New Mexico Sales Tax
New Mexico Sales Tax At a Glance
State rate: 5.125%
Maximum combined rate: 9.4375%
Tax Holidays: Back to School
Governing Body: New Mexico Taxation & Revenue Department
If you have a business based in New Mexico, or if you’re thinking of expanding to sell to customers there, you need to know about the sales tax regulations and requirements in the state. New Mexico has what’s called a gross receipts tax; the main difference between this and a sales tax is that the gross receipts tax is levied directly on the seller as opposed to on the buyer.
Since most sellers simply pass on the cost of the tax to the buyer, either lumped in with the purchase price of the item or listed separately, New Mexico’s gross receipts tax functions much like the sales taxes in other states in many respects. There are some important differences, however, and so it’s important to understand exactly how the state’s system works to ensure that you’re in tax compliance whenever you sell to customers in New Mexico.
New Mexico Sales Tax Rates
The base rate of the gross receipts tax in New Mexico is 5.125%. Just like sales taxes in other states, local jurisdictions can put additional taxes in place in their area, and that means that the effective rate for the state tax can vary quite a bit. The highest gross receipts tax rate in New Mexico is 9.4375%, and there is a range of values in between.
These local sales taxes can be levied at the city, county, school district, transportation district, or special purpose district levels, and they may be changed as frequently as twice a year, depending on local ordinances. The state puts out new rate schedules in July and January that will reflect these changes, but no explicit announcements are made concerning specific local sales tax rate adjustments, so small business owners should monitor to ensure they’re always using the most current rate.
If you have a physical location within New Mexico, you will have to pay tax at the rate in force in that physical location, regardless of whether your customers come to you to make purchases or you ship the goods to them directly. Businesses based out-of-state shipping to customers in New Mexico will pay tax at the 5.125% state rate.
Just as with sales tax or any other business tax, New Mexico can only compel sellers to pay gross receipts tax on sales to New Mexico customers if those businesses have a nexus in the state. The New Mexico Department of Taxation and Revenue considers anyone engaged in business activities in the state to have nexus there, and qualifying activities include but are not limited to:
- Selling property, including tangible personal property, real property, electricity, manufactured homes, certain types of licenses, and franchises, in New Mexico.
- Leasing or licensing property employed in the state.
- Granting a right to use a franchise employed in New Mexico.
- Performing services in New Mexico, including construction.
- Selling research and development services performed outside of the state when the product of those services is initially used within New Mexico.
Other conditions that can trigger a nexus and require paying the gross receipts tax include:
- Having a physical place of business in the state.
- Having property stored in the state.
- Having an employee in the state regularly.
- Contracting with a salesperson or other agent in New Mexico.
- Leasing equipment used in the state.
- Performing services in the state.
- Licensing the use of intangible personal property in the state.
- Transporting property into the state using the taxpayer’s vehicles.
These regulations cast a wide net, so it’s likely that if you make sales into New Mexico on more than an occasional basis, you will meet their criteria for having a nexus there.
New Mexico’s economic nexus law is similar to other states, requiring any remote sellers to collect gross receipts tax if they make $100,000 or more in sales to New Mexico residents in the collection period (the previous calendar year).
Although the effect is quite similar to a conventional sales tax, the gross receipts tax in New Mexico applies to everything unless it’s exempted, rather than being added on to specific types of goods as sales taxes typically are. That means that all goods sold in New Mexico are covered under the tax, along with all services provided. Essentially, any revenue received from business activities in the state is taxed, including shipping and handling charges, no matter how they’re listed on the receipt or invoice.
Certain classes of goods are exempted, including foods intended to be prepared and eaten in the home as outlined by the Federal Supplemental Nutrition Assistance Program. This includes most groceries and household staples, although it doesn’t cover hot prepared foods, alcohol and tobacco, and pet foods. However, even specified items are not exempted unless purchased in an establishment that meets the definition of a “retail food store” as outlined by the state.
Prescription drugs are also exempt, although over-the-counter drugs are not. Medical services are only exempt if they’re provided by the administrators of the Federal Military’s TRICARE program.
Registration and Filing
If you’ve determined that your business is eligible for the gross receipts tax, you must register with the state before you can file a return and make payments. To do this, you can submit a paper application, or you can apply online through the New Mexico e-filing services and receive a Combined Reporting System ID number. There is no fee to register in this way.
Once you’ve been issued your ID number, you’ll also be assigned a filing frequency, which will be based on your expected total tax liability per month. Filing frequency options include:
- Monthly – use this option if your total tax liability is more than $200 per month on average, or if you prefer to file monthly.
- Quarterly – use this option if your total tax liability is less than $600 per quarter, or if it’s an average of less than $200 per month during that quarter.
- Semi-annually – use this option if your total tax liability is less than $1,200 per six-month period, or if it’s an average of less than $200 per month during the six-month period.
- Seasonally – use this option if you only do business during a specific part of the year. The months in which you will be filing must be indicated.
- Temporary – use this option if you only need to file once due to a special circumstance. The start and end dates must be specified, and they must not be more than six months apart.
Filing and payment can be completed online through the Taxpayer Access Point.
Due Dates and Penalties
Your New Mexico state gross receipt tax returns and payments are due on the 25th of the month following the close of the period in question. If this date falls on a weekend or holiday, returns and payments will be considered timely if made by the following business day.
Monthly Due Dates
Quarterly Due Dates
|January – March (Q1)||April 25|
|April – June (Q2)||July 25|
|July – September (Q3)||October 25|
|October – December (Q4)||January 25|
Semi-annual returns are due July 25th for the period running from January through June, and on January 25th for the period running from July through December. Even if you have no tax liability for a particular period, you must file a return as long as you have an active registration with the New Mexico Department of Taxation and Revenue.
Returns and payments submitted late will be subject to a penalty of 2% of the total tax due per month or fraction of a month that it’s late. The maximum penalty that can be assessed is 20% of the total tax due, and interest will accrue as well on a daily basis. The rate of that interest can vary depending on the period in which the tax was due so be sure to check the linked table.
New Mexico Sales Tax Software
Keeping up with the specific rates and regulations in New Mexico can be a challenge, particularly because they change so often. This situation is compounded if you’re selling in multiple states at the same time, but it’s essential that you stay in tax compliance with all applicable laws so that you can continue doing business in the state, and so that you don’t incur any penalties or added costs. The best way to ensure that you’re up to date on the latest developments in New Mexico gross receipts tax, as well as sales taxes in other states, is to take advantage of the powerful tax calculator software TaxTools places at your fingertips.
With this program, you can be sure that you’re always paying your tax at the correct rate, and that you’re keeping thorough records regarding the location and nature of individual sales. TaxTools can also generate any needed reports, and it integrates smoothly with all ecommerce platforms, so you won’t have to change anything about the way you do business.
If you’re ready to learn more about how TaxTools can benefit your company and streamline your processes, click here to sign up for a free trial today.
Last updated August 2022