Gross Receipts Tax

New Mexico: the tax billed to the buyer is not a receipt

New Mexico’s gross receipts tax is the state’s main tax on sales of goods and services. FYI-105, the Department’s guide to the tax, says “The state’s portion of the gross receipts tax (4.875%)” is set by state law, and that the total rate combines the rates imposed by the state, the counties and the municipalities. The local part depends on location: “In general, businesses will use the location code and tax rate corresponding to the location where their goods or the product of their service are delivered.” Rates change once a year: “Starting July 1, 2025, rates will only change in July, unless there is a special situation.”

A seller who passes the tax on has to show it. The overview says “If GRT is passed on to the customer, it is required to be separately stated on the invoice,” and FYI-105 adds that “the tax must be separately stated, or a statement must be provided to the customer indicating that the gross receipts tax is included in the billed amount.”

The detail that matters most for the books is in FYI-105’s list of what gross receipts do not include: “Tax billed to the buyer.” A $100 sale with $7.50 of tax passed on is $100 of gross receipts, not $107.50. The tax on the invoice is the tax due, and nothing more.

Out-of-state sellers are caught too: “Businesses that do not have a physical presence in New Mexico, including marketplace providers and sellers, also are subject to GRT if they have at least $100,000 of taxable gross receipts in the previous calendar year.” The return is form TRD-41413, filed monthly unless the Department approves a quarterly or semi-annual period for a business whose tax averages $500 a month or less.

Hawaii: the tax on the tax, and the 4.712 percent rate

Hawaii is blunter about what its tax is not. The Department of Taxation’s FAQ says “Hawaii does not have a sales tax; instead, we have the GET, which is assessed on all business activities.” Tax Facts 37-1 explains the difference: “A sales tax is a tax on customers whereas GET is a tax on businesses.” Most retail sales are taxed at 4 percent, and all four counties add a 0.5 percent surcharge, for 4.5 percent.

Passing it on is optional. The FAQ says a seller “may choose to visibly pass on the GE and any applicable county surcharge” to its customers, “but is not required to do so.” The catch is that whatever the seller collects from the customer is itself part of its gross income. Tax Facts 37-1: “The maximum rate is greater than the tax rate because businesses are taxed on their gross receipts including GET that is charged to customers.”

The Department’s own example shows the arithmetic. On a $100 sale at a 4.5 percent tax rate, the maximum pass-on rate is 4.712 percent, so the customer pays $4.71 and the invoice total is $104.71. The seller then owes 4.5 percent on $104.71, which is $4.71. The amount collected covers the tax on the whole receipt, including the tax itself.

Remote sellers are caught when “the business has gross income or receipts of $100,000 or more, or has 200 or more transactions in the current or preceding calendar year.” Periodic returns are on Form G-45, filed monthly, quarterly or semiannually depending on the expected liability, with an annual reconciliation on Form G-49.

What Stripe Tax does with it

Stripe treats both taxes as sales tax for calculation purposes, while noting their local names. Its New Mexico page says “In New Mexico, Stripe Tax supports the calculation and collection of sales tax (including seller use tax). New Mexico refers to its sales tax as the Gross Receipts Tax (GRT),” and that “Stripe calculates the taxes that apply to your customer’s location.” Its Hawaii page says the same of the general excise tax.

For Hawaii, Stripe passes on the full amount. Its Hawaii page explains that “Because a business must pay GET on the entire amount paid by a customer, it also owes GET on any GET reimbursement it collects from customers,” and that “Stripe Tax only supports the maximum pass-on rate, which fully covers a business’ GET liability.” A Stripe invoice to a Honolulu customer shows the pass-on rate, not the 4.5 percent tax rate.

Stripe doesn’t start collecting on its own. Like any state, New Mexico and Hawaii need a registration added in Stripe Tax before tax is calculated there. If you create tax rates by hand instead of using Stripe Tax, the Tax Rate object’s tax_type field has a value for exactly this case: gross_receipts_tax, labeled “Gross Receipts Tax.”

Booking a gross receipts tax in QuickBooks

Start with the question of who bears it. A gross receipts tax that the business absorbs, like Washington’s B&O tax or GET a Hawaii seller chooses not to pass on, is an operating expense. Washington’s statute says such taxes “shall constitute a part of the operating overhead” of the business. Record it when the return is filed or accrue it monthly, but it never touches a customer invoice.

When the tax is passed on and separately stated, most businesses treat the collected amount the way they treat sales tax: it goes to a liability account and leaves when the return is paid. Stripe reports it as tax, and a single tax payable account in QuickBooks holds it alongside every other state’s collections.

The two states then part ways at filing time. In New Mexico, the collected tax isn’t part of gross receipts, so the return is built on the pre-tax sales and the tax due should match what was collected. In Hawaii, gross income includes the GET charged to customers, so the return is built on the tax-inclusive total. At the 4.712 percent pass-on rate, the tax due works out to roughly what was collected, apart from rounding. If you pass on less than the maximum, the shortfall is the business’s own cost, and the balance left in the liability account after payment should be cleared to expense.

Whichever treatment you use, decide it with your accountant and apply it consistently, because it changes what your revenue line says.