Gross Receipts Tax Data

Presentation to the Eleventh Annual New Mexico Data Users Conference

November 5, 2009

Clinton Turner, Senior EconomistNew Mexico Taxation and Revenue Department

Presentation Outline

• What is the Gross Receipts Tax (GRT)?

• What information does the Taxation and Revenue Department (TRD) receive?

• What information does TRD provide (what does it mean)?

What is the Gross Receipts Tax?

• Gross Receipts: the total amount of money or other consideration received from selling property in New Mexico, leasing licensing property employed in New Mexico, granting the right to use a franchise employed in New Mexico performing services in New Mexico or selling research and development services outside New Mexico the product of which is initially used in New Mexico.

• After exemptions and deductions a tax rate of 5% plus county and municipal local options is applied (averaged 6.7% in FY09).

• See “FYI-105 Gross Receipts & Compensating Taxes: An Overview” at http://tax.state.nm.us/pubs/fyi_105.pdf for a good introduction to all exemptions and deductions.

How Much Revenue is Collected?

• In FY09 a total of $3.2 billion was collected• Comprises “over 70% of total [municipal] General Fund

revenues”– $875 million directly

• Major source for counties, $314 million directly• Made up 32% of the State General Fund

– $1.83 billion – Other: food and medical deduction hold harmless distributions ($121

million), county equalization distribution, Aviation Funds, State Building Bonding Fund, TIDDs, ect.

• 10 Pueblos or Tribes with cooperative agreements– $5 million

GRT Growth• Taxable Gross Receipts (TGR) have grown by an average of

4.9% over the last 10 years

• Growth is more stable than severance or corporate income taxes but less than property taxes

• After -1.4% State General Fund revenue growth in FY09 the consensus revenue forecast (TRD, DFA, & LFC) in October was– FY10: -4.8%– FY11: 5.3%– FY12: 4.8%– FY13: 5.2%– FY14: 5.0%

• Historic revenue and consensus revenue forecasts with testimony can be found on DFA’s website (under Board of Finance then General Fund and the Economy)

What Information Does TRD Get?

• Combined Reporting System (CRS) Registration– Timing– NAICS code

• Monthly, quarterly, or semi-annual CRS tax returns– Everything else

Information from CRS Registration

• The combined reporting system allows taxpayers to report and pay the following taxes on a single return– Gross Receipts Tax– Compensating Tax– Withholding Tax– Governmental Gross Receipts Tax– Interstate Telecommunications Gross Receipts Tax– Leased Vehicle Surcharge– Leased Vehicle Gross Receipts Tax

Information from CRS Registration: Timing

• The initial registration will set filing frequency for at least the first year

• If taxes due in the previous year averaged more than $200 per month the taxpayer must file monthly– Statute requirements can only be enforced after one full year of

reporting

• Important for seasonal patterns

Information from CRS Registration: NAICS

• North American Classification System: – “The North American Industry Classification

System (NAICS) is the standard used by Federal statistical agencies in classifying business establishments for the purpose of collecting, analyzing, and publishing statistical data related to the U.S. business economy.”

• TRD currently uses a subset of the 1997 version

Information from CRS Registration: NAICS Cont.

• At registration the taxpayer is asked to provide two pieces of information:

Information from CRS Registration: NAICS Cont.

• A clerk in a district office converts this information into a NAICS code• First method is to enter a 6-digit code:

Information from CRS Registration: NAICS Cont.

• Most common method to assign code is to search by major industry sector, NAICS code, SIC code, or keyword and then select the 6-digit code from a list:

Information from CRS Registration: NAICS Cont.

• Where can errors be introduced in NAICS Selection?– Incomplete, incorrect, or no information from the taxpayer– Data entry error

• 611000 (Education Services) instead of 311000 Food Manufacturing)

– Selection is not precise • 810000 (Other Services) instead of 812113 (Nail Salons

– Selection is not accurate • 621000 (Ambulatory Health Care Services) instead of 713900

(Other amusement & Recreation Services) for a fitness center– Fitness Center would be classified as 713940 (Physical Fitness &

Recreational Sports Centers) but that code is not part of the 1997 subset currently used

Information from CRS Registration: NAICS Cont.

• What other problems can occur with NAICS Selection?– No Selection– Two or more primary selections

• Caused problems in past reports– Double, triple, … counting on RP-80– Into unclassified on RP-500

• Should now be fixed or greatly reduced– If a business truly does have multiple activities must

choose one primary• No method to apportion between codes• 1/3 Construction (23), 1/3 Architectural Services (54), and 1/3

Waste Management, & Remediation Services (56)

Information from CRS Registration: NAICS Cont.

• Possibilities to get NAICS data from a better source?– Data from NM Department of Workforce

Solutions was sampled and compared to TRD data• Often hard to match entities correctly• Neither data set provided clear improvement

– Restrictions on the use of federal data • cannot be comingled

Information from Tax Returns

• Please open a CRS-1 Filer’s Kit

– Tear out a CRS-1 Form

– Turn to the instructions on the previous page

CRS-1 Form

What Data Does TRD Provide:

• Gross Receipts by Geographic Area and NAICS Code (RP-80) Report– 2-digit quarterly & 6-digit monthly

• Monthly Local Government Distribution (RP-500) Report

• http://tax.state.nm.us/pubs/taxresstat.htm

Redaction

• TRD cannot reveal information from taxpayer’s reporting except:– Section 7-1-8.H 1978 NMSA “in a manner, for statistical

purposes, that the information revealed is not identified as applicable to an individual taxpayer”

• If either report has an “*” there is an amount but the small number of taxpayers preclude its release

• Amounts are always included in totals• Must also hide next smallest subtotal

RP-80 vs. RP-500

• RP-500 organized by where revenue is distributed, RP-80 organized by where revenue is collected

• RP-500 ties to distributions, RP-80 ties to reporting• RP-500 historically printed each month, separated,

and sent to each county and municipality in the State (originally formatted for printing)

• RP-80 formatted for Excel

RP-80

• Based only on tax return information entered into TRD’s GenTax system in a given time period (no distribution data)

• Excel workbook with 4 sheets– Local– County– Muni– State

RP-80 “Local” Sheet• Data grouped for each CRS location code

– Municipalities– Tax Increment Development Districts (TIDDs)– Remainder of County Areas (Outside Municipalities)– Pueblos or Nations

• Sales to tribal entities or members• Sales to tribal non-members by tribal non-members

– Out-of-State• Out-of State (R&D Services)• Out-of-State (All Other)

– Other Taxes• Leased Vehicle Gross Receipts Tax• Leased Vehicle Surcharge• Governmental Gross Receipts

RP-80 “County” Sheet

• Totals for each of the 33 counties• Unclassified is made up of:

– Leased Vehicle Gross Receipts Tax– Leased Vehicle Surcharge– Governmental Gross Receipts– Preempted Pueblo or Nation

• Sales to tribal entities or members

– Out-of-State

RP-80 “Muni” Sheet• Municipal

– all location codes inside municipal boundaries (except Native American locations)

• Nation Non-Taxable– All Native American nations (sales to tribal entities)

• Nation Taxable– All Native American nations (sales to tribal non-members by tribal non-

members)• Pueblo Non-Taxable

– All pueblos (sales to tribal entities)• Pueblo Taxable

– All pueblos (sales to tribal non-members by tribal non-members)• Unincorporated

– All remainder of county locations (outside municipal boundaries)

RP-80 “Muni” Sheet Cont.

• Unclassified is made up of:– Leased Vehicle Gross Receipts Tax– Leased Vehicle Surcharge– Governmental Gross Receipts– Out-of-State

RP-80 “State” Sheet

• Unclassified– Leased Vehicle Gross Receipts Tax– Leased Vehicle Surcharge– Governmental Gross Receipts– Nation Non-Taxable

• All Native American nations (sales to tribal entities)

– Pueblo Non-Taxable• All pueblos (sales to tribal entities)

RP-80 Column Headings• “Industry”

– 20 major industry groups• “NAICS Description”

– 6-digit NAICS code and title• “Count”

– Number of tax returns or lines on a tax return with a different location codes

• “Gross Receipt”– Gross receipts reported on return

• “Txbl Gross”– Taxable gross receipts reported on returns

RP-80 Column Headings Cont.• “Gross Tax”

– Calculated Gross Receipts Tax due entered into the system• “Food-Med Deduction”

– Separately reported Food Deductions allowed under Section 7-9-92

– Separately reported Medical Deductions allowed under Section 7-9-93

• “Food-Med Tax”– Food and Medical Deduction Hold Harmless Distributions

(Sections 7-1-6.46 & 7-1-6.47) calculated from reported Food and Medical Deductions

Local Government Distribution (RP-500) Report• Organized by each recipient of revenue collected on the CRS-1

Form• Periods are monthly and match exactly with revenue

distribution periods– Returns due 25th day following the end of the filing period– Revenue period “closes” on the night of the 12th of each month,

distributions are calculated on payments and returns processed up to that point

– Distributions begin on the 13th (times delayed by weekends and holidays)

• Amounts will match actual monthly distributions• Two separate Sheets

– Distribution– Industry– Will discuss and take questions on Distribution sheet at end of

presentation (time permitting)

RP-500 Column Headings• # Returns

– Same as RP-80 “Count”– Number of tax returns or lines on a tax return with a

different location codes• Total Gross Receipts

– Gross receipts reported on return and processed in the revenue period

• Taxable Gross Receipts– Taxable gross receipts reported on returns processed in the

revenue period• Matched Taxable Gross Receipts

• The amount of taxable gross receipts in a revenue period that corresponds to payments received, processed, and matched to a return

RP-500 Column Headings Cont.• Total Tax Due

– Total tax due calculated from returns processed during the revenue period

• Total Tax Paid– Sum of payments received, processed, and matched to

returns during revenue period• Recipient Due

– Total distribution due to the recipient (county, municipality, etc.)

• Recipient Paid– Sum of payments received, processed, and matched to

returns that are do the specific recipient

Gross Receipts (with or without exemptions?)

• Instructions direct the taxpayer to report only the amount of deductible and taxable gross receipts on the CRS-1 Form

• However taxpayers often include and report taxable, deductible, and exempt receipts in the gross receipts column– They then report the exemptions as deductions and pay the

correct amount of tax

• This makes gross receipts amounts much less meaningful to track than taxable gross receipts

TRD data systems

• “Legacy”– May 1998 to April 2001

• TRIMS– April 2001 through August 2003

• GenTax– September 2003 to Present

Current TRD System• GenTax is a commercial off-the-shelf (COTS) system

customized for New Mexico• Positive effects on data

– Core functions are cheaper (at least initially), faster, and more robust

• Negative aspects for data– Locked into relationship with one company– Parts of the code are proprietary– Must pay annual for support– Must pay for large changes– In-house changes are limited– In-house expertise and experience is reduced

Conclusion• Why examine GRT?

– Major source of revenue for the State, counties, and municipalities

– One of the most timely indicators of New Mexico’s overall economy

– Even with data shortcomings much useful data is available• Contact Info:

– Email: Clinton.Turner@state.nm.us– Phone: (505) 827-0693

• GRT Data User Survey• Additional Questions

Lo catio n Indus try NAICS De s c riptio n Count Gross Re ce ipt

Txbl Gros s Gross Ta x

Food-Me d Ta x

Food-Me d De duction

111000 - C ROP PRO DUCTION * * * * * *113000 - FOR ES TR Y & LOGGING * * * * * *115000 - S UP POR T ACTIVITIES FOR * * * * * *115110 - S UP POR T ACTIVITIES FOR * * * * * *115210 - S UP POR T ACTIVITIES FOR 5 46,175 46,175 3,001 0.00 0.00115310 - S UP POR T ACTIVITIES FOR * * * * * *Tota ls 12 85,716 76,009 4,941 0.00 0.00212320 - S AND,GRAVEL,CLAY,CER * * * * * *213111 - DRILLING OIL & GAS WEL * * * * * *Tota ls 5 -6,630 -6,630 -371 0.00 0.00221000 - UTILITIES * * * * * *221100 - ELECTRIC P OWER GENER 12 4,595,129 3,896,284 253,258 0.00 0.00221210 - NATUR AL GAS DISTRIBUT * * * * * *221300 - W ATER,SEWAG E & OTHE * * * * * *Tota ls 19 5,408,443 4,405,011 286,325 0.00 0.00

Cons truction 233000 - BUILDING, DEVELOPING A 167 14,852,197 12,888,670 837,770 0.00 0.00

August 2009 Accrual (Business Activity) MonthSeptember 2009 Collection MonthOctober 2009 Distribution Month

R e port No. 80 -- NAICS Code Ve rs ion

State of New MexicoTaxation and Revenue Department

Combined Reporting System

ANALYS IS OF GROS S RECEIPTS BY INDUS TRY

01001 - S a nta Fe County, Re ma inde r

Agriculture , Fore s try, Fis hing a nd Hunting

Mining and O il a nd Ga s Extra ctionUtilitie s

New Mexico Taxation and Revenue Department "Local Government Distribution by Industry"Business Activity Month: Aug-2009 Report Run: 10/14/2009 9:42:44 AMReporting Month: Sep-2009 From: September 13, 2009Distribution Month: October-2009 To: October 13, 2009Virden, Village of 23209

Total Gross Receipts

Taxable Gross Receipts

Matched Taxable Gross Receipts

Total Tax Due

Total Tax Paid

Recipient Due

Recipient Paid

UtilitiesCurrent * * * * * * * *Other 0 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Total * * * * * * * *Retail Trade

Current 4 449.13 449.13 449.52 29.48 29.50 8.87 8.88

Other 0 0.00 0.00 0.00 0.00 0.00 0.00 0.00Total 4 449.13 449.13 449.52 29.48 29.50 8.87 8.88

Information and Cultural IndustriesCurrent 7 7,385.53 7,385.53 7,385.60 484.68 484.68 145.87 145.87Other 0 0.00 0.00 0.00 0.00 0.00 0.00 0.00Total 7 7,385.53 7,385.53 7,385.60 484.68 484.68 145.87 145.87

Professional, Scientific and Technical ServicesCurrent * * * * * * * *

Other 0 0.00 0.00 0.00 0.00 0.00 0.00 0.00Total * * * * * * * *

Other Services (except Public Admin)Current 5 2,306.99 2,306.99 2,306.13 151.39 151.34 45.56 45.54Other 0 0.00 0.00 0.00 0.00 0.00 0.00 0.00Total 5 2,306.99 2,306.99 2,306.13 151.39 151.34 45.56 45.54

Unclassified EstablishmentsCurrent * * * * * * * *Other * * * * * * * *

Total 3 (169.63) (169.63) (169.30) (11.13) (11.11) (3.35) (3.35)All Industries

Current: 20 20,111.98 20,111.98 20,110.63 1,319.85 1,319.76 397.22 397.18

Other: 2 (213.64) (213.64) (212.88) (14.02) (13.97) (4.22) (4.21)Total: 22 19,898.34 19,898.34 19,897.75 1,305.83 1,305.79 393.00 392.97

# Returns

New Mexico Taxation and Revenue Department Local Government Distribution SummaryBusiness Activity Month: August-2009 Report Run: 10/14/2009 9:31:31 AMReporting Month: September-2009 From: 13-Sep-2009Distribution Month: October-2009 To: 13-Oct-2009

Albuquerque, City of 02100Option Tax Penalty Interest Admin Contracts Paybacks Disbursement 645-Muni Infra-Structure 621,285.31 1,659.94 1,231.24 (20,285.73) 0.00 0.00 603,890.76645-Muni Infra-Structure(Food) 50,271.14 0.00 0.00 0.00 0.00 0.00 50,271.14645-Muni Infra-Structure(Medical) 29,409.19 0.00 0.00 0.00 0.00 0.00 29,409.19* * 645-Total Muni Infra-Structure * * 700,965.64 1,659.94 1,231.24 (20,285.73) 0.00 0.00 683,571.09650-Municipal GRT 9,953,971.62 28,068.52 22,480.99 (162,573.47) 0.00 0.00 9,841,947.66650-Municipal GRT(Food) 904,880.48 0.00 0.00 0.00 0.00 0.00 904,880.48650-Municipal GRT(Medical) 529,347.87 0.00 0.00 0.00 0.00 0.00 529,347.87* * 650-Total Municipal GRT * * 11,388,199.97 28,068.52 22,480.99 (162,573.47) 0.00 0.00 11,276,176.01690-Muni Share - State GRT 12,225,369.99 32,602.17 24,614.26 0.00 0.00 0.00 12,282,586.42690-Muni Share - State GRT(Food) 985,314.30 0.00 0.00 0.00 0.00 0.00 985,314.30690-Muni Share - State GRT(Medical) 576,418.69 0.00 0.00 0.00 0.00 0.00 576,418.69* * 690-Total Muni Share - State GRT * * 13,787,102.98 32,602.17 24,614.26 0.00 0.00 0.00 13,844,319.41Interstate Telecom 27,612.00 12.78 3.34 0.00 0.00 0.00 27,628.12

Total 25,903,880.59 62,343.41 48,329.83 (182,859.20) 0.00 0.00 25,831,694.63Total Food Deductions: 80,433,820.97

Total Medical Deductions: 47,054,611.31Total

Gross GRT Distribution: 22,938,912.16

Food Distributions: 1,940,465.92Medical Distributions: 1,135,175.75

Municipal Equivalent Distribution: 129,344.66

Municipal Eq Contracts: 0.00Total Administrative Fees: (182,859.20)

Total Contracts: 0.00

Total Paybacks: 0.00Total Distributed: 25,961,039.29