What is Nexus?You'll need to collect sales tax in New Mexico if you have nexus there. There are two main ways that sellers can be tied to a state when it comes to nexus: physical, or economic.
Physical nexus means having enough tangible presence, or activity in a state to merit paying sales tax in that state.
Economic nexus means passing a states' economic threshold, for total revenue, or the number of transactions in that state.
Calculating Nexus in New Mexico
Your business has a physical nexus in New Mexico if it has a tangible presence in the state, such as:
- Owning or renting a place like an office, warehouse, or shop
- Having employees or agents around
- Storing goods in the state, like in a fulfillment center
Since July 1, 2019, New Mexico introduced economic nexus for remote sellers. You're in this boat if, during the last calendar year, your business:
- Had sales of tangible items, licenses, or services delivered into New Mexico topping $100,000
- Made at least 200 separate transactions of tangible goods, licenses, or services in the state
In New Mexico, affiliate nexus happens when your business partners with a local entity that helps you tap into or keep up your market in the state. This can include activities like advertising or promoting your products or services.
New Mexico doesn't specifically talk about click-through nexus laws. But, if your business makes sales through referrals from a New Mexico-based affiliate, you might still fall under the state's affiliate nexus rules.
Starting July 1, 2019, New Mexico asks marketplace facilitators (think Amazon, eBay) to handle the sales tax for their sellers if they meet the economic nexus criteria we mentioned earlier.
Over-100-year-olds are exempt from sales tax, because reaching a century undoubtedly deserves a tax break!
Sales Tax Registration in New Mexico
How to Get Your New Mexico Sales Tax Permit
If your business has a physical presence or economic activities in New Mexico, you're going to need a New Mexico tax identification number.
- Gather Your Info: Before jumping into registration, round up this info.
- Business name and address
- Federal Tax ID Number or EIN (if you have one)
- Type of business (like sole proprietorship, partnership, corporation, etc.)
- Details about ownership and management
- What your business does
- When you plan to start your taxable activities in New Mexico
- Register Online or by Snail Mail: You can register for a New Mexico sales tax license online through the New Mexico Taxpayer Access Point (TAP) or by downloading the Business Tax Registration Update form (ACD-31015) from the TRD website and mailing it in.
- Get Your Tax ID: Once the TRD processes your registration, they'll give you a New Mexico tax identification number. This is your key to reporting and paying taxes like gross receipts tax and compensating tax.
- Show Off Your License: Once you've got your sales tax license, make sure it's displayed where people can see it at your business place.
Cost of Registering for a New Mexico Sales Tax License
Great news – there's no fee to register for a New Mexico sales tax license!
Federal Tax ID for New Mexico Sales Tax License
If your business is a corporation, partnership, or LLC, you'll need a Federal Tax ID Number or EIN. Sole proprietors without employees can just use their Social Security Number.
Other New Mexico Registrations to Consider
Depending on what your business is all about, you might need to register with other New Mexico agencies, like:
- New Mexico Secretary of State for things like business entity registration and trademarks
- New Mexico Department of Workforce Solutions for unemployment insurance
- New Mexico Environment Department for environmental permits
Guide to collecting sales tax in New Mexico
Is New Mexico an Origin or Destination Sales Tax State?
New Mexico plays by the destination-based sales tax rules. This means the sales tax you charge is based on where your customer is, not where you are. So, when you're sending products to a customer in New Mexico, charge the sales tax rate that applies to their location, including state, county, and local taxes.
What Sales are Subject to Sales Tax in New Mexico?
In New Mexico, they call sales tax the Gross Receipts Tax (GRT), and it covers a lot of ground, including:
- Goods like furniture, electronics, and clothes
- Services from professionals (like lawyers, architects, accountants)
- Renting out tangible stuff
- Construction work
- Utilities (electricity, gas, water)
Is Software as a Service (SaaS) Taxed in New Mexico?
Yep, SaaS gets taxed in New Mexico. They see SaaS as a kind of software subscription, where you access an application online. So, whether it's traditional SaaS, cloud computing, or web-based software, if you're selling it in New Mexico, get ready to collect sales tax on it. Just make sure you're registered with the New Mexico Taxation and Revenue Department.
What is Exempt from New Mexicone Sales Tax?
Certain items and services dodge the sales tax in New Mexico, like:
- Prescription meds and some medical gear
- Groceries and home food
- Sales to government bodies and nonprofits
- Textbooks for students in New Mexico schools
- Transportation services
Who is Eligible for New Mexico Sales Tax Exemptions?
Some folks in New Mexico don't have to pay sales tax, including:
- Government agencies
- Schools and educational bodies
- Native American tribes
- Agricultural producers for certain items
What To Do If Your Customer is Exempt from Sales Tax in New Mexico?
If a customer is tax-exempt, they should hand you a New Mexico Nontaxable Transaction Certificate (NTTC) or similar proof. Keep a copy for your records to back up the tax-free sale, especially if the tax auditors come knocking.
What if You Lose a New Mexico Sales Tax Exemption Certificate?
Oops! If you lose an exemption certificate, ask your customer for a new one pronto. Keeping these records straight is super important for staying on the right side of tax laws and avoiding headaches during audits.
In New Mexico, if you buy a hot air balloon, it’s tax-free – because that's how New Mexicans prefer to rise above taxes.
Steps for Filing a New Mexico Sales Tax Return
In New Mexico, how often you file and pay your sales tax depends on your business's sales volume. The New Mexico Taxation and Revenue Department (TRD) will set this up for you when you register:
- Monthly Filing: If you're pulling in over $200 a month in tax, you'll be filing and paying monthly, with everything due by the 25th of the following month.
- Quarterly Filing: If you're in the $50 to $200 range monthly, you're on the quarterly plan. Here, returns and payments are due by the 25th day after the quarter ends.
- Annual Filing: For those averaging less than $50 a month, you'll file and pay annually, with everything due by January 25th of the next year.
What If a Filing Date Falls on a Weekend or Holiday?
If your due date lands on a weekend or holiday, don't sweat it – you get until the next business day to file.
Penalties for Late Filing in New Mexico
If things go a bit sideways, here are the penalties you might face:
- Late Filing: 2% per month on the tax due, maxing out at 20%.
- Late Payment: Same deal – 2% per month, up to 20%.
- Negligence: If it's a mistake, there's a 5% penalty.
- Fraud: A hefty 50% penalty if it's intentional.
- Interest: Plus, interest accrues from the due date until you pay up.
Sales Tax Incentives in New Mexico
New Mexico offers some cool incentives. To snag these incentives, make sure you meet the criteria and apply through the right state channels:
- Industrial Revenue Bonds (IRBs): Cut down on property and sales taxes for eligible activities.
- High-Wage Jobs Tax Credit: 10% back on wages and benefits for creating new, well-paying jobs.
- Manufacturing Investment Tax Credit: A 5.125% credit for buying equipment and machinery for manufacturing.
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