Monday, June 29, 2015
Do you sell landowner hunting permits?
BE AWARE! How many of you get Landowner permits? How many of you pay Gross Receipts tax on those permits? Outfitters and guides brought this up at their summer meeting this past week. I was not aware of it at all! Here is a question answer produced by them for their members (see attachment). I thought our members needed to be made aware of this. If you have any questions, please feel free to contact me. I think it’s safe to say, I sort of kind or understand what is going on and how to fix it. BUT, realize in a nut shell. If you get permits YOU are responsible for the Gross Receipt tax on that permit! The IRS is starting to do audits on this! Landowner Permits The rules and regulations that relate to landowner permits can be found in section 184.108.40.206 Part C of the Gross Receipts and Compensation Tax Act Regulations. You can view these regs. in their entirety HERE scroll to the bottom of page 13. The regulation states "Granting the right to hunt is the sale of a license to use - For purposes of this section, granting by a landowner to another, a right to access and hunt within the boundaries of the landowner’s real property is a license to use the real property. A license is a form of property as defined in Subsection J of Section 7-9-3 NMSA 1978 and the receipts from the sale of a license are subject to the gross receipts tax." In more understandable terms, what this means is the landowner is responsible for the Gross Receipts Tax on landowner permits period. Every landowner that is allocated a landowner hunting permit is required to register with NM Taxation and Revenue (get a CRS number) and pay GRT at, at least, the minimal interval (semi-annual). Even if that tax is $0 because they receive the applicable forms from the Outfitter or broker. This issue gets further complicated by anyone who purchases a landowner permit for re-sale. For example, if an Outfitter purchases a landowner permit from a landowner and then resells this permit as a part of a larger outfitted package, that Outfitter is responsible for the GRT on the entire package (unless the hunter pays for the guided portion and the landowner permit separately - meaning one check to Outfitter and one check to Landowner). There is no law against double taxation so in this instance both the Outfitter and the Landowner would theoretically be paying the GRT on the landowner permit. The way to avoid this "double taxation" is for the Outfitter to issue the Landowner a "non-taxable form" (NTTC Type 2 - A form that must only be issued once in your entire relationship with the landowner). Hence, every Outfitter that is buying landowner permits and reselling them as a packaged deal should be issuing the Landowner an NTTC Type 2 to exempt the Landowner from the GRT on their permits. If you are not doing this the landowner is NOT exempt from having to pay GRT and, assuming they are not paying GRT, could definitely be audited and fined for failure to pay GRT on their permits. However, please note that the Outfitter is not on the hook if the landowner refuses to pay the GRT. The Outfitter GRT is completely separate of the landowner. Issuing an NTTC Type 2 is simply a courtesy to the landowner. Additionally any Landowner who sells their permits to a third party broker (i.e. Cabelas, goHunt.com, Hunting Fool, etc...) should also be receiving an NTTC Type 2 from that broker to exempt them from the GRT on their permits. Equally, if one of these brokers sells the permit directly to a hunter, that broker is responsible to pay ALL of the GRT for that permit. And if the broker sells the permit to an Outfitter who then sells the permit to a hunter as a package, the Outfitter needs to issue an NTTC Type 2 to the broker (if they wish to avoid double taxation). The bottom line is the landowner is always the party required to pay the GRT on landowner permits. If they wish to avoid paying taxes on these permits they need to have whom ever they sell their permit to issue them an NTTC Type 2. Guides Guides are also responsible for the GRT of the sale of hunts which they guide. NM Taxation and Revenue is cracking down on this hard and everyone that shows income as an independent contractor will be subject to audit over the next several years. The only way for a Guide to be exempt from paying the GRT on the income he receives from the Outfitter is for the Outfitter to issue the Guide a "non-taxable form" (NTTC Type 5 - A form that must only be issued once in your entire relationship with the guide). What this means is that every Guide needs to be registered with NM Taxation and Revenue and have them issue the Guide a CRS number. Than the Outfitter must issue the Guide and NTTC Type 5. Conclusion Most Outfitters should be issuing two types of NTTC forms. One for each relationship they have with a landowner and another for each relationship they have with their guides. A type 2 to the Landowner, for the purchase of the landowner permit and a type 5, to the Guide, for their services. Kerrie C. Romero Executive Director - New Mexico Council of Outfitters and Guides 51 Bogan Rd Stanley, NM 87056 (505) 440-5258 (www.nmoutfitters.com)