefront of our typical online experience. As this trend grows, wrinkles in the fabric need to be ironed out. One such issue has been the dilemma of states collecting the sales tax they need from products sold online. Since internet retailers sell to consumers in many states outside their home, it was unclear where it would be necessary to collect sales tax, if at all. A resolution to this problem is finally being implemented after a Supreme Court ruling in 2018.
What Is the Remote Seller Nexus?
Starting in 2008, some states went about enacting provisions that would require online retailers to collect internet sales tax on the products they sell and remit those taxes to the state. This became known as the “Remote Seller Nexus.” A connection, or “nexus” must be established between a business and a state before a state can require the business to collect and remit sales tax on their merchandise. The South Dakota v. Wayfair, Inc. ruling on June 21, 2018 paved the way for states to enact and enforce regulations on ecommerce sales tax collection.
These regulations create an economic nexus based on sales volume and transactions performed in individual states, regardless of whether the business operates a physical store or location in the state.
How This Ruling Affects Websites and Sales Tax
In New Mexico and across the country, internet businesses are beginning to pay the appropriate sales tax to states their consumers live in since the Supreme Court ruling in the Wayfair case. Forty-five states and the District of Columbia collect sales tax from consumers on products and taxable services they purchase. On October 1, 2019, an economic nexus that allows states to create and enforce laws regarding online sales tax collection went into effect. If you are an online retailer, learn the specifics of these state laws and begin complying accordingly to protect your business and avoid fines.
Rules for Businesses Selling in New Mexico
New Mexico is one of the states that has taken advantage of the South Dakota v. Wayfair, Inc. Supreme Court ruling to help collect more revenue that they need for important state budget factors such as road repairs. H.B. 6, which was signed into law by the New Mexico governor on April 4, 2019, requires remote sellers with no physical presence in the state to collect and remit state gross receipts tax. States are using sales volume thresholds to determine at what point the taxes become necessary. The threshold New Mexico has established for gross receipts tax collection is $100,000 in yearly sales in the preceding calendar year. This measure also requires marketplace facilitators to collect and remit the tax for their sellers if the sales through their marketplace platform are over $100,000 in a year.
Marketplace sellers aid retailers by promoting their products on the marketplace and collect payment through a third party. New Mexico legislators predicted that the gross receipts tax collected from online sellers in the first year will raise $43 million for the state’s General Fund.
Simplifying Online Sales Tax for Your Company
All this may seem a bit mind boggling when you consider the number of states involved and the varying specifics of each state’s regulations. Retailers may wonder how they can adapt to the new rules, keep records in proper order for every state and still ensure operations continue running in an efficient way to keep revenues coming in and business going smoothly. Fears arise about non-compliance and accounting errors that could result in fines for the business and even more stress.
If that sounds like you, Forix can help you take the stress out of the whole transition. We partner with online tax service experts to take care of all your accounting duties for you. All the sales data, tax records, and filing responsibilities become our worry, not yours. The time we can save your staff and the money we can save you by avoiding accounting mistakes and state non-compliance fines will keep you in the black and help your business grow. Reach out to us today to find out how we can help.
Disclaimer: The information in this blog post is provided for general informational purposes only and should not be construed as legal advice from Forix.