By Tony Parra: PNT Staff Writer
For the moment, Portales city officials can breath a sigh of relief after early numbers from the gross receipt taxes have not been affected by the elimination of the food tax.
The food tax was eliminated from New Mexico after Gov. Bill Richardson and legislators passed a bill through the 2004 legislature. New Mexicans began noticing the elimination in their receipts from grocery purchases on Jan. 1.
To make up for the tax gap, the sales tax on other items went up, with rates varying by city and county. Portales’ sales tax rate is currently 7.562 percent.
“So far the gross receipts revenue is up 2 1/2 percent from last year,” Marilyn Rapp, city treasurer, said. “Revenue is up $98,856 after the first four months of 2005 from the estimations.”
City mayors, councilors, city managers and treasurers were concerned this would effect the amount of money generated from the gross receipt taxes in their communities. The move was made by legislators in the bill because the tax cut would effect everybody.
Debi Lee, Portales city manager, said the tax change was something which concerned her.
“We have had the governor and committees assure us it would not harm municipalities,” Lee said. “I’m optimistic because their intent is good.”
So far the gross-receipt tax totals are in line with last year’s totals from the same time-frame. The city of Portales generated $307,651 in January of 2004 and $343,223 in January of 2005. Portales generated $351,142 in February of 2004 and gained $434,099 in February of 2005.
Gross receipt totals came in lower for the month of March of 2005 ($304,614) compared to March of last year ($334,237). However, the numbers came in higher for April of 2005 ($364,202) than April 2004 ($326,698).
“There’s still uncertainty as to what kind of effect it will have on the budget,” Rapp said. “We will keep monitoring the gross receipt tax each month.”
Rapp said that in previous years food was taxed at the same rate as retail sales, so it was difficult for legislators to figure out exactly how much of an impact the change would make.
Rapp said the New Mexico Taxation and Revenue department representatives have granted business owners an extension to report their taxes from February 25 to May 25. Rapp said she feels there are still gross-receipt taxes which will come in late and affect the budget.
To offset the loss of revenue from the food tax, legislators also raised the taxes on on cigarette sales by 60 cents for a total state tax of 81 cents per pack.
The reduction of the food tax would mean a loss of $39.7 million a year for the 2005-06 fiscal year, but the increase in the cigarette tax would mean an additional $41.8 million in revenue.
Portales city officials and Roosevelt County commissioners may have trouble attracting new businesses to the area due to the high gross receipt tax. Additions of two new taxes on Jan. 1 from the county commission pushed the gross-receipt tax for Portales residents to 7.562 percent. The gross receipt tax is the third highest of all of the cities and towns in New Mexico behind only Gallup at 7.687 and Ruidoso at 7.687 percent.
Gross receipts items
Items that are tax free:
• Any food or food product intended to be consumed or prepared off the premises
• All food eligible under the Federal Food stamp program or foods purchased from a retailer who accepts food stamps or holds a certificate as a qualifying New Mexico food retail store
• all staple foods such as breads, cereals, dairy products, fruits and vegetables, meat poultry and fish
• All foods purchased from a retailer who accepts Food Stamps or holds a certificate as a qualifying New Mexico retail food store
• Seeds and plants to grow food for personal consumption
Items that are not tax free:
• All non-food items like soaps, paper products, household supplies, grooming items, cosmetics, toothpaste, hardware, sewing items, toys and other such items commonly sold in food stores
• Hot foods like delicatessen and items from in-store snack bars, fast foods sand all foods purchased from a restaurant
• Restaurant food
• Food purchased from stores that do not accept food stamps or are not retailers certified by New Mexico
• Vitamins, minerals, supplements and over-the-counter medicines
• Alcoholic beverages
• Tobacco and tobacco products
• Pet foods, pet accessories and medicines
• Food already exempt or deductible under another provision of the New Mexico Gross Receipts and Compensation Tax Act
Source: The State of New Mexico.