NEW MEXICO GROSS RECEIPTS TAX, PART 1: THE BASICS

NM GRT-Part 1

If you do business in New Mexico, you've run into Gross Receipts Tax (GRT) — but a lot of business owners don't fully understand how it actually works. Here's Part 1: the fundamentals.

It's Not a Sales Tax

GRT is imposed on the seller, not the buyer, even though it's usually passed on to the customer at checkout like a sales tax would be. The statewide base rate is 4.875%, but county and municipal add-ons stack on top. In Santa Fe, the combined rate is currently 8.1875%. Your actual rate depends on where the transaction is sourced, which is where things get interesting.

Location Matters — But Differently for Goods vs. Services

For tangible merchandise, New Mexico uses destination-based sourcing: the sale is taxed at the rate of the county or municipality where the item is delivered, not where your business is located.

Services work differently. Professional services — legal, accounting, tax prep, counseling, and similar — are generally sourced to the seller's location, not the buyer's. So a counselor based in Santa Fe providing an online therapy session to a client in Albuquerque still reports and pays GRT at the Santa Fe rate, because the service is remote and the seller's location controls. (The exception is in-person professional services performed somewhere other than the provider's own business location — those get sourced to where the service is actually delivered.)

Out-of-State Income Still Gets Reported

Here's a common point of confusion: if you perform a service for an out-of-state buyer, you still report those receipts on your GRT return — you don't just leave them off. What happens instead is you back them out as a deduction. Under NMSA 7-9-57, receipts from services sold to an out-of-state buyer are deductible, as long as the buyer doesn't take initial use or delivery of the finished product in New Mexico. Report it, then deduct it — not simply omit it.

NTTCs: The Key to Most Deductions

Most GRT deductions run through a Nontaxable Transaction Certificate (NTTC), a document your buyer provides certifying the transaction qualifies for a deduction. Common types include resale (Type 2), sales to nonprofits (Type 9), and sales to government entities (Type 6). Without a valid NTTC or acceptable alternative evidence — like a contract or invoice clearly showing the qualifying relationship — the deduction can be disallowed even if the underlying transaction would have qualified.

A Real Example: Instructors Working Through a Studio

One deduction we see often: an instructor who contracts with a gym or studio that resells their services to its own members. Under NMSA 7-9-48, receipts from a service sold for resale are deductible when the buyer (the studio) issues a Type 2 NTTC. The instructor still reports the income, then backs it out with the certificate on file — the same report-then-deduct pattern as the out-of-state rule above.

Part 2 will cover more deduction categories and where people most commonly get GRT wrong on their returns.

Please reach out if you have questions or need help with your CRS reporting.

CPA in Santa Fe, New Mexico

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