Determining Nexus
Establishing nexus means that your business has sufficient connection to or presence in New Mexico for the state to have taxing authority.
This connection might mean that you have a permanent presence in the state; for example, you may have a business location, resident employees, or property (tangible or intangible). The other type of connection may be a temporary presence in which you engage in regular and systematic solicitation of business. You or your employees or representatives conduct activities here to establish and maintain the business’s economic market, for example.
Determining Corporate Income Tax Nexus
Liability for New Mexico corporate income tax often depends on whether your corporation has nexus in New Mexico. Any corporation with income from the transaction of business in, into or from New Mexico or from property or employment in the state has nexus. This means that the business has enough presence for New Mexico to impose the corporate income tax. An example of “enough presence” is employees or representatives who conduct business activities in the state to establish and maintain the business’s economic market. The only exception is if the business’s activities are immune under federal Public Law (P.L.) 86-272. New Mexico follows the Multistate Tax Commission’s guidance on what are protected activities under P.L. 86-272, which can be found on their website.
Gross Receipts Tax Nexus
A person may perform research and development services outside New Mexico but then use the product of the service in New Mexico. In this case the person is subject to gross receipts tax if he or she has physical gross receipts tax nexus. Criteria sufficient to establish physical nexus in New Mexico include, but are not limited to, the following:
- having a business location in New Mexico;
- having property stored in New Mexico;
- employing any person in New Mexico;
- contracting with a salesperson or other agent in New Mexico;
- leasing equipment used in New Mexico;
- performing services in New Mexico;
- licensing the use of intangible property in New Mexico, or
- transporting property in New Mexico using the taxpayer’s vehicles.
Gross Receipts Tax Economic Nexus
A person has nexus with New Mexico when they are considered to be ‘engaging in business’ in the state. The definition of engaging in business is carrying on or causing to be carried on any activity with the purpose of direct or indirect benefit.
Beginning July 1, 2019, a person who lacks physical presence in New Mexico can have economic nexus. This includes marketplace providers. For someone who lacks physical presence, engaging in business means having in the previous calendar year total taxable gross receipts of at least one hundred thousand dollars ($100,000) from sales, leases, and licenses of tangle personal property, sales of licenses and sales of services and licenses for use of real property sourced to this state pursuant to Section 7-1-14 NMSA 1978.
Taxable gross receipts do not include those receipts that are eligible for an exemption or deduction. To find out more information on what is subject to gross receipts tax please see the FYI-105, Gross Receipts & Compensating Taxes – An Overview.
Links
FYI-350: Corporate Income Tax and Corporate Franchise Tax
FYI-105: Gross Receipts and Compensation Taxes – An Overview
FYI-270: Information on Research and Development