When a business purchases inventory to resell, they can do so without paying gross receipts tax. In order to do so, the retailer will need to provide a New Mexico Non-Taxable Transaction Certificate (NTTC) (commonly referred to as a Resale Certificate) to their vendor.
Learn more about what a NTTC is, how to get one and more.
What is a Non-Taxable Transaction Certificate?
When retailers purchase products to resell, they often don’t pay sales tax to the supplier on the purchase. The sales tax will still be paid, but instead of the retailer paying sales tax, the retailer charges sales tax to their customer on the final value of the merchandise. The collected sales tax is then sent by the retailer to the New Mexico Taxation & Revenue Department.
For example, when a pet store purchases dog toys from their supplier to sell in the store, the pet store owner won’t typically have to pay sales tax to their supplier. When a customer (or end-user) purchases the dog toy, the retailer will charge sales tax to the customer based on the full price of the toy. The retailer will collect the sales tax from all their transactions and periodically (typically at the end of the month) send the sales tax to the state.
The purpose of the certificate is to provide evidence of why sales tax was not collected on a transaction. Similar names for a resale certificate include reseller number, seller’s permit, exemption certificate, wholesale license, or reseller’s license. In order for the supplier to allow the tax-exempt purchase, the seller needs proof the buyer intends to resell the product by providing a valid resale certificate.
The sales tax exemption is only intended to be used for inventory that will be resold and not intended for the tax-free purchase of items used in normal business operations such as paper, pens, etc.
Before a business starts to sell products or providing taxable services, they must first register for a New Mexico CRS Identification Number from the New Mexico Taxation and Revenue Department.
After receiving the number, an NTTC can be filled out and used with vendors to purchase tax-free.
ACD-31050 Non-Taxable Transaction Certificate Fillable Form
How to fill out the New Mexico NTTC – Form ACD-31050
Filling out the ACD-31050 is pretty straightforward, but is critical for the seller to gather all the information.
If audited, the New Mexico Taxation and Revenue Department requires the seller to have a correctly filled out ACD-31050 Non-Taxable Transaction Certificate. Without it correctly filled out, the seller could end up owing gross receipts taxes that should have been collected from the buyer in addition to penalties and interest.
Steps for filling out the ACD-31050 New Mexico Non-Taxable Transaction Certificate
Step 1 – Begin by downloading the New Mexico Non-Taxable Transaction Certificate Form ACD-31050 or logging into the New Mexico Taxation & Revenue website and completing an electronic certificate.
Step 2 – Identify the name, business address and phone number of the buyer
Step 3 – Enter the New Mexico CRS Identification Number of the buyer
Step 4 – Choose the type of NTTC
- Type 2: for tangibles for resale, lease or re-lease, or for purchase by manufacturer
- Type 5: for services for resale, for export, or for services performed on manufactured products
- Type 6: for construction contractor’s purchase of construction materials, construction services, construction-related services or for the lease of construction equipment
- Type 9: for purchase of tangible personal property by New Mexico or United States governments, 501(c)(3) organization, or credit unions
- Type 10: for purchase or lease of tangible personal property or services by a person who holds an interest in a qualified generating facility
- Type 11: for purchase of tangible personal property that is consumed in the manufacturing process
- Type 12: for purchase of utilities that are consumed in the manufacturing process
- Type 15: for tangible personal property purchased by qualified federal contractors
- Type 16: for sales of property, services and leases to qualified film production companies, accredited foreign missions, and their accredited members
Step 5 – Indicate the number of certificates being requested. The Department will only issue a maximum of 5 NTTCs to be used at a later date.
Step 6 – The purchaser will print and sign the certificate.
The resale certificate is kept on file by the seller and is not filed with the state.
Are sellers required to accept resale certificates?
Sellers are not required to accept resale certificates, however most do. If the vendor doesn’t accept the certificate, the buyer will have to pay gross receipts tax on the merchandise being purchased. In most cases, they will be able to get a credit for the gross receipts taxes paid.
What steps should a business take to accept a resale certificate?
When a business is presented with a resale certificate, the burden of proof is on the seller to verify that the buyer’s information is correct and to keep these records. Failing to verify this information may put the liability of paying New Mexico gross receipts taxes on the seller.
Before accepting a resale certificate, a seller should:
- Review the resale certificate to make sure it is completely filled out.
- Verify the purchaser’s CRS number is valid by logging into the Taxation and Revenue Department’s website and clicking on Check CRS Status.
- Sellers are also responsible for examining the certificate and evaluating whether the goods sold are reasonably consistent with the purchaser’s line of business. For example, if the buyer’s business is a car dealership but they are wanting to purchase office supplies tax-free, the seller should investigate further.
- Keep a file of resale certificates.