New food tax law causes confusion for some retailers

By Ryn Gargulinski: CNJ staff writer

To some, the new tax law that exempts certain food items is simply confusing.

For others, the Jan. 1 legislation — prepared food and hot food still carry sales tax while staple items and cold food are exempt — has been a nightmare.

“The biggest problem is the retailers’ failure to fill out their gross-receipt tax forms properly,” said Libby Gonzales, director of Revenue Processing at the State Department of Tax and Finance.

Clovis’ total for March receipts, which reflect January sales, was nearly $500,000 less than the previous month, or $956,187.95. City Budget Director Don Clifton said the dip made city officials anxious until the state disclosed the reason.

“We (The State Department of Taxation and Finance) did everything we could to assist the retailers in filing their receipts properly,” said Gonzales. She said the Department of Taxation and Finance offered training classes throughout the state and provided easy access to information phone numbers and even forms on their Web site.

“We don’t know why the retailers didn’t ‘get it,’” she said. She also said a three-month grace period will be given for retailers to refile their receipts correctly and the budget will eventually even out.

Clifton said extra money to make up for Clovis’ March dip is coming in already. April’s gross-tax receipts totaled $1,875,590.10 — $800,000 higher than last year’s total for the same month.

“That accounts for some of the money missed in March,” Clifton said. “We don’t know if that’s all of it or not.” Another reason for the increase in April’s gross receipts, he said, is a boom in the economy in general.

“When we have more gross-receipt tax, we have more demand for services,” he said. “We’re still ahead, even though we have to pay for some overtime.”

The new tax law exempting certain food items and medical services meant a 1.875 percent increase in taxes on everything else across the board.

Sales tax on all other items in Clovis went up to 7.3125 percent, from last year’s 6.625 percent, due to state and county increases. Clovis sales tax will be raised again in July, Clifton said, due to another 0.125 percent increase from the county.

Clifton said the new tax law still benefits the consumer.
“I calculated it in my personal budget and I came out ahead,” Clifton said.

Gov. Bill Richardson’s office said New Mexico residents will get another tax break from Aug. 5-7 when clothing and school supplies less than $100 and computer equipment less than $1,000 will be tax exempt.

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