Independent Contractors vs Employees

If you provide services for one or more businesses or organizations, you are considered either an employee or independent contractor.

You cannot be both for purposes of a single transaction. In New Mexico, pay received by independent contractors is subject to gross receipts tax unless a statutory exemption or deduction applies to a transaction.

Employee wages are exempt from gross receipts tax. We accept the determination of the Internal Revenue Service regarding your status as an independent contractor or an employee. The IRS offers the following criteria as general guidelines.

Criteria

You may be an employee if:

• income tax is withheld from your paycheck;
• you are covered by Worker’s Compensation;
• the business or organization that pays you also pays Social Security taxes and unemployment insurance for you;
• the business or organization considers you an employee, or
• the business or organization controls how a job is performed.

You may be an independent contractor if:

• you create your own schedule and hours;
• you are responsible for your own costs associated with the service provided. This includes the costs of your own vehicle, supplies or equipment;
• the business or organization gives you a Form 1099 rather than a Form W-2, or
• you have complete control over how you provide service to the business or organization that is paying you.