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Mercado.jpg

Mercado food stand at the University of New Mexico.

Photo Courtesy of UNM Food via twitter (@UNMFood)

Mercado, one of few exemptions to state law

Thanks to a 2004 law repealing a longstanding tax on food in New Mexico, residents and visitors have been able to buy most of their food tax-free at the vast majority of retail stores around the state.

This is not the case at most bodega-style markets at the University of New Mexico.

On any given day, UNM students, faculty, staff and visitors can be seen filtering in and out of six convenience stores on campus. For a quick bite to eat in between classes, the proximity and ease of access can make these options for quick calories appealing in a high-stress academic environment.

Likely unbeknownst to some of those consumers is the New Mexico gross receipts tax they pay on top of the price of their bag of chips or bottle of water.

Due to a confluence of the New Mexico definition of retail food stores and a federal food stamp law that has been in the books for more than 50 years, the Mercado in the Student Union Building and four Market locations around campus are exempt from a 2004 state law that repealed the gross receipts tax on food for home consumption.

Amanda Gerard, the operations manager for UNM Food, said the Mercado and Market stores are permitted to charge a gross receipts tax on food based on the criteria in New Mexico § 7-9-92.

“The nature of Mercado/Market does not permit it to be classified as a retail food store under the parameters described in the code,” Gerard said in an email to the Daily Lobo, “Our convenience concepts usually have some type of proximate seating to facilitate immediate consumption of the food.”

New Mexico defines a retail food store as “one in which staple foods account for 50% or greater of the sales,” which includes fresh meats, fish and produce, bread and cereals, according to Gerard.

La Montañita Co-op’s location adjacent to the bookstore and across from George Pearl Hall is the lone exception — the member and employee-owned cooperative, as a subcontractor for the University, does not impose a gross receipts tax on most food sales and is the only campus retailer that accepts food stamps as a form of payment.

“The inclusion of EBT has not yet been integrated into the retail operated by our operating partners at Chartwells (Higher Ed),” Gerard said.

The Co-op — like the Mercado/Markets — has proximate seating both inside and outside the store where customers can consume food or drink. It was not immediately clear why the campus La Montañita location does not apply the gross receipts tax to food purchases.

The history of food taxation in New Mexico can trace its roots back to the Great Depression when the sparsely populated state was under extreme financial duress. An “emergency school tax” was imposed on goods and services in 1935 and subsequently replaced by the Gross Receipts and Compensating Tax Act in 1966, according to a report compiled by former state Commissioner of Revenue Fred O’Chesky.

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In 2004, former Governor Bill Richardson and then-State House Speaker Ben Luján led a successful repeal of the gross receipts taxes on groceries and a select number of medical services.

Throughout the investigation for this article, the Daily Lobo also found that the outsourced food services provided to the University have recently been operating in the red, according to a recent audit conducted by the UNM Internal Audit Department.

The Food Services Vendor Billing department — which includes the Mercado and Markets around campus — ran at a deficit of $72,571 for the fiscal year ending June 30, 2018, the most recent year for which figures were available. The internal audit of the University reserves and deficits from earlier this year noted that no deficit reduction plan for Food Services Vendor Billing. Auditors did, however, project that the deficit would be eliminated by the end of fiscal year 2019.

An Inspection of Public Records Act request by the Daily Lobo for financial documents related to the Food Services Vendor Billing department was not granted by the time of publication.

That five-figure deficit, however, raises questions about the internal management and pricing structures of services provided by UNM Food, a division of the University’s Institutional Support Services (ISS).

The University and UNM Food contract with Chartwells Higher Ed to provide campus food services including “dining centers, food courts, cafes, catering and vending”, according to the ISS website.

Chartwells, a for-profit subsidiary of British foodservice behemoth Compass Group plc, operates at 280 college and university campuses across the United States. Compass, the largest contract foodservice company in the world, has not been immune to criticism of their business practices.

Bribery, wire fraud and money laundering allegations in connection to a Compass contract with United Nations peacekeepers resulted in the termination of the head of the company’s United Kingdom operations in 2005. Earlier this year, Chartwells ended a contract with drug rehabilitation organization Cenikor at Louisiana State University (LSU) after an investigation revealed that the nonprofit foundation was assigning clients to unpaid positions in LSU cafeterias instead of prison or jail time.

The Daily Lobo found that retail prices at the Mercado, while similar to other convenience stores off-campus, are markedly more expensive than the same products at the Smith’s on Yale. A one-liter bottle of Life Water (stylized LIFEWTR) is marked up at a rate of 72% before tax, and a two-count package of frozen Hot Pockets run a pre-tax bill of $4.89 — a staggering 144% markup over the Smith’s price.

Adding the Albuquerque gross receipts tax rate of 7.875% charged at the Mercado, an untaxed frozen meal at Smith’s goes from two dollars to $5.28 faster than you can walk the four blocks from the grocery store to campus.

It's unclear what kind of profit margins Mercado and the four Markets rake in. 

Andrew Gunn is a senior reporter at the Daily Lobo and can be reached on Twitter @agunnwrites or news@dailylobo.com.

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