New Mexico vacation rental tax guide

With a bounty of popular destinations including Santa Fe and Taos, the Land of Enchantment offers ample opportunity for short-term rental (STR) businesses.

But these opportunities come with tax obligations. Like hotel stays, STRs in New Mexico are subject to lodging taxes. Failure to comply with state and local tax laws can result in fines and interest penalties. Tax jurisdictions are increasingly making STR tax compliance a priority, so it’s important to address compliance before tax authorities address it for you. 

Avalara MyLodgeTax put together this guide to help you comply with New Mexico lodging tax laws at the state level. Local jurisdictions may have their own lodging tax rules. For more information on the tax rates and jurisdictions that apply to your rental’s specific location, use our lodging tax lookup tool.

No lodging tax guide is a substitute for professional tax advice. Consider this an asset to help you understand and prioritize your vacation rental questions and concerns. Questions pertaining to specific situations or out-of-the-ordinary conditions are best solved with a certified tax professional familiar with New Mexico tax laws.

Lodging tax basics

In New Mexico, lodging taxes operate a bit differently than in other states. Vendors are taxed for the privilege of doing business in the state, with taxes levied on STR businesses according to their gross receipts. STR business owners may pass the taxes on to their guests.

What’s the definition of “short-term rental” in New Mexico?

In New Mexico, gross receipts from leasing property are subject to state lodging taxes. Local jurisdictions may have their own definitions.

Who’s required to collect and file taxes on short-term rentals in New Mexico?

If you collect payment from short-term guests renting out a room, apartment, house, or other dwelling, you’re likely responsible for paying lodging taxes to New Mexico tax authorities.

Location is key to compliance

The location of your rental is a crucial piece of information for lodging tax compliance. Your address determines which tax jurisdictions you’re required to report to, which taxes you need to collect, and the appropriate tax rates.

Use our lodging tax lookup tool to get a rate report specific to your New Mexico rental’s address. The report includes the estimated total tax rate to collect from guests, number of required registrations, number and frequency of returns per year, and minimum number of rented days to qualify as a taxable stay.

It should be noted that tax rates and the rules governing them change frequently. Please consider your tax rate report to be informative rather than authoritative.

Local short-term rental regulations

STR operators in New Mexico should be aware of the local regulations that apply to them, including rules covering:

• Legality
• Permits, licenses, and registrations
• Zoning
• Advertising
• Neighborhood notification
• Building and housing standards

Homeowner associations (HOAs), condominium communities, co-ops, and landlords may also have specific rules regarding vacation rentals. It’s your responsibility to be aware of STR policies that apply to your property.

Registering with tax authorities

Before you can begin collecting lodging taxes on your STR in New Mexico, you’re legally required to register with the New Mexico Taxation and Revenue Department. You can register online to receive a Combined Reporting System (CRS) Identification Number. Depending on your jurisdiction, you may be required to register with your local tax authority and file local lodging tax returns in addition to state registration and filing.

Collecting lodging taxes      

Once you’re registered with tax authorities, you’re ready to start paying lodging taxes.

Which taxes apply to New Mexico short-term rentals?

In New Mexico, lodging taxes can include:

Tax rates

Before you can begin paying lodging taxes, you need to know the correct rate to pay to avoid compliance issues. Our lodging tax lookup tool can give you a rate report specific to your New Mexico address. 

What charges are taxable?

In New Mexico, the state gross receipts tax (GRT) is levied on a business’s receipts from sales and services, including transient accommodations, so any revenue received from providing STRs is subject to GRT. However, hosts can pass the tax on to guests either by separately stating it on the invoice or by combining the tax with the selling price.

What happens when my short-term rental marketplace (such as Airbnb or Vrbo) collects taxes for me?

New Mexico requires all marketplace providers — such as Airbnb and Vrbo — that collect money on behalf of individual accommodations providers in excess of $100,000 in the prior calendar year to pay gross receipts tax on the transactions they facilitate. As an individual seller, you must file GRT returns even if a marketplace provider is paying taxes on your behalf, but you can deduct sales on which taxes have already been paid. 

Marketplace providers may not collect locally administered taxes on your behalf. If taxes aren’t being paid for you, you’re responsible for remitting them to state tax authorities.

Are guests ever exempt from taxes? 

There are situations in which you aren’t required to pay lodging taxes in New Mexico. For example, lodging transactions involving Indian tribes or tribal members, where the lodging occurs on tribal land, may not be subject to New Mexico GRT.

Filing lodging tax returns

In New Mexico, you can file lodging tax returns and pay tax manually or online. The New Mexico Taxation and Revenue Department allows credit card payments, but you may be charged convenience fees for this type of payment.

When do I need to file my returns?

You’ll be assigned a filing frequency and due dates when you register with the New Mexico Taxation and Revenue Department. Filing due dates are as follows:

I didn’t rent my property during this filing period. Am I still required to file a lodging tax return with the New Mexico Taxation and Revenue Department?

Yes. STR operators registered with the New Mexico Taxation and Revenue Department are required to file returns each assigned filing period, regardless of whether you had any STR income or collected lodging taxes. Such returns are commonly known as “zero dollar returns.” Local tax authorities may have their own requirements.

Are there penalties for filing taxes late?

Whether you choose to offer STRs through a marketplace like Airbnb or Vrbo or directly to guests, you open the door to tax liability at the state and local level. As tax revenue is a major source of local funding, tax authorities are becoming more aggressive in their efforts to identify individuals and businesses violating tax laws. Failure to register with tax authorities and file lodging tax returns in New Mexico on time may result in late fees, interest payments, and in extreme cases, legal action.

I’ve been offering short-term rentals without paying lodging tax. What options do I have?

If you’re already operating an STR but not paying lodging taxes, you may be in violation of New Mexico tax laws. Take the time to review your legal responsibility (with a tax professional, if necessary) and understand the risk of continuing to not collect tax.

STR hosts in New Mexico may be able to take advantage of a managed audit. A managed audit offers an opportunity for hosts to proactively disclose prior period tax liabilities in accordance with a binding agreement with the New Mexico Taxation and Revenue Department. Managed audits are offered to encourage cooperation with state tax laws and may result in some or all penalty and interest payments being waived.

Are there options for outsourcing lodging tax filing?

Yes. Many STR operators in New Mexico file several state and local lodging tax returns every year. Filing solutions such as Avalara MyLodgeTax can relieve this burden.