How to Use and Accept Resale Certificates in New Mexico

What Is a Resale Certificate?

When a business purchases products for resale in New Mexico, they can use a resale certificate to avoid paying sales tax on those items. The buyer ultimately collects the tax when the item is sold to the final consumer.

The supplier relies on the resale certificate as proof that the buyer is a legitimate reseller. Misusing the certificate, such as for personal consumption, can lead to penalties and potential tax liabilities. This framework ensures that sales tax is only applied at the point of final sale.

Who Qualifies for a Resale Certificate in New Mexico?

To qualify for a resale certificate in New Mexico, a business must:

• Be registered with the New Mexico Taxation and Revenue Department for sales tax purposes
• Engage in the sale of tangible goods that are taxable when sold to consumers
• Purchase items with the intent to resell them, not for personal use or business consumption

Qualified businesses can apply for and utilize a resale certificate to make tax-free purchases for resale purposes.

How to Get a Resale Certificate in New Mexico

Steps for obtaining a resale certificate:

1. Register for a New Mexico CRS Identification Number

Businesses must first register for a Combined Reporting System (CRS) number with the New Mexico Taxation and Revenue Department, either online or in person.

Once approved, the business receives a CRS Identification Number, which is essential for sales tax reporting.

2. Understand New Mexico’s Resale Certificate Regulations

New Mexico does not issue a standalone resale certificate. Instead, businesses use their CRS number to claim tax-exempt purchases.

The CRS number itself functions as a resale certificate, which businesses present to suppliers.

3. Provide Your CRS Number to Suppliers

To purchase tax-exempt inventory intended for resale, businesses must submit their CRS number to suppliers.

Some suppliers may request a specific certificate form, such as the Multistate Tax Commission’s Uniform Sales & Use Tax Certificate.

4. Ensure Proper Usage and Compliance

The CRS number should only be used for tax-exempt purchases of resalable items.

Suppliers might verify your CRS registration through official state databases.

Improper use of tax-exempt status may lead to penalties, back taxes, and revocation of tax privileges.

If the process seems complicated, doola’s expert bookkeeping team can assist you in navigating these steps smoothly. 

What Are Differences from Other States?

• Unlike many states that provide a separate resale certificate, New Mexico uses the CRS number for resale purchases.
• Businesses are not required to obtain an additional resale certificate document.

How to Accept a Resale Certificate as a Seller in New Mexico

When accepting a resale certificate, follow these guidelines:

1. Obtain a completed resale certificate, with the buyer’s CRS number, before processing a tax-exempt sale.
2. Ensure the goods purchased are for resale, not for personal or business use.
3. Maintain records of all transactions with resale certificates for auditing purposes.
4. Verify that your buyers’ CRS numbers are valid in the state of New Mexico.

Failure to follow these practices might lead to denied tax exemptions or potential penalties.

Common Mistakes to Avoid

Misusing a resale certificate can result in audits, fines, and the loss of tax-exempt status. Common errors include:

• Buying items for business use instead of resale
• Providing an expired or incorrect CRS number
• Not keeping comprehensive records of tax-exempt purchases

Regularly reviewing how resale certificates are used and keeping accurate documentation can aid in compliance.

Sales Tax Rules and Exemptions in New Mexico

New Mexico’s regulations state that specific products and services may not qualify for a resale exemption. It is vital for businesses to understand these state-specific rules to maintain compliance. Consulting state guidelines provides valuable direction on which resale items are taxable versus nontaxable.

Resale Certificate vs. Sales Tax Permit

Resale certificates allow businesses to make tax-exempt purchases, whereas sales tax permits enable them to collect and remit sales tax to the state. These are closely interconnected:

Resale Certificate:
Used to purchase inventory tax-free from suppliers

Sales Tax Permit:
Required to charge and collect sales tax from customers

Maintaining both ensures a business remains compliant with tax laws.

Penalties for Misusing a Resale Certificate in New Mexico

Misusing a resale certificate in New Mexico can incur considerable consequences including fines and tax audits. Businesses are tasked with understanding and adhering to sales tax laws, ensuring that resale certificates are used appropriately for valid purposes. Violations could lead to financial penalties and damage the business’s credibility.

FAQs About Resale Certificates in New Mexico

Do resale certificates expire? 

In New Mexico, businesses must maintain their CRS number registration, but they do not receive a separate certificate with an expiration date.

Can out-of-state resale certificates be used in New Mexico? 

Out-of-state businesses must ensure compliance with New Mexico’s regulations, potentially requiring a valid New Mexico CRS number in some situations.

Can a resale certificate be used in multiple states?

Resale certificates are typically specific to state regulations, although mutual agreements may allow use across some state lines.

How long is a resale certificate valid? 

The CRS number remains valid as long as the business maintains good standing with New Mexico’s taxation department.

Staying Compliant With doola 

Resale certificates are crucial for facilitating tax-free transactions for resellers, aiding businesses in managing their tax liabilities effectively. It’s essential for New Mexico businesses to understand how to obtain and utilize these certificates properly to avoid penalties and ensure compliance. For comprehensive financial management solutions, including professional tax advice, doola can assist in ensuring adherence to resale tax obligations in New Mexico. Leveraging our thorough expertise allows businesses to concentrate on core operations while staying compliant with state regulations.