By Lisa Lopata, Esq., Checkpoint
The New Mexico Taxation and Revenue Department (TRD) issued a ruling to a marketplace provider discussing gross receipts tax liability for various fees it receives. The marketplace provider offers products and services to marketplace sellers and customers. In response to a ruling request, the TRD explains the definition of gross receipts for marketplace providers and requirements for some gross receipts deductions. (New Mexico Taxation and Revenue Dept. Ruling No. 401-24-03, 12/11/2024, released January 2025.)
Customer return fees. When a customer makes a return, they might be charged a fee for return shipment. These customer return fees are gross receipts to the marketplace provider and are deductible as receipts from a transportation service if three requirements are met: (1) the property is transported from one point in New Mexico to another point in New Mexico; (2) the transportation was part of interstate commerce; and (3) the marketplace provider has a single contract for transportation of the returned product. If the item was shipped to a warehouse outside New Mexico, the first requirement would not be met. If the item was shipped directly to a New Mexico warehouse, the interstate commerce requirement would not be met. The marketplace provider can meet the single contract requirement by using its own fleet or entering a single contract with a shipping service which may subcontract to other companies.
Customer return fees that are not deductible receipts are sourced to the place where the property enters the transportation stream. The TRD ruled that the marketplace provider may use the buyer’s shipping address to determine source of the gross receipts.
Service fee deducted from customer payments. For some marketplace sellers, the provider collects customer payments and remits those proceeds to the sellers, minus a fee for its services. Gross receipts include “receipts collected by a marketplace provider.” This means the marketplace provider’s gross receipts are the total amount of payments directly paid to it by customers. The TRD stated the marketplace provider would report its service fee separately only if it was charged in a transaction separate from the sale of the product, such as a listing fee.
Logistics fees. The marketplace provider charges logistics fees on a per unit basis for fulfilling orders and packaging and labeling items. It deducts logistics fees from the payment it collects from the buyer. Like the deducted service fee, these fees are gross receipts but are not taxed separately because they are not from a separate transaction.
Monthly service fee plans. Some marketplace sellers buy the provider’s marketplace services through a monthly fee plan. The invoice to the seller charges a monthly lump sum. Gross receipts from the provider’s services are sourced to the location where the product of the service is delivered. The TRD ruled that the source of the monthly service fees is the location of the seller based on the seller’s address. The product of the service is the seller’s “freedom from responsibility” for marketing, back office and administration costs.
© 2025 Thomson Reuters/Tax & Accounting. All Rights Reserved. | Privacy Statement
