New Mexico HB 98 Ends Taxation On Delivered Groceries

THINK NEW MEXICO News:

A year ago, as New Mexicans began staying at home to limit the spread of COVID-19, a disturbing fact came to light: some grocery stores, particularly large chains, were charging tax on the food they delivered to New Mexicans.

New Mexico was one of the last states to repeal its food tax, back in 2004. At that time, nine states still fully taxed the sale of groceries; today, the number has shrunk to just Mississippi and Alabama. States have moved away from food taxes because taxing food is bad policy. Food taxes are among the more regressive of taxes, since food is a necessity and since poor families spend a much larger share of their income on food – and thus on the food tax – than wealthier ones.

Surprisingly, many large grocery chains declined to support the legislation repealing New Mexico’s food tax back in 2004. We had assumed they would support it since repealing the tax would put more money back in the pockets of their customers, allowing them to purchase more groceries. We later learned that because grocers have up to 56 days to submit the tax dollars to the state, they were making money in the interim by keeping those tax dollars in their bank accounts and earning interest from it. 

This may explain why several large chains chose to tax the food that they delivered to New Mexicans, over and above any delivery charges. (By contrast, many smaller local grocers like Cid’s in Taos supported the original food tax repeal and did not charge tax on food they delivered to their customers over the past year.)

The tax on delivered food, which was as high as 9 percent in some parts of the state, fell most heavily on the elderly, disabled, and immunocompromised New Mexicans who were most at risk of serious illness or death during the pandemic. It was wrong that they should have to pay higher prices for the same fruits, vegetables, and baby food that would be tax free if they were able to risk the crowds in the grocery store and purchase them in person, rather than having them delivered.

When Think New Mexico learned that some stores were taxing delivered groceries, we alerted Gov. Michelle Lujan Grisham, and her Taxation and Revenue Secretary issued a directive clarifying that food sold for delivery should not be taxed. However, the Taxation and Revenue Secretary also noted that, due to a change in the state tax code that is taking effect this summer to allow for the taxation of internet sales, the law would need to be changed in order to permanently end the taxation of delivered groceries.

So we were pleased to work with Rep. Javier Martinez, Chair of the House Taxation and Revenue Committee, and Rep. Jason Harper, the ranking Republican on that committee to close the loophole during this most recent legislative session.

Representatives Martinez and Harper sponsored House Bill 98, which included numerous minor corrections to the state’s tax code. Among them was a fix to the food tax exemption, which we asked the sponsors to include. This fix will ensure that all food sold by grocery stores in New Mexico will not be taxed, regardless of whether the food items are purchased at the store or delivered to a customer’s home.

House Bill 98 passed the House and Senate unanimously, and is now on the governor’s desk. We urge Governor Lujan Grisham to sign it into law.

Over the past year, the COVID-19 pandemic has highlighted the urgency of ensuring that the most vulnerable members of our community can safely access food and other necessities. Permanently ending the taxation of delivered groceries is one important step we can take to keep at-risk New Mexicans safe and healthy now and into the future.

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