New Mexico Sales Tax Guide
Chapter 1: An introduction to New Mexico sales tax management
Learn about sales tax automation
Introducing our Sales Tax Automation 101 series. The first installment covers the basics of sales tax automation: what it is and how it can help your business.
Sales tax is a tax paid to a governing body (state or local) for the sale of certain goods and services. First enacted in the United States in 1921, sales tax dates back to ancient Egyptian times where paintings depict the collection of tax on commodities. New Mexico first adopted a general state sales tax in 1933. Since that time, the rate has risen to 5.125. In the second quarter of 2015, the New Mexico Taxation and Revenue Department reported $529,089 in revenue from taxes on general sales and gross receipts; 33% of total New Mexico state taxes.
As a business owner selling taxable goods or services, you act as an agent of the state of New Mexico by collecting tax dollars from purchasers and passing it along to the state and local tax authority. This is an important point worth emphasizing. Any sales tax collected from residents belongs to the New Mexico Taxation and Revenue Department. As a business owner, it is your responsibility to manage the taxes you collect to remain in compliance with state laws and avoid penalty and interest payments.When does New Mexico gross receipts tax need to be collected?
In New Mexico, gross receipts tax is collected on the sale of tangible goods and some services. The tax is collected by the seller and remitted to state and local tax authorities. The seller acts as a pseudo-tax collector.Do I need to collect gross receipts tax in New Mexico?
To better understand whether you need to collect gross receipts tax in New Mexico, we've created a simple three step checklist you can use to get a better feel for your New Mexico tax situation:
- Do I have nexus in New Mexico?
- Am I selling taxable goods or services to New Mexico residents?
- Is my buyer required to pay gross receipts tax?
If the answer to all three of the questions above is "Yes", then you are required by the New Mexico Taxation and Revenue Department to collect, file, and remit gross receipts tax.Does gross receipts tax accept out-of-state resale certificates?
Yes! At the time of publication, the New Mexico Taxation and Revenue Department is accepting out-of-state resale certificates.What happens if I don't collect any gross receipts tax?
If you meet the criteria for collecting sales tax (nexus in New Mexico and selling taxable goods or services to taxable residents) and choose not to collect gross receipts tax, you will be held responsible for the tax due. As such it is extremely important that you set up tax collection at the point of sale. Attempting to contact customers to collect sales tax after the fact is time consuming and unlikely to be fruitful.Is New Mexico a Streamlined Sales Tax (SST) state?
At this time, New Mexico is not a member of the Streamlined Sales Tax (SST) Agreement.What state sourcing rules apply to New Mexico?
New Mexico is an origin-based state. Origin-based states are those where the transaction location is defined as the shipping location of the seller rather than the delivery location of the buyer. As a seller, this means you are responsible for applying the sales tax rate determined by the ship-from address on all taxable sales.