New Mexico imposes a gross receipts tax, which applies to the utilization of property or services within the state. This tax is designed to protect New Mexico businesses, and an LLC structure may offer a means to minimize taxes by enabling owners to deduct certain expenses from their tax returns. The state also levies a corporate income tax on businesses that generate income within its jurisdiction.
Taxes on Businesses and Individuals
Gross Receipts and Corporate Income Tax
Corporate income is taxed at a maximum rate of 7.600%. The gross receipts tax ranges from 5.125% to 9.0625%, with first-time tax cuts and rebates currently in effect. Notably, New Mexico does not impose an LLC franchise tax and food purchases have been exempt from gross receipts tax since 2005.
After business registration, companies receive a CRS Number which also acts as the New Mexico Tax ID Number. For tax compliance, the following forms are used:
- Form A: for individuals
- Form PIT-1: for income tax
- Form CRS-1: for businesses’ gross receipts tax
Businesses can register for the CRS online to immediately receive the ID and are then able to file returns and make tax payments electronically.
Payroll and Other Taxes
Businesses with employees must withhold payroll taxes. New Mexico has a 0.79% property tax rate and does not have a specific sick leave tax. However, employers must adhere to the Healthy Workplaces Act, which mandates the provision of leave. SUTA (State Unemployment Tax Act) and state income tax withholdings are typically filed monthly.
Workers Compensation and Related Costs
Employers should offer breakdowns of withholdings and may pay the global workforce through platforms like Deel. Workers’ compensation is mandatory, with a quarterly assessment fee of $4.30 per employee, where employers and employees contribute $2.30 and $2, respectively.
If a business has more than three employees, it must obtain a private workers’ compensation insurer, or it can choose to self-insure if it has over 100 employees.
Specifics of the Gross Receipts Tax (GRT)
The GRT applies to retailers, wholesalers, manufacturers, and service providers on receipts from selling or leasing property or services. The compensating tax complements GRT by imposing a 5.125% tax on property and 5% on services used in the state to shield New Mexico businesses. The compensating tax is reported on the CRS form which is due on the 25th following the transaction. A portion of these receipts goes towards funding city and county initiatives.
Goods and services now apply taxation based on the location where they are provided rather than the location of the seller, following destination-based rules. The taxation of goods and services also recognizes and provides credits for taxes paid in other jurisdictions.
Certain receipts are exempt from the gross receipts tax if they are subject to other state taxes, like the corporate income tax or compensating tax. No local income taxes are imposed in the state, which simplifies tax obligations for businesses and residents.