New Mexico offers a vibrant environment for business, with about 162,000 small businesses employing 54% of the state’s workforce. Whether you’re an established business owner or planning to start a new venture, understanding the tax landscape in New Mexico is crucial. This guide provides an overview of the various taxes small businesses in New Mexico must navigate, including tax rates, filing requirements, and deadlines.
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Types of Business Taxes in New Mexico
Business owners in New Mexico may be subject to various taxes depending on their business structure, activities, and revenue. Here’s a breakdown of the main types of taxes:
- Corporate Income Tax
- Applicable Entities: C corporations, S corporations, partnerships, and LLCs taxed as corporations at the federal level
- Tax Rate: 4.8% for net income below $500,000; for income over $500,000, $24,000 plus 5.9% of the excess over $500,000
- Filing Requirements: File Form CIT-1 or Form S-Corp-1 by the due date for federal tax returns.
- Estimated Payments: Required if liability exceeds $5,000. Payments are due quarterly by the 15th day of the fourth, sixth, ninth, and 12th months of the tax year.
- Pass-Through Entity (PTE) Tax
- Applicable Entities: S corporations, partnerships, LLCs taxed as partnerships
- Tax Rate: 5.9%
- Filing Requirements: File Form PTE or S-Corp by the due date for federal tax returns.
- Gross Receipts Tax
- Applicable Entities: Companies that sell physical products and certain taxable services
- Tax Rate: Varies throughout the state from 4.875% to 8.9375%
- Filing Requirements: File Form TRD-41413 monthly, quarterly, or semi-annually, as assigned, by the 25th day of the month following the end of the tax period.
- Wage Withholding Tax
- Applicable Entities: Employers with employees
- Tax Rate: 1.7%-5.9%
- Filing Requirements: File Form TRD-41414 monthly, quarterly, or semi-monthly, as assigned, by the 25th of the month following the end of the tax period being reported.
- Unemployment Insurance Tax
- Applicable Entities: Employers with employees
- Tax Rate: Varies based on business’s experience rating
- Wage Base: $31,700
- Filing Requirements: File quarterly reports online by the last day of the month after the end of the calendar quarter.
- Personal Property Tax:
- Applicable Entities: Businesses in certain industries
- Tax Rate: Based on property type and value
- Filing Requirements: File your annual property tax return by the last day of February of the tax year.
- Nonresident Withholding Tax
- Applicable Entities: Pass-through entities with nonresident members
- Tax Rate: 5.9% on distributive share income
- Filing Requirements: Report and pay with annual tax return.
- Franchise Tax
- Applicable Entities: C corps, S corps
- Tax Rate: $50
- Filing Requirements: File Form CIT-1 or Form S-Corp-1 by the due date for federal tax returns.
How to File and Pay New Mexico Business Taxes
Business taxes in New Mexico can be filed and paid through various methods:
- Online Filing and Payment: Use New Mexico’s Taxpayer Access Point (TAP) for electronic submissions and payments.
- Mail: Send forms and payments to the address on the form (where allowed).
Important Deadlines
Keep track of these key dates to avoid penalties:
- Corporate Income Tax Returns: Due by the due date for federal tax returns.
- Estimated Tax Payments: Due quarterly by the 15th day of the fourth, sixth, ninth, and 12th months of the tax year.
- Gross Receipts Tax Returns: Due monthly, quarterly, or semi-annually, as assigned, by the 25th day of the month following the end of the tax period.
- Withholding Tax Returns: Due monthly, quarterly, or semi-annually, as assigned, by the 25th day of the month following the end of the tax period.
- Unemployment Insurance Reports: Due quarterly by the last day of the month after the end of the calendar quarter.
- Franchise Tax Returns: Due by the due date for federal tax returns.
Tax Credits and Incentives
New Mexico offers several tax credits and incentives for small businesses, including:
- High Wage Jobs Tax Credit: A tax credit for urban and rural employers, equal to 8.5% of wages and benefits for eligible new jobs, up to $12,750 per new job. This can be claimed for each new high-wage job performed for the year the job was created and for three consecutive qualifying periods.
- Investment Credit: A 5.125% credit for qualifying equipment purchased or brought into the state in connection with a manufacturing operation. This includes an employment requirement based on the investment amount.
- Research and Development Tax Credit: Available to businesses conducting qualified research at a qualified facility qualified in the state. The amount ranges from 5%-10% of qualified expenditures up to $5 million.
New Mexico’s business tax breakdown by business type
Business taxes can get complicated, so below, we’ve included a chart that breaks down the taxes different business structures usually pay.
Keep in mind that pass-through entities don’t pay federal income taxes themselves—the obligation is passed on to their business owners or shareholders, who pay them through their personal income tax returns.
| Business type | Personal income tax | PTET | Corporate income tax | Gross receipts tax | Withholding tax | Unemployment tax | Federal income taxes |
| C corporation | No | No | Yes | Yes, if applicable | Yes, if you hire employees | Yes, if you hire employees | Yes |
| S corporation | Yes (pass-through), if not making the PTET election | Yes | Yes | Yes, if applicable | Yes, if you hire employees | Yes, if you hire employees | Yes (pass-through) |
| LLC | Yes (pass-through), if not making the PTET election | Depends on how it’s structured | Depends on how it’s structured | Yes, if applicable | Yes, if you hire employees | Yes, if you hire employees | Depends on how it’s structured |
| Partnership | Yes (pass-through), if not making the PTET election | Yes | No | Yes, if applicable | Yes, if you hire employees | Yes, if you hire employees | No |
| Sole proprietorship | Yes (pass-through) | No | No | Yes, if applicable | Yes, if you hire employees | Yes, if you hire employees | Yes, by way of individual income tax |
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New Mexico Small Business Taxes: The Employer’s 2023 Guide
Although New Mexico originally captured the hearts and minds of the nation with its breathtaking landscapes, today, the Land of Enchantment also draws aspiring business owners with its welcoming business climate. With a lower-than-average cost of living and high startup survival rate, it’s little wonder that 83% of entrepreneurs in the state started a business out of choice rather than necessity.
So, if you’re thinking about starting a business of your own in New Mexico, here’s what you should know about the state’s small business taxes:
What business taxes do you pay in New Mexico?
Most prospective entrepreneurs expect to pay taxes of some sort when they start a business in New Mexico—and the truth is, there are a lot of them. Between income taxes, franchise taxes, gross receipts taxes, employer taxes, and more, it’s easy to miss something if you’re not careful.
But that’s where we come in. In the following sections, you’ll learn more about the taxes most business owners can expect to pay, including which businesses they apply to, what tax rates to expect, and how to file your tax returns.
New Mexico personal income tax
Pass-through entities—like sole proprietorships, partnerships, and limited liability companies (LLCs)—typically aren’t taxed on the entity level in New Mexico. Instead, their income taxes are passed on to their owners, who pay taxes on their share of the business profits on their personal tax returns at the standard income tax rates.
In 2023, New Mexico levies a graduated individual income tax ranging from 1.7% to 5.9% of a taxpayer’s income.
How to file and pay
Personal income tax returns (Form PIT-1) can be filed online via the Taxpayer Access Point (TAP) system or by mail.
Note that the tax filing deadline for state income tax returns depends on several factors, including your filing and payment method. For further information, consult the personal tax return instructions. If you prefer to file a paper return, send your tax form to the appropriate address listed in the instruction booklet.
Taxpayers with an income tax liability of $1,000 or more must make quarterly estimated tax payments by April 15, June 15, September 15, and January 15. Payments can be made via TAP or sent by mail (along with payment voucher Form PIT-ES) to the following address:
Taxation and Revenue Department
P.O. Box 8390
Santa Fe, NM 87504-8390
For more information on the New Mexico individual income tax, visit the state’s Taxation and Revenue Department (TRD) website.
New Mexico pass-through entity reporting
Partnerships, S corporations, and LLCs taxed as a partnership or S corporation are required to file separate returns in addition to the ones their owners file. Businesses use these returns to report income—including non-resident income—as New Mexico levies a 5.9% tax against each non-resident’s share of net income from the business.
Recently, the state has also allowed these pass-through entities to be taxed at the entity level (instead of passing their income tax obligations on to their owners) if they make a pass-through entity election. Businesses that take this election pay a 5.9% income tax.
How to file and pay
New Mexico’s partnership returns (Form PTE) and S corporation returns (Form S-Corp), as well as any non-resident income tax payments, are due the same day as the federal returns. Tax returns and payments can be submitted electronically via TAP.
Pass-through entities must also file another tax form, Form PTW-D, via TAP. Businesses that want to be taxed on the entity level can make the pass-through entity election by checking “Entity Level Tax” under Section D of this form.
Learn more about the New Mexico pass-through entity reporting guidelines by visiting the TRD website.
New Mexico corporate income tax
All corporations in New Mexico are charged a corporate income tax for doing business in the state.
New Mexico’s corporate income tax rate in 2023 is 4.8% of a business’s net income below $500,000. Income over $500,000 is taxed at a 5.9% rate plus an additional $24,000 fee.
How to file and pay
New Mexico corporate tax returns (Form CIT-1) are due by the 15th day of the fourth month following the end of the fiscal year. If your business follows the calendar year, your due date is April 15. Corporate returns can be filed via TAP or an authorized third-party software provider.
Corporations that expect their annual tax liability to exceed $5,000 must pay quarterly estimated taxes by the 15th day of the fourth, sixth, ninth, and 12th months of the fiscal year. These taxes can be paid online or submitted by mail (along with payment voucher CIT-ES) to the address below:
NM Taxation & Revenue Department
P.O. Box 25127
Santa Fe, NM 87504-5127
Find out more about New Mexico’s corporate income tax by visiting the TRD website or reading this corporate income tax guide.
Franchise tax
New Mexico also assesses a $50 annual franchise tax on C corporations and S corporations for the privilege of doing business within the state, even if they’re not actively engaged in business during that tax year.
How to file and pay
Corporate franchise taxes are reported using the same form as the corporate tax return (Form CIT-1 or Form S-Corp), so they share the same deadline and filing guidelines as well.
Gross receipts tax
Rather than the typical sales tax imposed by many other states, New Mexico levies a gross receipts tax (GRT) on businesses operating in the state instead. Companies that sell physical products and certain taxable services collect this tax from customers at the point of purchase and send it to the New Mexico Taxation and Revenue Department.
A business’s gross receipts tax rate depends on its location within the state, but 2023 rates range from 5% to 9.3125%.
If you’re unsure whether your business is required to collect the New Mexico GRT, talk to your tax professional or contact the TRD.
How to file and pay
Before you can collect gross receipts tax, you must register with the TRD. You can do this online through the TAP system or by mailing a completed Form ACD-31015 to the address below:
Taxation and Revenue Department
Attn: Compliance Registration Unit
PO Box 8485
Albuquerque, NM 87198-8485
Then you’ll be assigned a monthly, quarterly, or semi-annual filing frequency. A complete list of due dates can be found in the GRT tax return instructions, but returns are typically due by the 25th of the month following the end of the tax period. File your returns and make any tax payments via TAP or mail Form TRD-41413 to the following address:
Taxation and Revenue Department
PO Box 25128
Santa Fe, NM 87504-5128
The TRD encourages all businesses to file their returns via the TAP system, but those with an average monthly GRT tax liability of $1,000 or more must file electronically.
Get more information on the New Mexico gross receipts tax by visiting the TRD website or reading the TRD’s tax guide.
Withholding tax
Businesses with employees that reside or perform work in New Mexico are required to withhold taxes from those employees’ wages and pay them to the Taxation and Revenue Department. These taxes are typically known as withholding taxes or employment taxes, but in New Mexico, they’re called wage withholding taxes.
The withholding tax rate for each employee is different because it’s determined in part by their income and the allowances they take, but in 2023 the tax rates range from 1.7% to 5.9% of an employee’s wages. Use the state’s withholding tables to determine how much income to withhold from each employee’s paycheck.
How to file and pay
Before you can file withholding taxes, you must register your business via TAP (if you haven’t done so already).
Once registered, you’ll be assigned a monthly, quarterly, or semi-annual filing frequency depending on your estimated tax liability. You can find a complete list of filing frequency deadlines in the wage withholding tax return instructions booklet, but generally, withholding tax returns (Form TRD-41414) are due on TAP by the 25th of the month after the end of the tax period.
Employers must also file an annual withholding statement, along with copies of all employee information returns, with the TRD by January 31. Details on how to file these tax forms can be found in the TRD income and withholding tax guide.
Visit the TRD website to learn more about the New Mexico wage withholding tax.
Unemployment insurance tax
New Mexico employers also pay state unemployment insurance taxes, which cover unemployment benefits for any eligible workers who leave the company.
In 2023, new employers (those contributing to the unemployment insurance program for under two years) pay a UI tax ranging from 1% to 1.12% of the first $30,100 of each employee’s wages. Employers with two or more years of experience are assigned a new rate based on several factors, including the employer’s claims experience and payroll.
The New Mexico Department of Workforce Solutions (DWS) provides a formula for calculating an experienced employer’s tax rate, as well as examples, on the DWS website.
How to file and pay
To pay state unemployment taxes, first, you’ll need to register your business with the DWS UI tax self-service system. You’ll use this same system to file wage reports and pay your taxes quarterly.
All reports and tax payments must be submitted by the last day of the month after the end of the calendar quarter. The DWS mandates that reports must be filed even when there are no wages to report for the tax period.
Find more information about the New Mexico unemployment tax on the DWS website or in the unemployment insurance employer handbook.
Other industry-related and local taxes
In addition to the state tax authorities, many local governments in New Mexico levy their own taxes on businesses within their jurisdiction. For example, because the state sets the maximum local GRT tax rate at 3.813%, the average combined state and local tax rate is 7.72%.
The state of New Mexico also imposes a series of taxes on certain industries, products, services, and business activities. Some of these taxes include:
- Bingo and Raffle Tax
- Fuel Surcharge Tax
- Cigarette Tax
- Cannabis Excise Tax
- Alcohol Excise Taxes
- Gaming Tax
- Oil, Natural Gas, and Mineral Extraction Taxes
- Motor Vehicle Excise Tax
Because these taxes are assessed based on factors like the nature and location of your business, you’ll want to talk with your tax advisor or accountant to determine which ones you’re responsible for.
New Mexico business tax breakdown by business type
To help you keep track of your state tax obligations, below, we’ve included a breakdown of the different taxes each business entity type typically pays in New Mexico.
Keep in mind that pass-through entities don’t pay federal income taxes at the entity level either—their taxes are passed on to their owners, who pay them on their personal tax returns.
| Business type | Personal income tax | Pass-through entity reporting | Corporate income tax | Franchise tax | Gross receipts tax | Withholding tax | Unemployment tax | Federal income taxes |
| C corporation | No | No | Yes | Yes | Yes, if applicable | Yes, if you hire employees | Yes, if you hire employees | Yes |
| S corporation | Yes | Yes | Yes | Yes | Yes, if applicable | Yes, if you hire employees | Yes, if you hire employees | Yes (pass-through) |
| LLC | Yes | Depends on your business structure | Depends on your business structure | Depends if it’s taxed as a corporation | Yes, if applicable | Yes, if you hire employees | Yes, if you hire employees | Yes (pass-through) |
| Partnership | Yes | Yes | No | No | Yes, if applicable | Yes, if you hire employees | Yes, if you hire employees | Yes (pass-through) |
| Sole proprietorship | Yes | No | No | No | Yes, if applicable | Yes, if you hire employees | Yes, if you hire employees | Yes, by way of individual income tax |
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