New Mexico Sales Tax Rate Rules Penalties Filing

Understanding New Mexico’s sales tax landscape can be challenging due to varying rates across cities and counties. Whether you are a small business owner or an online seller, understanding the correct sales tax rate for each location is essential for compliance.

In this guide, we’ll walk you through New Mexico’s sales tax rates for key cities, helping you ensure your business collects the right amount of tax.

What Is the Sales Tax Rate in New Mexico?

New Mexico has a unique sales tax structure. Instead of a traditional state sales tax, the state uses a gross receipts tax. This tax applies to the total amount of sales or receipts a business generates rather than just the sale of tangible goods.

• State Gross Receipts Tax Rate: The gross receipts tax rate varies throughout the state from 5.125% to 8.6875%.
• Local Gross Receipts Tax Rates:

• Localities in New Mexico can add their own taxes on top of the state rate, meaning the total tax rate can vary depending on the location.
• Local tax rates can range from 0.25% to 3.00%, bringing the overall sales tax rate (state + local) to 5.375% to 8.125% in most areas.

For example:

• Albuquerque (the state’s largest city) has a total gross receipts tax rate of 7.875%, which includes the state rate and local taxes.
• Santa Fe has a combined rate of 8.1875%.

New Mexico Sales and Use Tax Overview

As a business owner in New Mexico, it is crucial to understand the state’s sales and use tax rules to stay compliant. The Taxation and Revenue Department serves the State and oversees the collection and enforcement of these taxes.

New Mexico has a gross receipts tax instead of a traditional sales tax, which applies to the total amount of sales a business makes, not just tangible goods. In addition, there is also a use tax that applies to items purchased outside New Mexico but used within the state.

Here’s an overview of the key aspects of New Mexico’s sales and use tax system.

Key Features of New Mexico Sales Tax

1. Gross Receipts Tax (GRT):
   • State Rate: The state’s base rate for gross receipts tax is 5.125%.

Local Rate: Local jurisdictions can add their own taxes, which can range from 0.25% to 3.00%. When you add the local rates to the state rate, the total sales tax rate will range from:

• 5.125% + 0.25% = 5.375% (minimum)
• 5.125% + 3.00% = 8.125% (maximum)

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2. Applicability to Services: Unlike many states, New Mexico applies the gross receipts tax to both tangible goods and most services. This includes everything from retail sales to certain professional services.
3. Use Tax: New Mexico also has a use tax, which applies to tangible personal property purchased outside the state but used or consumed within the state. The use tax is typically the same rate as the gross receipts tax.
4. Filing Requirements:
   • Businesses must register with the New Mexico Taxation and Revenue Department to collect and remit the gross receipts tax.
   • Businesses with a physical presence in New Mexico or those making sales to New Mexico residents, are generally required to collect the tax.

Taxable and Exempt Items in New Mexico

Taxable Items in New Mexico include:

• Tangible personal property like goods such as clothing, electronics, furniture, and appliances.
• Most services, including professional services like legal, accounting, and consulting, are taxable. Other taxable services include advertising, landscaping, cleaning, and repair services.
• Food and beverages. Also, grocery items (e.g., fresh fruits, vegetables, and unprepared foods).
• Construction services, including services related to building, remodeling, and repairing structures.
• Telecommunications services like phone services, internet, and cable.
• Rentals or leasing tangible personal property, such as vehicles, machinery, and equipment.

Some of the most common sales tax exemption items in New Mexico include:

• Most grocery items
• Prescription drugs
• Sales to Government and Nonprofits
• Sales of Certain Property to Native American Tribes
• Sales of Certain Agricultural Products
• Sales to Resale
• Sales of Motor Vehicles

For detailed information on sales tax exemption in New Mexico and specific conditions, it is advisable to consult the resources provided by the New Mexico Taxation and Revenue Department. Understanding these tax obligations is crucial for compliance and avoiding potential penalties.

When Do Businesses Need to Collect Sales Tax in New Mexico?

In New Mexico, businesses must collect gross receipts tax (GRT) under certain conditions. Here’s when the tax applies:

New Mexico Physical Nexus

If your business has a physical presence in New Mexico, such as a retail store, office, warehouse, or employees, you must collect gross receipts tax. This applies to all taxable sales within the state, including in-person and online sales where goods or services are delivered to a New Mexico address.  This includes both in-person and online sales where goods or services are delivered to a New Mexico address.

New Mexico Economic Nexus

Even if you don’t have a physical presence in New Mexico, you may still be required to collect gross receipts tax if your business meets certain economic nexus thresholds:

• $100,000 or more in gross receipts from sales made to New Mexico customers during the previous or current calendar year.
• If your business exceeds this threshold, you must register with the New Mexico Taxation and Revenue Department and collect the tax on sales made to New Mexico residents. For more information, click here.

Out-of-State Sellers

Out-of-state sellers who meet the economic nexus criteria must collect New Mexico gross receipts tax on sales to customers in New Mexico. This includes online sales and sales through remote platforms.

Failure to Collect New Mexico Gross Receipts Tax

Failure to collect the required gross receipts tax can result in serious consequences. Here’s what can happen if you don’t comply:

Penalties for Late Filing and Payment

1. Late Filing Penalty:
   • Penalty for late filing: The Penalty is calculated at 2% per month or partial month to a maximum of 20% on the unpaid principal of tax due.
   • If a return is filed more than 60 days after the due date, an additional $50 late filing penalty applies, even if no tax is owed.
2. Late Payment Penalty: 5% of the amount due, plus 1% per month on the unpaid tax, with a maximum penalty of 25% of the tax owed.
3. Interest: Interest is charged on any unpaid gross receipts tax at a rate set annually by the New Mexico Taxation and Revenue Department. Interest accrues from the due date of the payment until it is paid in full.

Also read: U.S. Sales Tax Penalties: What Are the Penalties for Filing Late [Not Paying]?

New Mexico Sales Tax for Out-of-State and Amazon FBA Program Sellers

In New Mexico, out-of-state sellers, including those using the Amazon FBA (Fulfillment by Amazon) program, are required to collect and remit gross receipts tax (GRT) if they meet certain criteria.

Out-of-state businesses selling to New Mexico residents must comply with economic nexus rules. Remote sellers, including those using the Fulfillment by Amazon (FBA) program, should know if their inventory is stored in New Mexico.

FBA remote sellers can access the Inventory Event Detail Report from Amazon Seller Central to check if their inventory is based in New Mexico. If you have inventory stored in the state, you have likely triggered New Mexico physical nexus and are required to collect New Mexico gross receipts tax.

Registering for a New Mexico  Seller’s Permit

To collect New Mexico gross receipts tax, businesses must register for a gross receipts tax (GRT) account with the New Mexico Taxation and Revenue Department (TRD). Here are the steps to register for a New Mexico Seller’s Permit:

1. Obtain an Employer Identification Number (EIN): Before registering, you must have an EIN. If you don’t already have one, apply online through the IRS website.

2. Create an Account with the New Mexico Taxation and Revenue Department (TRD):

• Visit the New Mexico TRD website.
• Create a business account on the TRD portal to get started with your registration.

3. Complete the Seller’s Permit Application:

• After creating your account, log in and fill out the online application for a gross receipts tax (GRT) account.
• Provide your business information, including:
  • Business name
  • Physical and mailing address
  • Type of business
  • Federal Employer Identification Number (EIN), if applicable
  • Ownership structure (sole proprietorship, LLC, corporation, etc.)

4. Provide Additional Information (if needed): Depending on your business type, you may need to provide additional details, such as your NAICS code or specific business activities.

5. Submit the Application: Once you have filled out the application, submit it through the TRD portal. Be sure to review all information for accuracy.

6. Wait for Approval: After submission, the New Mexico TRD will review your application. If everything is in order, they will issue your GRT account number (Seller’s Permit), which will allow you to legally collect gross receipts tax in New Mexico.

7. Start Collecting Tax: Once you receive your seller’s permit, you are required to collect gross receipts tax on taxable sales made in New Mexico.

How to Collect Sales Tax in New Mexico

Collecting New Mexico gross receipts tax (sales tax) begins with registration. The state imposes a 5.125% gross receipts tax rate, with localities adding additional rates up to 3.00%, resulting in a total rate as high as 8.125% in some areas. As a business, you must apply the correct sales tax rate based on the customer’s location.

Use the New Mexico Taxation and Revenue Department’s Tax Rate Lookup Tool to confirm the correct rate for each sale. Once registered, you must collect gross receipts tax on taxable goods and services and itemize the tax clearly on receipts. This ensures transparency for your customers.

Stay compliant and track your tax obligations with ease. Tools like Commenda can automate gross receipts tax calculations and filings, saving you time and minimizing the risk of errors.

Tax-Exempt Customers

Certain organizations and customers in New Mexico are exempt from paying gross receipts tax. These include:

• Sales made to nonprofit organizations: Sales to recognized nonprofit organizations in New Mexico are exempt from gross receipts tax.
• Sales to federal, state, or local government entities: Sales to government entities are generally exempt from gross receipts tax.
• Resale Exemption: If a business purchases items for resale, they can be exempt from paying gross receipts tax at the time of purchase, provided a resale certificate is presented.
• Sales of most food items: Sales of food for home consumption (groceries) are exempt from gross receipts tax.
• Prescription drugs: Sales of prescription drugs and certain medical devices are exempt from gross receipts tax.

Tip:
To qualify for gross receipts tax exemptions in New Mexico, businesses must obtain exemption certificates from tax-exempt customers and maintain proper documentation for audit purposes.

Filing Sales Tax Returns in New Mexico

Here’s information on filing sales tax returns in New Mexico:

Filing Steps

1. Gather Your Sales Data: Review your sales records, including the total sales and the gross receipts tax collected from New Mexico customers. Ensure all figures are accurate and up-to-date.
2. Log in to the New Mexico TRD: Access the New Mexico Taxation and Revenue Department (TRD) website and log in to your account through the New Mexico Taxpayer Access Point (TAP) portal.
3. Complete the Gross Receipts Tax Return Form: Select the appropriate gross receipts tax return form based on your filing frequency (monthly, quarterly, or annually). Enter the necessary details, including gross sales, taxable sales, and sales tax collected.
4. Review and Submit: Double-check all figures to ensure accuracy. Once confirmed, submit your return electronically through the TRD website.
5. File on Time: Ensure that you file by the due date assigned to your business. Late filing may result in penalties and interest charges.

Also read: State Sales Tax Filing: Due Date and Process

How to Pay Your New Mexico Sales Tax

There are several payment methods available to remit the gross receipts tax you owe in New Mexico:

• Electronic Funds Transfer (EFT): The most efficient and commonly used method is Electronic Funds Transfer (EFT). This method directly debits your business bank account for the payment. EFT is typically required for businesses with larger tax liabilities or those that make regular payments.
• Credit Card: Businesses can pay their gross receipts tax using a credit card via the New Mexico Taxation and Revenue Department’s online payment portal. Be aware of potential processing fees when using a credit card for payments.
• Check: If you prefer not to pay electronically, you can mail a check along with your gross receipts tax return. Ensure the check includes the correct payment amount and your business information to avoid delays.
• ACH Debit: New Mexico businesses can also use ACH Debit for electronic payments. To use this method, businesses must set up ACH Debit through their New Mexico Taxpayer Access Point (TAP) portal.

Using Sales Tax Automation Tools

Sales tax automation tools like Commenda can simplify your sales tax calculation and filing with built-in reporting, remittance, and expert accounting support. With features such as nexus tracking, exemption certificate management, and automated sales tax filing, Commenda helps businesses save time and reduce errors associated with manual processes.

Trusted by over 250 businesses across borders, Commenda not only handles multi-state sales tax compliance but also ensures that you remain informed about changing tax laws. This allows you to focus on growing your business while the software manages your sales tax obligations seamlessly.

Click here to see how Commenda can streamline your sales tax needs and enhance your operational efficiency.

New Mexico Sales Tax Compliance Checklist

Stay compliant with New Mexico’s sales tax regulations by following this comprehensive checklist. Ensure accurate reporting, proper documentation, and timely payments to avoid penalties.

• Register for Gross Receipts Tax (GRT)
  • Obtain an EIN and register with the New Mexico Taxation and Revenue Department.
  • Receive your GRT account number.
• Determine Nexus
  • Check if your business has a physical nexus or economic nexus in New Mexico (sales over $100,000).
• Identify Taxable Items
  • Know which goods and services are taxable and which are exempt (e.g., food, prescription drugs, resale items).
• Charge the Correct Sales Tax Rate
  • Apply the state rate (5.125%) and local rates (up to 8.125%).
  • Use tools like New Mexico’s Tax Rate Lookup Tool to determine specific rates.
• File Sales Tax Returns
  • File returns monthly, quarterly, or annually based on your liability.
  • Submit returns on time using the New Mexico TRD TAP portal.
• Pay Sales Tax
  • Use methods like EFT, credit card, or check to pay on time.
• Maintain Records
  • Keep records of sales, tax collected, and exemption certificates.
• Stay Updated
  • Monitor changes in sales tax laws and adjust your practices as needed.

How Should I Prepare for New Mexico’s Sales Tax Audits and Appeals?

Being prepared for a New Mexico sales tax audit can help your business avoid unnecessary penalties, save time, and streamline the process. Here are the key steps you should take to prepare for audits and how to handle appeals if needed:

Understanding the Audit Process

The WDOR conducts audits to ensure businesses are correctly reporting and remitting sales tax. An audit typically focuses on:

• Reviewing sales tax returns: Verifying that sales tax was collected and remitted accurately.
• Inspecting business records: Ensuring all taxable sales and exemptions are properly documented.
• Assessing tax liability: Determining if the correct amount of sales tax has been paid.

Audits can be triggered by discrepancies in your sales tax filings or by random selection. Once selected for an audit, the DOR will notify you with the details and schedule an audit.

Also read: Sales Tax Audits: Common Triggers, Risks, and How to Prepare

Steps to Prepare for an Audit

Preparing for an audit in New Mexico involves ensuring all your records are up-to-date and easily accessible. Here are some steps to help you prepare:

• Maintain Accurate Records: Keep detailed records of all sales, purchases, and gross receipts tax collected. This includes receipts, invoices, contracts, and exemption certificates.
• Stay Organized: Ensure your records are well-organized and easily accessible. Use accounting software or a filing system to track and store all relevant documentation.
• Review Your Tax Returns: Double-check your sales tax returns for accuracy before submission. Ensure that all sales, tax collected, and exemptions are correctly reported.
• Know the Rules: Familiarize yourself with New Mexico’s sales tax laws and regulations to ensure compliance. This will help you understand what is taxable and what is exempt.
• Respond Promptly: If selected for an audit, respond to the New Mexico Taxation and Revenue Department’s (TRD) requests promptly and provide all requested documentation.
• Prepare for an Appeal (if necessary): If you disagree with an audit decision, be prepared to file an appeal. Ensure that you have strong evidence to support your position and consult with a tax professional or an attorney.
• Consult a Tax Professional: Consider working with a tax expert who specializes in New Mexico sales tax to guide you through the audit process and help with appeals if needed.

During the Audit

When the audit begins, here are some best practices to follow:

• Cooperate with the Auditor: Be polite, transparent, and cooperative during the audit. Provide the auditor with the requested records in a timely manner.
• Keep Records of Everything: Document all communications and provide the auditor with any information they request, including your sales and exemption records.
• Understand the Auditor’s Requests: Ask for clarification if any part of the audit request is unclear. Ensuring full understanding will help you provide the correct documentation.

New Mexico Sales Tax Rates by City

Here’s a breakdown of sales tax rates by city to help you stay compliant with local tax laws:

Don’t let sales tax complexities hold your business back. Partner with Commenda for expert guidance. Schedule a free call with our sales tax experts today!

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FAQs

What triggers the sales tax nexus in New Mexico?

What should I include in my New Mexico sales tax compliance checklist?

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What is the New Mexico economic nexus rule for remote sellers?

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Are there special taxes, excise charges, or local add-ons I need to consider?

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