Broker commission for sale of home

[BKS]

Recently, I am trying to put my home for sale. Broker filled out the sales contract and mailed out to me (I am out of town..home is in different town). His commission shows 5% PLUS sales tax on purchase price of the home. Is it normal practice to pay state sales tax in addition to commission the agent is getting? Why sales tax? Do Brokers have to pay sales tax on commission they get from the sale of the home? Home is in New Mexico.

Right now I am renting that home and the same broker is managing the property. He charges 10% of monthly rent plus sales tax on his 10% commission. I was renting my home for the first time, so I thought it was normal to pay sales tax on 10% rental commission.

Now i am trying to sell home, he is tryng to do the same. Now I realize I should never have paid sales tax on his 10% rental commission. can anyone tell me how should I approach this situation? Thanks.

[zxcvbob]

Check with the NM comptroller's office and see if commissions are taxable, and see he ever turned in the sales tax (the 2 are not necessarily related.)

Bob

[Colbyt]

Sales tax laws vary greatly from state to state but I have never heard of a sales tax on rentals or sales of real property. Our state does require a modest deed tax on the sale of property paid by the seller. Something like

1.00 per 1000 of valuation.

I would check this out with the local sales tax department. It sounds like a rip off to me.

Colbyt

[JerryL]

[doubter]

From New Mexico web site

Note the last sentence of paragraph 2.

1. What is New Mexico's sales tax rate?

New Mexico does not have a sales tax. It has a gross receipts tax instead. This tax is imposed on persons engaged in business in New Mexico, but in almost every case the person engaged in business passes the tax to the consumer. In that way the gross receipts tax resembles a sales tax. See question # 3 under "Gross Receipts Taxes".

1. What is taxable?

Generally speaking, sales and leases of goods and other property, both tangible and intangible, are taxable. Groceries, magazines, and over-the-counter drugs are taxable. (Prescription drugs are no longer taxable.) Unlike many other states, sales and performances of services are taxable in New Mexico.

1. What is the gross receipts tax rate and how is it determined?

The gross receipts tax rate varies throughout the state from 5.00% to 7.1875%. The total rate is a combination of rates imposed by:

The state, The counties, and The municipalities

[doubter]

Note that the tax is on the commission, not on the sale of the property. In this case, the commission is a percent of the sale but that doesn't always have to be the case. New Mexico taxes "performances of services."

[doubter]

The first is easily verified by checking the web site

The second is of no concern to the OP.

[JerryMouse]

Except, I bet, for lawyers.

[v]

But the tax OP is talking about would not be on the sale or rent, it would be on the COMMISSION. Now, I don't know if such services are taxed in NM or not, but that is still way different from what you are saying.

That's known as a transfer tax or "stamp tax" as traditionally you bought "tax stamps" to affix to the deed. Not the same tax.

-v.

[v]

And while you might be able to find out the first, you are deluding yourself to think you will (or can) be told the second.

We own several business and file sales tax returns in 2 states. here's (basically) what the forms say: What are your total taxable sales this month?

The business does not report every transaction individually. The Comptroller would have no idea if the broker paid tax on that particular transaction, assuming he is paying SOME tax. Now, you could "turn him in" and ask that he be audited saying you don't think he is turning in his tax - but why do you think this of him more than any other person or entity? Just because you were not familiar with the tax, doesn't mean he is any more likely than anyone else not to turn it in.

Now sometimes people do indeed not turn in their tax. And sometimes people do get audited. But the consumer would still have to pay the tax.

-v.

[Jim Erickson]

[William Brown]

Its a sales tax on services; the latest trend in our state governments' attempt to get anything we have that the feds missed.