Cannabis businesses in NM confused on how to levy taxes
Sales subject to excise tax as well as local gross receipts tax
Dispensaries across New Mexico may owe money to the state depending on how they have taxed their adultuse products since the start of recreational sales.
Recreational cannabis sales are subject to a cannabis excise tax of 12%, as well as a local gross receipts tax on each transaction.
But many dispensaries, including Amnesia Dispensary & Accessories in Albuquerque, have combined the two taxes — something the state is saying is incorrect and can leave businesses owing the state additional money.
The New Mexico Taxation and Revenue Department sent a memo May 6 reminding cannabis businesses that gross receipts taxes “should be figured on the total sales price, including the excise tax amount.”
The memo included guidance on how to do that. For instance, a sale of $100 would include a 12% cannabis excise tax to bring the total to $112. Then, businesses would add the gross receipts tax to the combined total.
“I haven’t been made aware that I’m going to have to pay, but if they change that then it looks like I would have to,” said Julieta Neas, owner of Amnesia Dispensary & Accessories. “If that’s what’s going to happen, then they need to kind of just bite the bullet and take that loss because that loss shouldn’t fall on us.”
Charlie Moore, a spokesman with the New Mexico Taxation and Revenue Department, said dispensaries weren’t told prior to the May 6 memo how they should be collecting taxes, but added that the department “provided guidance as quickly as we could considering the statutory language.”
Duke Rodriguez, president and CEO of Ultra Health, said dispensaries may owe thousands of dollars because of the miscommunication.
“For the smallest operators, like a micro business, it probably is $1,000 to $2,000 a month,” Rodriguez said. “For the top operators, it’s probably as much as ($25,000) to $50,000.”
He said Ultra Health — the largest cannabis business in the state — was operating off a March 2021 state analysis of the legislation that legalized recreational cannabis sales for adults, which refers to a “combined maximum tax rate.” He said many other businesses may have been doing the same.
“This method the Taxation and Revenue Department is demanding really does violate basic tax fairness principles of taxing,” Rodriguez said.
Both Ultra Health and Amnesia use BioTrack — the state’s contracted track-and-trace system — as a point-of-sale system for their businesses. Neas said BioTrack’s system had combined the two taxes when sales were made.
BioTrack’s vice president Moe Afaneh told the Journal the company asked the state how taxes were to be levied prior to the sale of recreational cannabis, adding that there wasn’t “clear guidance” from the start.
He said BioTrack was made aware of the changes from the state after the May 6 memo was sent out, prompting the software company to make changes to its system for New Mexico dispensaries.
Moore said the department would support a legislative change in the future.
“The Department is preparing to propose a statutory fix for calculating Gross Receipts Tax on both cannabis and cigarettes in the next legislative session,” he said.