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.

The State of New Mexico recently approved a five year phased reduction of corporate income tax from the current top rate of 7.6%, starting in taxable year 2014. For taxable years beginning on or after January 1, 2018, the top rate will be 5.9%.

New Mexico offers an election to use a Single Sales Factor formula for apportioning corporate income tax, which can benefit multi-state companies with substantial out-of-state revenues. Under this method, a corporation’s taxable income is apportioned to New Mexico based solely on the percentage of its total sales within the state — rather than using a traditional three-factor mix of property, payroll, and sales."

This apportionment option is particularly attractive for businesses that:

• Produce goods or provide services in New Mexico but sell primarily outside the state, and

• Want a clearer, more predictable tax calculation tied directly to market activity.

In New Mexico, qualifying taxpayers — including certain manufacturers and headquarters operations — may elect to use the Single Sales Factor method when filing their corporate income tax returns. This can reduce taxable income apportioned to the state and align the tax burden more closely with where a company earns its revenue.

By shifting the focus to the sales factor alone, this policy removes the tax penalty on in-state investment in property and payroll, making New Mexico a more competitive location for growth-oriented operations.

• 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%
• Gross Receipts Tax Report

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.

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.