New Mexico's tax system has one feature that sets it apart from almost every other state: the gross receipts tax (GRT). Instead of a traditional sales tax on goods, New Mexico taxes businesses on receipts from selling goods and most services, at combined rates of about 5% to 9%. Income taxes are moderate, with a flat 5.9% corporate rate and personal rates from 1.5% to 5.9%. LLC fees are among the lowest anywhere.
This guide covers New Mexico's business taxes for 2026, with worked examples and comparisons with its neighbors.
New Mexico business taxes at a glance
A New Mexico C corporation pays a flat 5.9% on profit and a $50 annual franchise tax. Pass-through owners pay graduated rates, with most business income in the 4.7% to 4.9% brackets and income above $210,000 taxed at 5.9%. Every business with New Mexico receipts, including consultants, lawyers and contractors, owes gross receipts tax on its sales and usually passes it on to customers. LLCs pay $50 to form and have no annual reports or fees afterward. The state's oil and gas revenue has allowed recent tax cuts, including the 2023 GRT rate reduction and the 2025 income tax changes.
Corporate income tax
| Item | 2026 |
|---|---|
| Corporate income tax rate | 5.9% flat |
| Franchise tax | $50 per year |
- Flat rate: A 2024 law eliminated the lower 4.8% bracket from the 2025 tax year.
- Apportionment: Single sales factor for most businesses, phased in from 2021.
- Combined reporting: Required for unitary corporations from 2025.
- Credits: High-wage jobs credit, technology jobs and research credit, film production credit and rural job credits.
- Returns: Form CIT-1 is due on the 15th day of the fourth month after year-end.
Gross receipts tax (GRT)
| Component | Rate |
|---|---|
| State GRT | 4.875% |
| County and municipal add-ons | About 0.25% to 4% |
| Combined rates | About 5.1% to 9.1% |
How the GRT differs from a typical sales tax:
- It's a tax on the seller. Businesses owe it on their receipts and may choose to pass it on to customers, which most do.
- It applies to services. Professional services, consulting, repairs, construction and most other services are subject to GRT.
- Destination sourcing: Since 2021, the rate depends on where the customer receives the goods or services, not where the seller is located.
- Deductions: Sales for resale, sales to governments and certain manufacturing inputs are deductible. Food at grocery stores and prescription drugs are deductible with the state reimbursing local governments.
- Remote sellers with more than $100,000 of New Mexico taxable receipts must register.
Personal income tax and pass-through owners
| Taxable income (single, 2026) | Rate |
|---|---|
| $0 to $5,500 | 1.5% |
| $5,500 to $16,500 | 3.2% |
| $16,500 to $33,500 | 4.3% |
| $33,500 to $66,500 | 4.7% |
| $66,500 to $210,000 | 4.9% |
| Over $210,000 | 5.9% |
- Capital gains deduction: The greater of $2,500 or 40% of gains from selling a New Mexico business, or $2,500 for other gains.
- LLC owners, partners and sole proprietors pay these rates on profit.
- S corporation shareholders pay on their share.
- PTE election: Partnerships and S corporations can elect to pay tax at the entity level.
Payroll and property taxes
- Unemployment insurance: Employers pay on a wage base above $30,000. New employers start at 1% or a rate based on industry.
- Workers' compensation fee: A small quarterly fee per employee.
- Paid sick leave: Required under the Healthy Workplaces Act.
- Property tax: Property is assessed at one-third of value, and effective rates are among the lowest in the country. Business personal property is taxed for some industries.
Forming a business in New Mexico: fees and ongoing costs
| Item | LLC | Corporation |
|---|---|---|
| Formation filing fee | $50 | $100 minimum |
| Annual report | None required | $25 (biennial report options exist for some) |
| Franchise tax | None | $50 per year |
| Registered agent | Required | Required |
Worked example: $500,000 of profit
| Step | Amount |
|---|---|
| Taxable income | $500,000 |
| New Mexico corporate tax at 5.9% | $29,500 |
| Federal tax at 21% on $470,500 | $98,805 |
| Total income tax | $128,305 (25.7%) |
The $50 franchise tax would be added. For a single LLC owner with $150,000 of New Mexico taxable income, state tax is about $6,808. At $75,000 it is about $3,133. Remember that the business also owes GRT on its receipts, usually collected from customers.
How New Mexico compares with its neighbors
New Mexico's income taxes are higher than all its neighbors' except at lower incomes. Its GRT rate is comparable to neighbors' sales taxes but applies to far more services, which matters most to professional service firms. Arizona has a similar transaction privilege tax but taxes fewer services.
Choosing an entity in New Mexico
- LLC: $50 to form and no annual reports; owners pay graduated rates up to 5.9%.
- S corporation: Same personal rates, plus federal payroll tax savings and a $25 report.
- C corporation: 5.9% plus 21% federally, plus the $50 franchise tax.
Doing business across New Mexico
New Mexico's population is concentrated in Albuquerque, Santa Fe, Las Cruces and the Rio Rancho area, while the southeastern Permian Basin is home to a large oil and gas industry. GRT rates vary widely across these locations, and because of destination sourcing, a business in Albuquerque that delivers to customers in Santa Fe must charge the Santa Fe rate. The state's national laboratories, Los Alamos and Sandia, support large technology and contracting sectors, and government contractors should note that most sales to the federal government are deductible from GRT.
Tax planning tips for New Mexico businesses
Pass GRT through clearly. Since GRT is legally a tax on the seller, be clear in contracts and invoices that the customer pays it. Otherwise you may have to absorb it.
Use nontaxable transaction certificates. Sales for resale and certain other sales are deductible only if you obtain a nontaxable transaction certificate (NTTC) from the buyer. Keep them on file.
Take advantage of the business sale deduction. Owners selling a New Mexico business can deduct 40% of the gain, which can save substantial tax compared with selling other investments.
Who pays the most in New Mexico
Professional service firms feel New Mexico's tax system most, because their fees are subject to GRT in addition to income tax. An accounting or consulting firm billing $1 million in Albuquerque collects close to $80,000 of GRT, which may make it less competitive than firms in Texas or Colorado that charge no sales tax on their services. Pass-through owners with income above $210,000 also pay the 5.9% top rate. Businesses that own property, by contrast, benefit from some of the lowest property taxes in the country.
Recent changes for 2025 and 2026
- Flat 5.9% corporate rate from 2025.
- New personal income tax brackets from 2025, lowering tax for most filers.
- Capital gains deduction changed to favor sales of New Mexico businesses.
- Combined reporting required from 2025.
- GRT rate at 4.875% after the 2023 cut.
Is New Mexico a good state for business?
Advantages
- Very low LLC fees and no annual reports
- Low property taxes
- Strong film, energy and technology incentives
- Federal laboratories and research institutions
Drawbacks
- Gross receipts tax on most services
- Higher income taxes than neighboring states
- Complex GRT rules with destination sourcing
- Smaller labor market and lower incomes
Compliance checklist
- File Articles of Organization or Incorporation with the Secretary of State.
- Register with the Taxation and Revenue Department for GRT, withholding and income tax.
- Register with the Department of Workforce Solutions if you hire.
- File GRT returns monthly, quarterly or semiannually.
- Pay the $50 franchise tax with the corporate return.
- File Form CIT-1, S-Corp or PTE each year.
Compare New Mexico with its neighbors below or estimate your taxes in the United States calculator. See LLC taxes for more.