Changes to New Mexico Gross Receipts Tax Sourcing Laws for Filing Period Ending July 2021

Changes to New Mexico Gross Receipts Tax Sourcing Laws for Filing Period Ending July 2021

August 24, 2021

James Ortiz

Effective July 1, 2021 New Mexico has moved to destination-based sourcing from origin-based sourcing. For monthly gross receipts tax filers, gross receipts tax returns due August 25 will be the first gross receipts tax report using the new sourcing rules.

Under the new rules, most New Mexico-based businesses pay the gross receipts tax rate in effect where their goods or the products of their services are delivered. The so-called destination sourcing method was mandated by legislation adopted in 2019 and 2020. The 2019 legislation also allowed the state to begin taxing internet-based sales by out-of-state businesses.


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New Mexico retailers whose sales are wholly or primarily at their place of business will see little or no effect. However, if some of their sales are completed through deliveries, they will need to pay the rate in effect where the purchaser has them deliver the merchandise.

The rules for service providers are more complex because they depend on the type of service provided. General services, in person professional services, and tangible personal property (goods) change from origin to destination-based. Professional services that require an advanced degree or a license from the state to perform (when not in-person) remain origin-based. Construction services and real estate commissions remain destination-based.

The New Mexico Taxation and Revenue Department held a public hearing on August 10, 2021 to gather comments from interested persons on proposed changes to the New Mexico Administrative Code governing gross receipts tax on services.

The Council on State Taxation, in a letter to revenue secretary Stephanie Schardin Clarke, said New Mexico could reduce burdens on remote sellers by either joining the Streamlined Sales and Use Tax Agreement (SSUTA) efforts or by conforming to the sourcing rules established under the agreement. Such changes could be made through an active rulemaking project under the Gross Receipts and Compensating Tax Act, the business group said.

“New Mexico is an outlier in the imposition of its gross receipts tax and broad inclusion of sales of services, which creates unique complexities in the administration of this tax,†wrote Erica Kenney, COST’s West Coast tax counsel.

The final changes to the New Mexico Administrative Code, if adopted, will be filed on or about August 26, 2021.

For up-to-date guidance on all New Mexico legislative tax developments contact your state and local tax specialists at REDW. James Ortiz, REDW’s State and Local Tax Principal, and Luis Giron, REDW’s State and Local Tax Accountant, are ready to help provide up-to-date guidance on New Mexico tax developments.


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