New Mexico doesn’t have a traditional sales tax. Instead, it uses a Gross Receipts Tax (GRT) that applies to businesses selling property or services. This comprehensive guide breaks down everything you need to know about New Mexico Sales Tax, officially known as the Gross Receipts Tax.
What is Included in New Mexico’s Gross Receipts Tax?
The GRT is a tax on the total revenue a business receives from various activities within New Mexico. These activities include:
- Selling property
- Leasing or licensing property
- Granting franchise rights
- Performing services within the state
- Performing services outside the state if the product is initially used in New Mexico
- Selling research and development services performed outside the state if the product is initially used in New Mexico
While businesses are legally responsible for paying the GRT, it’s common for them to pass the cost onto the consumer. This can be done by itemizing it on the invoice or by including it in the final selling price. This effectively functions as a sales tax for the end consumer.
New Mexico Sales Tax Rates: Decoding the Complexity
The GRT rate isn’t uniform across New Mexico. It fluctuates between 4.875% and 8.9375% depending on the specific location of the business. This variation stems from the combined rates imposed by the state, counties, and municipalities. The state collects the total GRT and then distributes the respective portions to the counties and municipalities.
These tax rates are subject to change twice a year, in January and July. Updated rate schedules are published online by the New Mexico Taxation and Revenue Department and are also included in the GRT Filer’s Kit.
Determining Your New Mexico Sales Tax Rate
Businesses typically use the tax rate associated with the location where their goods or services are delivered. However, there are exceptions, particularly for “professional services.” These services require a state license or a master’s degree or higher to perform. For detailed guidance on determining the correct location code and tax rate, consult FYI 200.
Out-of-State Businesses and New Mexico Sales Tax
Even businesses without a physical presence in New Mexico, including online marketplaces and sellers, must pay GRT if their taxable gross receipts in the state exceeded $100,000 in the previous calendar year. FYI-206 provides more information on this requirement for marketplace sales. This threshold underscores the importance of understanding New Mexico sales tax even for businesses operating remotely.
Need More Information on New Mexico Sales Tax?
For a complete overview of the Gross Receipts Tax, refer to FYI-105: Gross Receipts and Compensating Taxes: An Overview. This document provides a detailed explanation of the tax and its implications for businesses. You can also contact the New Mexico Taxation and Revenue Department for further assistance. Understanding the nuances of New Mexico sales tax is crucial for businesses operating within or selling to customers in the state. This guide provides a foundation for that understanding, enabling businesses to navigate the complexities of the GRT effectively.
