Taxes

The State of New Mexico and the Albuquerque metro area have a favorable tax environment and aggressive incentives to promote the relocation and expansion of business.

Franchise Tax

Corporate Income Tax Brackets:

If Net Income Is: Tax Shall Be:
$500,000 or less 4.8% of net income
$500,000 to $1,000,000 $24,000 + 6.4% in excess of $500,000
Over $1,000,000 $56,000 + 7.6% in excess of $1,000,000

Note: Apportionment is a three-factor formula. However, manufacturers can calculate using a four-factor formula (double-weighted sales).

Corporate income taxes “piggyback” on federal taxable income using the three factor formula: property, payroll and sales in New Mexico calculated as a percentage of the corporation’s property, payroll and sales. A corporation may select one of three methods for reporting their state corporate income tax: separate corporate entity, combination of domestic unitary corporations or federal consolidated group.

Double Weighting the Sales Option: companies can elect to double weight the sales, in which a corporation takes the New Mexico portion of plant, payroll, sales and sales (counting the sales twice) and uses a divisor of four. Double weighting the sales benefits manufacturers who have a significant investment in plant and payroll in New Mexico but sell most of their product outside the state.

Gross Receipts Tax / Compensating Tax (Sales & Use Tax):

• New Mexico Compensating Tax: 5.125%
• Albuquerque Metro Area Gross Receipts Tax range: 6.0625% - 7.8125%
• City of Albuquerque Gross Receipts Tax rate: 7.0%

Instead of a sales tax, New Mexico imposes a Gross Receipts Tax, which is a tax imposed on persons engaged in business in the state. In almost every case the business passes along the tax to the consumer, so the tax resembles a sales tax. Sales and leases of goods and other tangible property are taxable. Sales and performances of services are also taxable in New Mexico. The compensating tax (use tax) applies to purchases made outside New Mexico.

Unemployment Compensation:

Employers must make quarterly unemployment compensation contributions. For newly located firms, the initial contribution is 2.0 percent of the employee’s Taxable Wage Base for the first four years. After the four-year period, each employer is given an experience rating, which can cause a rate to increase or decrease. The Taxable Wage Base for the year 2012 is $22,400.

Workers Compensation:

In New Mexico Workers’ Compensation is privatized; thus, employers can solicit Workers’ Compensation insurance from any company authorized to provide insurance in the state. According to a 2009 study conducted by Actuarial & Technical Solutions, New Mexico manufacturers’ average workers compensation costs were 7.3 percent lower than the national average. New Mexico ranked 21st lowest in costs among 45 states evaluated (five of the 50 states are self-insured and not rated).

Employers must make quarterly payments to the Workers’ Compensation Administration totaling $4.30; $2.30 must be paid by the employer and $2.00 withheld from the employee’s wages.

Property Tax

Unless otherwise expressly exempt, all tangible personal and real property located within New Mexico is subject to a tax on the assessed value of property. Property is assessed by each county at the rate of 1/3 percent of value.

Property Tax Formula:
Full Value of Property x 1/3 percent = Assessed Value
Assessed Value x Mill Levy Rate / 1,000 = Taxes Due

The mill levy rate is based on the location of the property. The current mill levy rate for non-residential property are

Inventory Tax

There is no inventory tax in New Mexico.