Understanding New Mexico Sales Tax
Sales tax is a charge imposed by a governing body for the sale of certain goods and services. This amount is added on top of the selling price of those goods and services at the point of sale, collected by the seller, and then passed on to the governing body.
While the majority of states in the US have a sales tax, not every state does. For example, New Mexico is a state that technically does not have a sales tax. Instead, New Mexico has what is known as a gross receipts tax.
While similar in nature, there is a difference between a sales tax and a gross receipts tax. A sales tax is a charge that sellers add on top of the selling price (paid by the consumer) and then report and remit that tax amount. And a gross receipts tax is a percentage of revenue that the seller must pay the state and is ultimately paid out of the seller’s earnings. In most cases, the seller passes this amount onto the consumer.
The current gross receipts tax rate in New Mexico is 5.125%. Note that there may be local taxes that apply to your business, as well. The current maximum rate for local and county taxes is 4.125%.
Your role as business owner is to collect tax on behalf of the state of New Mexico and then pass that tax along to the appropriate authority. In New Mexico, the authority that administers the gross receipts tax is the New Mexico Taxation & Revenue Department. It’s important your business remain in compliance with the state, as failure to do so can result in penalty.
This guide covers the following New Mexico sales tax topics:
New Mexico Taxable Goods & Services
To get started, it’s important to understand which goods and services are taxable in the state of New Mexico, so that your business stays compliant with the state.
What are known as traditional goods, things like physical property, cars, furniture, appliances, and so on, are subject to gross receipts tax. All services performed in New Mexico require gross receipts tax. Additionally, the gross receipts tax applies to all digital goods and services, such as an album download or movie stream.
Some goods, however, are considered tax-exempt goods. These tax-exempt goods include gasoline, groceries, durable medical equipment, prescription medications, and certain medical services. Additionally, there are certain customers that are exempt from the gross receipts tax, such as nonprofits, government agencies, and merchants buying goods for resale.
Registering for New Mexico Sales Tax
Registering for a New Mexico seller’s permit is the next step for your business. To do so, you’ll register with the New Mexico Taxation and Revenue Department. By doing this, you’ll receive your Combined Reporting System (CRS) number, which is the number you’ll use to report collected gross receipts tax.
Your registration can be completed online or with a paper application by mail. The form you’ll be submitting to the Tax and Revenue Department is form ACD-31015 Business Tax Registration. Currently, there is no cost associated with registering for your CRS number. Note that online applications are typically processed faster.
When completing your registration with the Tax and Revenue Department, you’ll be required to provide the following information:
- Personal Identification Information (including SSN, address, and more)
- Business Identification Information (including EIN/FEIN, address, and more)
- Business Entity Type
- Primary Business Type
- Start of Business Date in New Mexico
- Accounting Method Used (cash or accrual)
If you’re acquiring an existing business that is already registered with the New Mexico Tax and Revenue Department, you will need to re-register your business with the updated owner name and information for their records.
How to Collect New Mexico Sales Tax
Once you have successfully obtained your New Mexico seller’s permit, the next step is determining how much gross receipts tax you will charge customers. It’s important here to make sure you’re collecting the correct gross receipts tax rate to avoid any risk of penalty or audit.
Collecting your New Mexico gross receipts tax will be influenced by the kind of sale you make. Let’s take a look at a few different methods of selling goods to get a sense of this.
Brick-and-Mortar (Physical) Store Sales:
Sales that take place in a physical store are relatively straightforward for the business owner, as the gross receipts tax rate is based on the store’s physical location. You will need to take into account any local taxes that apply in addition to the state’s tax rate.
In-State (Destination-Based) Sales:
A long-distance sale that takes place within the state of New Mexico is destination-based. So, for example if you own a business located in Santa Fe and make an online sale to a customer located in Albuquerque, the local tax rate that applies is that of the customer’s location (Albuquerque).
Out-of-State Sales:
If your business makes an out-of-state sale, you will only need to pay gross-receipts tax or sales tax (depending on the state) if your business has nexus in the state where the sale occurs. The term nexus refers to when a business has a physical presence in a state. Nexus is commonly established when you have an employee located in the state or a physical location, such as a store or warehouse.
How to File Your New Mexico Sales Tax Return
Once you have registered with the Tax and Revenue Department and begun charging gross receipts tax, it’s important that your business begin filing gross receipts tax returns. Those tax dollars that you’ve collected from consumers must be accurately transferred to the appropriate tax authorities.
To file your gross receipts tax return, you’ll need to submit your sales data along with the collected tax amount (even if this amount is zero) to the New Mexico Tax and Revenue Department.
Knowing how often you must submit a gross receipts tax return is generally determined by the amount of gross receipts tax your business collects. The Tax and Revenue Department will assign your business one of the filing frequencies detailed bellowed.
Semi-Annual Filing: You will file on a semi-annual basis if your business collects less than $1,200 in gross receipts tax within a 6-month period.
When Are Semi-Annual Filings Due?
- Months covering January – June: Due date is July 25
- Months covering July – December: Due date is January 25
Quarterly Filing: You will file on a quarterly basis if your business collects less than $200 in gross receipts tax per month.
When Are Quarterly Filings Due?
- Quarter 1 (January – March): Due date is April 25
- Quarter 2 (April – June): Due date is July 25
- Quarter 3 (July – September): Due date is October 25
- Quarter 4 (October – December): Due date is January 25
Monthly Filing: You will file on a monthly basis if your business collects more than $200 in gross receipts tax per month.
When Are Monthly Filings Due?
If filing monthly, the due date is the 25th of the following month (or next business day). For example, if filing for the month of January, the due date is February 25th.
Seasonal Filing: Seasonal filings apply to businesses that operate only during a specific time of year. In this case, you will need to indicate which months you are filing for and then file for those months on a monthly basis.
Temporary Filing: Temporary filings are typically for one-time filing scenarios. You will need to list a start and end date. And note that there is a 6-month maximum in this case.
If you ever miss a filing deadline and are late to file your return, you may face a late penalty and be charged interest on outstanding tax amounts. The state of New Mexico charges 2% per month of the tax reported on your return until that tax is filed (maximum of 20% of tax reported can be charged). For unpaid tax, New Mexico assesses an annual 4% interest rate.
If you do miss a filing deadline, however, be sure to file your return as soon as possible. Generally, the longer you wait to file your return after the deadline has passed, the larger your penalty and the more interest charged.
Important Note: Even if you have not collected any gross receipts tax in a given period, once you have obtained your New Mexico seller’s permit, you will still need to file a return by the appropriate deadline. If there was no gross receipts tax collected, you will file what is known as a zero return. Just like with any return, failing to submit by the deadline can result in penalty.