Avalara > Blog > Sales and Use Tax > New Mexico may change sales tax sourcing rules, tax marketplace and remote sales, and tax digital goods

New Mexico may change sales tax sourcing rules, tax marketplace and remote sales and digital goods


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Several significant sales tax* changes are currently under consideration in New Mexico. The Land of Enchantment is looking to change how sales are sourced in New Mexico, which would impact the rate of tax applied to each transaction. Legislators also hope to tax remote sales, hold marketplace facilitators liable for tax on all transactions made through the marketplace, and tax digital products.

Switch from origin sourcing to destination sourcing

Gross receipts tax in New Mexico is currently based on the location of the seller, not the location of the buyer. Consequently, any out-of-state businesses currently liable for New Mexico gross receipts tax are generally liable only for the state gross receipts tax, not local gross receipts taxes. For example, Amazon currently collects the 5.125 percent state gross receipts tax on its own sales in New Mexico, but it doesn’t collect any local gross receipts taxes.

Under the current policy, localities are missing out on a significant amount of gross receipts tax revenue. They’ll miss out on even more once the state starts taxing remote sales, unless the sourcing rules are changed as proposed in House Bill 579.

Effective January 1, 2020, HB 579 would source gross receipts and deductions to the location of delivery of the tangible personal property or service to the customer. For the leasing of vehicles, the reporting location would be the location where the customer first makes use of the vehicle, effective January 1, 2021.

Tax remote sales

Under current law, businesses with no business location or resident salesperson in New Mexico generally aren’t liable for gross receipts tax. In the event they are (e.g., if they lease property used in New Mexico), they’re liable only for the 5.125 percent state gross receipts tax, not local gross receipts taxes because of the sourcing rules described above.

Beginning July 1, 2019, persons who lack a physical presence in the state would be liable for the state gross receipts tax if they have economic nexus in the state — if in the previous calendar year they have at least $100,000 in total taxable gross receipts from sales, leases, and licenses of tangible personal property, services, and licenses for use of real property sourced to New Mexico.

Affected remote sellers would be liable for state and local gross receipts tax starting January 1, 2021, once the sourcing changes take effect.

The $100,000 threshold would apply to marketplace providers as well as direct sellers. Unlike many other states that have recently imposed a sales tax collection requirement on remote sellers, New Mexico doesn’t have a transaction threshold.

Hold marketplace providers liable for tax

Marketplace providers facilitate the sale, lease, or licensing of tangible personal property, services, or licenses for use of real property on behalf of marketplace sellers. They may also sell their own goods and services, etc., through the marketplace. Well-known marketplace providers or facilitators include Airbnb, Amazon, eBay, Etsy, and Walmart.

Under HB 579, the marketplace provider would be liable for the tax on receipts of all New Mexico sales starting July 1, 2019, “regardless of whether the marketplace sellers are engaging in business in the state.” The only exception is when a provider relies on erroneous information provided by the seller. In such cases, the seller would be liable for applicable taxes, plus penalties and interest charges.

Tax digital products

HB 579 defines “digital good” as “a digital product to be delivered electronically, including software, music, photography, video, reading material, an application, and a ringtone.” Think ebooks, Hulu and Netflix, and Pandora, among other products.

Digital products would be subject to New Mexico gross receipts tax effective July 1, 2019.

Will these changes come to pass?

There's no way to know for sure. Most states have already adopted a provision to tax at least some remote sales, and New Mexico has considered doing this in the past. In fact, the Legislature passed a remote sales tax measure in 2017, but it was vetoed by then Governor Susana Martinez.

That’s unlikely to happen this time around. When running for office, now Governor Michelle Lujan Grisham made it clear she would support legislation that helps level the playing field for local businesses, “taking away the unfair tax advantage online retailers currently have.”

Learn more about where you’re at risk for sales tax in this state-by-state guide to remote sales tax laws.

*A word about New Mexico sales tax. New Mexico doesn’t have a traditional sales tax. Instead, New Mexico imposes a gross receipts tax (GRT) on businesses for the privilege of doing business in the state. Businesses may pass the GRT on to consumers provided they separately state it on invoices, and they usually do. The GRT therefore feels like a sales tax to consumers, and it’s often referred to as a sales tax.


Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Avalara Author
Gail Cole
Avalara Author Gail Cole
Gail Cole began researching and writing about sales tax for Avalara in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.