Tax Information/Policy Office ¨ P.O. Box 630 ¨ Santa Fe, New Mexico 87504-0630

Introduction

Department Registration

Requirements for Corporations

How To Obtain a CRS Identification Number

The CRS-1 Filer's Kit

Checklist of Other Registration Requirements

Overview of Business Taxes

Other Taxes and Fees

Business Credits

Special Situations

Special Payment Methods

Electronic Filing

Account Notices

Successor in Business

Department Resources

Local Tax Offices

Workshops

Taxpayer Information

For Further Assistance

— INTRODUCTION —

— DEPARTMENT REGISTRATION —

— CHECKLIST OF OTHER REGISTRATION REQUIREMENTS —

The following are summaries of business-related taxes administered by the New Mexico Taxation and Revenue Department. This is not intended to be an exhaustive description, and exemptions and deductions are not included.

Please note that tax rates and requirements may change at various times throughout the year due to legislation. Taxpayers should review the applicable tax statutes for complete information on taxes and the Legislative Summary included in the July-December CRS-1 Filer's Kit.

For detailed information about how taxes are applied, rates, and filing requirements, taxpayers should refer to the July-December CRS-1 Filer's Kit, the current Oil and Gas Filer's Kit, or contact a local tax office for more information (see For Further Assistance).

Gross Receipts Tax is imposed on the gross receipts of people who sell property in New Mexico, perform services in New Mexico, lease property used in New Mexico, or sell research and development services performed outside New Mexico, the product of which is initially used in New Mexico. State and local governments that sell gas, electricity and cable television services are also liable for the gross receipts tax.

Compensating Tax is imposed on persons using tangible property in New Mexico on which gross receipts tax, sales or similar tax has not been paid to New Mexico or any other state.

Withholding Tax is similar to federal Withholding Tax. Resident and nonresident employers who control wages paid for employees working in New Mexico and withhold a portion of wages for federal income tax purposes must withhold and pay New Mexico personal income taxes from employees' wages. Employers who are transportation companies who have employees who are residents of New Mexico must also withhold for New Mexico even though the employee may not be working in New Mexico. Withholding Tax applies to residents and nonresidents, except that employers are not required to withhold tax on wages paid to nonresidents who work in New Mexico for 15 or fewer days per year. Also a special withholding tax applies to pass-through entities operating in New Mexico who have nonresident owners.

Governmental Gross Receipts Tax is imposed on certain receipts of state and local governments, including admissions to recreational, athletic or entertainment events; sales of sewer and refuse collection services; water and tangible personal property.

Leased Vehicle Gross Receipts Tax and Surcharge applies to all leases of passenger automobiles when the lease is for a term of six months or less; the vehicle is part of a fleet of five or more leased vehicles; the vehicle is a passenger automobile that will accommodate six or fewer adults; and the lessor acquired the vehicle on or after July 1, 1991. This tax and surcharge is imposed in addition to "regular" Gross Receipts Tax.

Interstate Telecommunications Gross Receipts Tax is imposed on receipts from providing interstate telecommunications services that originate or terminate in New Mexico and that are charged to a telephone number or account in New Mexico, regardless of where the bill for the services is actually delivered. This tax is imposed instead of "regular" Gross Receipts Tax.

Corporate Income Tax is imposed on the net income of every domestic corporation and on the income of foreign corporations from engaging in business in New Mexico. Insurance companies which pay the New Mexico premium tax are not subject to Corporate Income Tax.

Corporate Franchise Tax is imposed on every domestic and foreign corporation doing business in the state, and on every corporation, whether engaged in active business or not, which has or exercises a corporate franchise in the state. Note: A corporation may owe this tax even if it is exempt from Corporate Income Tax.

Workers' Compensation Assessment Fee is imposed on every employee and employer who is required or elects to be covered by the Workers' Compensation Act. Payment of this fee is in addition to the requirement to obtain a worker’s compensation insurance policy, which is private insurance obtained from an insurance company.

Property Tax is imposed on all real and tangible personal property located in New Mexico. Property includes residential or nonresidential properties, personal property, livestock, and manufactured homes. Except for property that is subject to a special method of valuation, only personal property that is depreciated for federal income tax purposes and owned by a business is subject to property tax. Personal property includes movable items that are not part of the real estate. Tangible personal property held by a business includes machinery, tools, furniture, fixtures, equipment, and supplies. Automobiles and inventories are exempt from personal property tax.

Natural Gas Processors Tax is a privilege tax on the processing of natural gas. Every operator of a natural gas processing plant is liable for this tax.

Oil & Gas Production Equipment Ad Valorem Tax is levied on the assessed value of equipment used at each production unit, in lieu of Property Tax on that equipment.

Oil & Gas Severance Tax applies to all natural gas, oil and other liquid hydrocarbons, and carbon dioxide severed from the soil and sold.

Oil & Gas Conservation Tax is levied on the sale of all natural gas, oil and other liquid hydrocarbons, carbon dioxide, uranium, coal, and geothermal energy severed.

Oil & Gas Emergency School Tax is imposed as a privilege tax on the business of every person severing natural gas, oil and other liquid hydrocarbons, and carbon dioxide in New Mexico.

Oil & Gas Ad Valorem Production Tax is levied on the sale of all natural gas, oil and other liquid hydrocarbons, and carbon dioxide produced in the state.

Cigarette Tax is levied on each cigarette sold, given, or consumed in the state.

Tobacco Products Tax is levied on the value of tobacco products (besides cigarettes) sold, shipped, or given to a person in the state and is imposed on the first purchase of the products.

Liquor Excise Tax is imposed on any wholesaler who sells alcoholic beverages on which this tax has not already been paid. A Local Liquor Excise Tax, collected by the Taxation and Revenue Department, is imposed on wholesale purchases in certain counties.

Gasoline Tax is imposed on distributors or wholesalers for the privilege of receiving gasoline in this state.

Special Fuel Supplier Excise Tax is imposed on distributors and wholesalers of special fuel (diesel, kerosene) used in vehicles registered to travel on the highway. Fuel users must file quarterly reports.

Alternative Fuel Tax is imposed on distributors of alternative fuel (LPG, CNG, LNG and A55). Annual permits are available for vehicles powered by alternative fuel.

Petroleum Products Loading Fee is levied on distributors of petroleum products, whether gasoline or special fuel.

Water Conservation Fee is imposed on operators of public water supply systems who regularly service, on average, at least 25 individuals for 60 days a year or whose systems have 15 service connections.

Weight-Distance Tax is imposed on motor vehicles that travel the state’s highways when the motor vehicle has a declared gross vehicle weight of more than 26,000 pounds.

Trip Tax is imposed in lieu of vehicle registration fees, annual permits and requirements, and weight-distance taxes on commercial motor carrier vehicles owned or operated by companies based outside New Mexico and not registered in New Mexico.

Railroad Car Company Tax (Private Car Tax) is imposed in lieu of property tax on the gross earnings from the use or operation of private railroad cars in New Mexico by organizations that own private railroad cars.

The following taxes are not administered by the Taxation and Revenue Department. Please refer to the previous section, Checklist of Other Registration Requirements, for contact information. The responsible agency is named in parentheses.

Lodger's Tax, also known as Occupancy Tax or Room Tax (municipality or county)

Insurance premium taxes and fees (Public Regulation Commission)

Pari-mutuel Tax (Racing Commission)

Unemployment Insurance Tax (New Mexico Department of Labor)

Utility Franchise Tax (municipality)

Business or professional licenses (Regulation and Licensing Department)

Corporation registration and reporting (Public Regulation Commission)

The following are summaries of business-related credits administered by the New Mexico Taxation and Revenue Department. This is not intended to be an exhaustive description. For more information, refer to the July-December CRS-1 Filer's Kit or contact a local tax office.

Investment Credit. Taxpayers who incorporate qualified equipment into a New Mexico manufacturing operation and meet a sliding-scale job creation requirement may claim credit against Gross Receipts Tax, Compensating Tax, or Withholding Tax due.

Compensating Tax on Construction Projects Credit. A person in the construction business who owes Gross Receipts Tax on the sale of a construction project may take a credit against the Gross Receipts Tax due for compensating taxes paid on the construction project.

Corporate Child Care Credit. May be taken against certain child care services provided by or paid for by a corporation for its employees' children.

Cultural Property Preservation Credit. May be taken against Corporate Income Tax (and Personal Income Tax) for restoring, rehabilitating, or renovating properties listed on the New Mexico Register of Cultural Properties. The project must be approved, in advance and at completion by the cultural properties review committee.

Qualified Business Facility Rehabilitation Credit. May be taken against Corporate Income Tax (or Personal Income Tax) for the restoration, rehabilitation, or renovation of a qualified business facility in an enterprise zone. A qualified business facility is a building that has been vacant for at least 24 months and will be put into use by a person in the manufacturing, distribution, or service industries. Advance approval of the project is required.

Taxes Paid to Another State Credit. There are two credits available. The first is a credit that essentially ensures that New Mexico Compensating Tax is not paid on tangible personal property for which similar tax has already been paid to another state. The second credit ensures that New Mexico Gross Receipts Tax is not paid on research and development services, performed outside New Mexico where the product of the service is initially used in New Mexico for which a sales or similar tax has already been paid to another state.

Following are brief discussions of situations that may apply to your business. For more information about these subjects, please contact any local tax office (see For Further Assistance at the end of this FYI).

—— SPECIAL PAYMENT METHODS ——

If your combined tax liability for the taxes listed below averaged $25,000 or more per month for the previous calendar year, regardless of the tax due for the current month, you are required to pay your tax due using one of the Department's special payment methods, including electronic transfer. The taxes involved are:

Gross Receipts Tax Leased Vehicle Gross Receipts Tax

Compensating Tax Interstate Telecommunications Gross Receipts Tax

Withholding Tax Natural Gas Processors Tax

Oil and Gas Taxes

If you are a "special payment" taxpayer, request the publication FYI-401: SPECIAL PAYMENT METHODS from any local tax office. If your average tax liability is less than $25,000 per month, you may choose to use special payment methods, but you are not required to do so.

—— ELECTRONIC FILING ——

ONGARD taxes can be filed electronically. The benefits of electronic filing are many, including the elimination of postage and paper handling costs. Electronic filers receive electronic acknowledgment from the Department that their returns have been received. Through electronic filing, the tax filing burden of large, multi-location filers can be dramatically reduced. The integration of tax preparation software with computer-based accounting programs can further allow taxpayers to eliminate the manual preparation of paper tax forms. (ONGARD taxes and annual Withholding Tax reconciliations may also be filed on magnetic tape.)

At some point during your relationship with the Taxation and Revenue Department, you may receive account notices from the Department. Notices that the Department sends include assessments, provisional assessments, bills, non-filer notices, and notifications of overpayment or credit. More information about the different kinds of account notices are in the July-December CRS-1 Filer's Kit and the current Oil and Gas Tax Filer's Kit.

It is possible you will receive more than one account notice, or continue to receive account notices even after you have provided the payment or information requested. Many of the Department's notices are computer-generated and sent out automatically, so it's possible your payment (or other information requested) and the Department's notices have "crossed" in the mail. Sometimes by the time payments are received and entered into the system, it's too late to prevent the next round of computer-generated letters from going out.

The Department is continually working to improve computer systems, so your patience is appreciated.

If you receive an account notice, do not ignore it. Call the phone number provided on the notice or your local tax office if you have any questions about what the notice means.

If you disagree with the information provided in the account notice, there are informal and formal steps you may need to take to resolve your differences with the Department. You may wish to request one or both of these publications: FYI-400: TAX AUDITS AND PROTEST PROCEDURES and FYI-402: TAXPAYER REMEDIES. They are available from any local tax office.

To protect itself, the purchaser of an existing business should complete a Tax Clearance Request (ACD-31096 which requires Adobe Acrobat for download) and submit it to the Department. Without a tax clearance, the purchaser may also buy unpaid tax obligations of the seller. After submission of the request, the Department then has thirty days to issue the requested clearance, notify the purchaser of any tax liability, or begin an audit to determine the amount of tax due. Once an audit has begun, the Department has sixty days to issue the clearance or determine the amount of tax due. If the Department fails to meet these time constraints, the purchaser will be released from any tax obligation as a successor in business.

If there is a tax liability and the purchase of the business is not final, a portion of the purchase price should be withheld to cover the tax liability. If the purchase of the business is complete and there is a tax liability, the purchaser becomes the party liable for the tax. For more information on Successor In Business contact the Support Office at (505) 827-0926.

The New Mexico Taxation and Revenue Department offers a variety of resources that may be useful in conducting your business.

Full-service tax offices are located throughout the state. Employees in these offices can answer your questions and provide you with tax forms and additional information. You may take advantage of any local tax office regardless of which office you normally use or where you mail in tax forms. Please see local tax offices.

Free CRS-1 Taxpayer Workshops are presented throughout the year by local tax offices. In these workshops, Department specialists discuss and answer your questions about Gross Receipts Tax, Compensating Tax, Withholding Tax, exemptions and deductions, how to file and pay CRS taxes, and more. For more information on these free workshops, please contact any local tax office.

The Department offers an Annual Tax Workshop series each May and June, presented by the Department's Tax Information and Policy Office and the Anderson Schools of Management, UNM. Separate workshops are held on Gross Receipts, Non-profit issues and Construction issues. Fees range from $50 to $85. ALL PRICES ARE SUBJECT TO CHANGE. All workshop attendees receive a Department regulation book and other pertinent materials. For more information on these workshops, please contact the Tax Information and Policy Office at (505) 827-0908, (505) 827-0928 or (505) 827-2523.

In September 1999, the Tax Information and Policy Office offered the first Income Tax Seminars for Practitioners. The Department plans to offer these seminars every year around the same time. Topics covered include income tax legislative and regulation changes, current court issues and an overview of the income tax forms for the upcoming tax season. Because these seminars are new to the Department, a fee for them has not yet been determined. For more information on these seminars, please contact the Tax Information and Policy Office at (505) 827-0908, (505) 827-0928 or (505) 827-2523.

The Department offers a variety of taxpayer information. Some information is free and other information must be purchased.

General Information. FYIs and Bulletins present general information with a minimum of technical language. All FYIs and Bulletins are free and available through all local tax offices, the Tax Information and Policy Office and on the Internet. The Taxation and Revenue Department’s Internet address is:

Regulations. The Department promulgates regulations to interpret and exemplify the various tax acts administered by the Department. The Taxation and Revenue Department regulation book is available for $45.00, prepaid. The order form is available at all local tax offices, through the Tax Information and Policy Office and on the Department’s web page. Specific regulations are also available at the State Records Center.

Rulings. Rulings signed by the Department Secretary and approved by the Attorney General are written statements that apply to one or a small number of taxpayers. A taxpayer may request a ruling (at no charge) to clarify its tax liability or responsibility under specific circumstances. The request for a ruling must be in writing, include accurate taxpayer identification and the details about the taxpayer’s situation, and be addressed to the Secretary of the Taxation and Revenue Department. The taxpayer’s representative, such as an accountant or attorney, may request a ruling on behalf of the taxpayer but must disclose the name of the taxpayer. While the Department is not required to issue a ruling when requested to do so, the Department carefully considers every request. The Department will not issue a ruling to a taxpayer who is undergoing an audit, who has an outstanding assessment, or who is involved in a protest or litigation with the Department over the subject matter of the request. All rulings issued by the department are compiled and available on the Department’s web page or on diskette for $25.00, prepaid. The order form to receive the rulings on diskette is available at all local tax offices, through the Tax Information and Policy Office and on the Department’s web page.

Local tax offices can provide full service and information about the Department's taxes, programs, and forms as well as specific information about your filing situation.  Main switchboard (Santa Fe): 827-0700