Renowned for its vibrant arts scene, iconic Southwestern cuisine, and dynamic history, New Mexico, often celebrated as the “Land of Enchantment,” presents a distinctive challenge for enterprises, especially ecommerce businesses. Understanding the nuances of sales tax in New Mexico is crucial to flourish in this state.
This guide breaks down everything you need to know about New Mexico’s sales tax, also known as gross receipts tax, from determining the right sales tax rates to understanding exemptions and filing processes. By the end of this comprehensive guide, you’ll be equipped to handle New Mexico’s sales tax with confidence and ease.
Sales Tax Nexus in New Mexico
When a business creates either a physical or economic nexus, it is required to collect gross receipts tax/sales tax in New Mexico. Businesses add this tax to the price of their products or services, which means customers end up paying it. For the customer, the gross receipts tax feels a lot like a sales tax because it increases the price of what they buy.
Physical Nexus
A physical nexus means having a significant physical presence or engaging in enough activities within a state to require the collection and payment of sales tax. The factors that determine a physical nexus in New Mexico include:
- Physical Location: This includes having an office, a place for distribution, sales, or showcasing products, a warehouse or storage facility, or any other place where you conduct business.
- Inventory in the State: This covers situations where you store your products within the state, even if it’s done through a third-party fulfillment center or 3PL (like Amazon FBA) or an online marketplace.
- Employees, independent contractors, agents, or other representatives operating on your behalf.
- Soliciting orders through advertisements in New Mexico, whether in newspapers, magazines, radio, or television.
- Leasing equipment in New Mexico.
- License using intangible personal property in New Mexico.
- Transporting properties in New Mexico using taxpayers’ vehicles.
- Performing services in New Mexico.
Economic Nexus
States have established regulations to collect sales tax from out-of-state sellers who meet certain revenue and/or transaction thresholds. This rule is known as
economic nexus.
Beginning July 1, 2019, the threshold for economic nexus in New Mexico is $100,000 in gross revenue in the previous calendar year’s sales.
While the nexus criteria mentioned above generally apply to most businesses, additional methods exist for establishing sales tax nexus. To access a comprehensive list of these rules, please refer to the
governing laws for sales tax nexus requirements in New Mexico.
New Mexico Sales Tax on Goods and Services
One of the first things you need to know is whether the goods you’re selling or services you’re offering are taxable in New Mexico.
Tangible Products
Almost all goods are taxable in New Mexico, including:
- Cosmetics
- Electronics
- Clothing
- Furniture
- Jewelry
- Home Goods
The goods that are
exempt from sales tax are:
- Groceries – Food products intended for human consumption except alcohol products, hot food, cocoa, and hot food for immediate consumption are exempt from sales tax
- Diapers
- Feminine Hygiene Products – Products such as pads, tampons, and menstrual cups are not subject to sales tax in New Mexico
- Agriculture Products
- Durable medical equipment and prescription medications
Services
In New Mexico, the majority of service-based transactions, such as professional services, advertising, and cleaning services, are subject to sales tax.
However, there are specific situations where certain services are exempt:
- New Mexico Activities Association-sanctioned refereeing, umpiring, scoring, or other officiating events
- Employee services
- Interstate telecommunication services
- Specified research and development services
Software-As-A-Service (SaaS)/Digital Products
SaaS is
taxable in the state of New Mexico.
Digital products (i.e., ebooks, downloadable video content, mobile apps) are
also taxable.
Shipping/Handling
Shipping and handling charges in the state of New Mexico are taxable if the seller paid the shipping charge separately from the product’s sale to the shipping carrier, delivery, or freight company. You may charge your customer sales tax on the shipping fee or pay for it yourself when you file your return.
Sales Tax Permits and Licenses in New Mexico
Now that you’ve got a handle on when sales tax nexus applies and which products are taxable in New Mexico, the next important step is getting your New Mexico Gross Receipts Tax Permit, also known as a sales tax permit.
Seller’s Permit
You can register for a New Mexico sales tax permit online at the
New Mexico Taxpayer Access Point (TAP).
Ensure you have specific information on hand when registering for a seller’s permit, including, but not limited to:
- Business Identification Information (name, address, phone number, email address)
- Business Entity Structure (sole proprietorship, partnership, corporation, LLC, etc.)
- Federal Employer Identification Number (EIN or FEIN)
- Owner/Partner/Officer Information
- Business Activity Details (description of products or services sold, sales volume, date of the first sale or the expected date to start dates)
Registration fee
There is no fee to register for a sales tax permit.
Renewal
In New Mexico, you don’t have to renew your sales tax permit.
Resale Certificate
A
resale certificate is a document that allows businesses to buy products without paying sales tax on them, as long as they plan to resell those items to customers, who will then pay the tax. As a seller, you can also accept resale certificates from others looking to buy for resale.
In New Mexico, sellers use resale certificates to buy goods from their suppliers that they intend to resell. The issuance of the certificates is always done in good faith that the seller would report tax on the final sale of the items.
You can fill out the
ACD-3150 – Application for Nontaxable Transaction Certificate provided by the New Mexico Department of Taxation and Revenue after you receive your sales tax permit. If you don’t want the hassle of registering, sign up for our all-inclusive service that includes sales tax registration.
Streamlined Sales Tax (SST)
The
Streamlined Sales Tax (SST) is an initiative to simplify and standardize sales tax regulations across multiple states. However, New Mexico is
not a party to this program, meaning it does not follow the uniform rules and definitions established by SST but has its own sales tax regulations.
Check with the New Mexico Department of Taxation and Revenue for the most current information on New Mexico’s participation in the Streamlined Sales Tax initiative.
Calculating and Collecting Sales Tax in New Mexico
Sales Tax Computation
In New Mexico, sales tax, also known in the state as the Gross Receipts Tax, isn’t just one simple rate; it’s a combination of state and local taxes. To figure out the total sales tax for your calculation, you’ll need to add up the rates for the state, county, and city (if applicable) where your transaction occurs. Use TaxHero’s New Mexico Sales Tax Calculator to compute for sales tax.
Here’s an example. Suppose an out-of-state seller satisfies the economic nexus criteria in New Mexico and sells to a customer in Albuquerque, NM, with a ZIP code of 87101. In that case, the seller has to charge the customer a total sales tax, which can be broken down as follows:
 |
SALES TAX FORMULA |
RATE |
| State: |
New Mexico |
4.875% |
| County: |
Bernalillo |
0.000% |
| District: |
First |
3.200% |
| City: |
Albuquerque |
0.000% |
| Combined Sales Tax Rate = |
8.075% |
|
Origin-based vs. Destination-based
When making in-state sales, it is important to determine if you are located in an
origin-based or destination-based state to figure out what rate to charge for sales tax.
New Mexico is a
destination-based state, meaning sales tax is determined based on the buyer’s location. That means for a New Mexico-based seller, sales tax is generally based on the location of the buyer when selling within the state.
For out-of-state or remote sellers, the sales tax rate is always determined by the buyer’s location. For instance, if you’re selling a product from Florida to a customer in Albuquerque, New Mexico, where you have nexus, you’d apply Albuquerque’s sales tax rate to that sale.
To make life easier, consider using sales tax software or consulting a tax professional, like TaxHero, to ensure accurate tax calculations and collections. Understanding these tax rules helps you stay compliant, whether you’re in-state or out-of-state.
Filing and Remitting Sales Tax Returns in New Mexico
The next step after collection is filing and remitting your New Mexico sales tax returns. Filing and remittance can vary in frequency, typically monthly, quarterly, or semi-annually.
- Monthly Filing: If your sales tax liability averages $200 or more per month
- Quarterly Filing: If your sales tax liability is $600 or less per quarter
- Semi-Annual Filing: If your sales tax liability is less than $1,200 during the six-month period or an average of less than $200 per month for the six-month period.
It’s crucial to keep accurate records of your sales and tax collections and adhere to the filing schedule set by the state to remain compliant with New Mexico’s sales tax regulations.
Due Dates
In New Mexico, the due date falls on the 25th day of the following month. For instance, sales tax collected in January is due by February 25th for monthly filers.
However, if this day is a holiday, weekend, or in the rare occurrence of a natural disaster, the deadline is typically extended to the next business day. For instance, if you’re a monthly filer and filing sales tax for the month of April, and the May 25th deadline falls on a holiday or weekend, you’ll have until May 26th, the following business day, to submit.
Filing Sales Tax Returns
To file your sales tax return for New Mexico, a few options are available:
- File online through the New Mexico Taxpayer Access Point (TAP).
- File by mail – Fill up the TRD-41413 form and mail it to the New Mexico Department of Taxation and Revenue.
- File with TaxHero – Let TaxHero take care of it so you don’t have to worry about missing a payment or return.
Timely Filing Discount
Some states offer a discount to businesses for collecting, filing, and remitting sales tax on time as an incentive to process sales taxes promptly. However, New Mexico does not offer a discount.
Sales Tax Holiday
For 2024, the planned sales tax holiday in New Mexico is:
| DATE |
TYPE |
ELIGIBLE MERCHANDISE |
| August 2-4, 2024 |
Back-to-School Tax-Free Holiday |
Various school-related items, including:
- Clothing and shoes ($100/unit or less)
- School supplies, and
- Computers and related devices ($1,000 or less)
|
| November 30, 2024 |
Small Business Saturday Gross Receipts Tax Holiday |
Small businesses in New Mexico with 10 or fewer employees can:
- Deduct sales under $500 from items like clothes, electronics, and toys. This tax break is available until July 1, 2025, for sales made on the first Saturday after Thanksgiving.
|
|
New Mexico Sales Tax Penalties
Like in most states, sales tax is a big part of how New Mexico generates revenue. Thus, maintaining compliance with sales tax regulations is of utmost importance. Failure to do so can lead to consequences and sales tax penalties. Therefore, it is crucial always to ensure you are up-to-date in filing, collecting, and remitting sales tax to the state.
Here are the specific penalties for non-compliance with sales tax regulations in New Mexico:
- Civil penalties are calculated by adding a penalty of 2% per month (up to 20% or at least $5) and daily interest at 7% annually to the tax owed. Even if you don’t owe tax, a $5 penalty applies, and while the penalty has a cap, the interest keeps accruing until payment unless it’s under $1;
- On the criminal side, offenses can be classified as a felony, depending on the severity and specific circumstances.
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