What’s the Deal with New Mexico Sales Tax?
- Sales Tax
- March 15, 2016 | Laura McCamy
New Mexico doesn’t have a sales tax. It has a gross receipts tax, which is completely different -- except it gets added onto sales just like a sales tax. So you can be forgiven if you think there is New Mexico sales tax.
Like Hawaii, which imposes a General Excise Tax or GET instead of a sales tax, New Mexico imposes a tax on the gross receipts or “the total amount of money or other consideration received” from certain types of sales. Unlike Hawaii, New Mexico doesn’t impose an additional tax on gross receipts taxes sellers pass on to buyers.
New Mexico Sales Tax by Another Name
Sellers have the option to pass on New Mexico’s gross receipts tax to customers, just like a sales tax. Also like sales tax, the tax rate varies throughout the state, as various cities and counties add local taxes on top of the statewide base rate.
If you are an online seller with nexus in New Mexico, you won’t notice much difference between collecting and remitting the state’s gross receipts tax and collecting sales tax in any other state.
More Than a Sales Tax
New Mexico’s gross receipts tax is different from a sales tax, however, because gross receipts are not exactly the same as sales of tangible goods. While there is a great deal of overlap, more types of business income are covered by gross receipts tax than are subject to sales taxes in most states.
For example, in addition to sales of tangible goods, gross receipts taxes are due on income from commissions, garbage collection, property rentals, and sales of franchise licenses. Tickets to sporting events, concerts, and other types of entertainment are also taxable. And, last but not least, the grossest of gross receipts taxes: It’s added onto sewage services. Don’t even ask what that means.
There one huge difference between sales tax and gross receipts tax in New Mexico: While most services are not subject to sales tax in most states, services are covered under New Mexico’s gross receipts tax.
This means that if you hire a plumber in Albuquerque, you’ll pay tax not only on any parts you need but also on the plumber’s labor. Construction, legal fees, haircuts -- any service you can think of is subject to the gross receipts tax.
New Mexico Sales Tax Included
The gross receipts tax in New Mexico may not be obvious to buyers, especially of goods and services that aren’t usually subject to sales tax in other jurisdictions. This is because the state allows sellers and service providers to include the tax in their pricing and back it out at tax time (unlike Hawaii, which does not allow sellers to back out GET).
Even though New Mexico says it doesn’t have sales tax, online sellers should treat the gross receipts tax like any other sales tax. Like sales taxes, you will have to stay on top of the local tax rates and any changes in tax rates (New Mexico can change its gross receipts tax rate up to twice a year, in January and July). Sales tax software can help you manage your New Mexico gross receipts taxes so you stay in compliance with yet another state’s complex tax laws.