@tjandjen wrote:
Yes, NM is my home and I paid taxes, Fed and State every year. the state wants to know if my income was earned out of state - my income was received out of state by sales but earned while living in NM. I assume thats what they mean.
That is probably not what they mean. Income is earned at the place where you perform the work, not where your customers are located. If you make items to sell, or buy items to resell them and fulfill orders from NM, that is NM income.
Additionally, if you live in NM, you are required to file a NM tax return and report all your world-wide income, no matter where it was earned. In addition, if you temporarily live or work in another state, you may owe income tax to that state as a non-resident.
I don't understand why NM is asking for income verification if you say you already reported your income. Is it possible they are asking about sales tax? Turbotax experts are generally not experts in local sales tax rules. I don't know what the rules for New Mexico are, but I remember that (at least in the past) if you lived in New York state and were a small business, you were required to collect sales tax and remit it to the state for in-state customers but not out of state customers. If the rules in NM are similar, and you have not been collecting and paying NM sales tax, the state may be asking you to prove that all your customers were out of state so you were not required to collect sales tax. In that case, you should have your own reliable business records (addresses of customers and sales amounts). Etsy may or may not be able to help you.
