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After you start a New Mexico LLC, there are two main types of ongoing filings. The first is the Annual Report with the state, and the other is taxes.
Paying taxes is an important part of running a business, but figuring out which taxes you need to pay can be a pain.
This lesson will provide you with general resources and the basics of New Mexico LLC tax filing requirements.
What taxes does a Limited Liability Company pay in New Mexico?
Each LLC has a different tax situation, so the taxes paid for a New Mexico LLC varies.
The amount of taxes owed for your LLC depends on rules like:
- how your LLC is taxed
- state and local tax rules
- any sales and use tax requirements, or
- whether you have employees
Additionally, some business types are required to register for industry-specific taxes.
Pro Tip: We recommend hiring an accountant to ensure your LLC meets all of its tax obligations.
We also recommend getting an EIN Number for your LLC. An EIN is also called a Federal Tax Identification Number. They mean the same thing.
Not only will an EIN number be used to open an LLC bank account, but it will also be used for filing taxes with the local, state, and federal governments.
LLC pass-through taxation (Who pays the taxes?)
By default, LLCs don’t pay taxes.
Instead, the LLC Members are responsible for reporting the income (or losses) on their personal 1040 tax return. The Members pay taxes on any LLC profits. This is because of LLC pass-through taxation.
Simply put, pass-through taxation means the responsibility for reporting tax information from an LLC “passes through” the LLC to the LLC Members.
How are LLCs taxed in New Mexico?
By default, a New Mexico LLC is taxed by the Internal Revenue Service (IRS) based on the number of Members the LLC has. Then the New Mexico Taxation & Revenue Department honors this and taxes your LLC the same way at the state level.
An LLC with 1 owner (Single-Member LLC) is taxed like a Sole Proprietorship.
An LLC with 2 or more owners (Multi-Member LLC) is taxed like a Partnership.
The above are referred to as the “default status“. Meaning, they are automatically applied based on the number of LLC Members.
Alternatively, you have the option of requesting an “elective status” for your LLC. This is done by filing an extra form with the IRS. Once granted, this elective status means the IRS will treat your LLC as a Corporation (either an S-Corporation or C-Corporation) for tax purposes.
Note: Your New Mexico LLC Operating Agreement should also include information about how your LLC is taxed.
Federal Income Taxes
There are several different options for how the IRS can treat your LLC for tax purposes.
Single-Member LLC taxes (default status)
The IRS treats all Single-Member LLCs as Disregarded Entities for tax purposes. This just means that the IRS doesn’t expect the LLC to file its own federal income tax return.
Instead, the owner of the Single-Member LLC files the return (and pays the federal income taxes).
How the LLC pays federal income tax is determined by who owns the LLC:
- If the LLC is owned by an individual, the LLC is taxed like a Sole Proprietorship.
- If the LLC is owned by another company, the LLC is taxed as a branch/division of the parent company.
Multi-Member LLC taxes (default status)
If an LLC has two or more owners, the LLC is taxed like a Partnership.
The LLC needs to file a 1065 Partnership Return and issue a Schedule K-1 to the LLC owners.
The K-1s report each owner’s distributive share of profits. And the K-1 income “flows through” to the owners. The income taxes are then paid by each owner on their personal income tax return (Form 1040).
Husband and Wife LLC taxes
In community property states like New Mexico, a husband and wife LLC has the option to file taxes as a Single-Member LLC (aka Qualified Joint Venture) instead of a Multi-Member LLC.
On your EIN Application, you can choose to have your husband and wife New Mexico LLC taxed as a Qualified Joint Venture. If you already have an EIN for your LLC, you can send a letter to the IRS requesting that your LLC be taxed as a Qualified Joint Venture.
Otherwise, a husband and wife New Mexico LLC will be taxed in the default status as a Partnership.
Electing to have your LLC taxed as a Corporation
Instead of the default statuses above, a Limited Liability Company (LLC) can be taxed like a Corporation.
Note: We recommend speaking with an accountant before making a corporate election.
There are two types of corporate elections:
- S-Corporation
- C-Corporation
LLC taxed as an S-Corporation (elective status)
By filing Form 2553 with the IRS, your LLC can request to be taxed like an S-Corporation.
Being taxed as an S-Corp can help businesses (with established profits) save money on self-employment taxes.
Tip: There are additional expenses to having your LLC taxed as an S-Corporation Most new business owners shouldn’t make this tax election until their business is established and revenue is consistent. Once there is at least $70,000 in annual net income per LLC Member, we recommend speaking to your accountant about this option.
LLC taxed as an C-Corporation (elective status)
By filing Form 8832 with the IRS, your LLC can request to be taxed like a C-Corporation.
Being taxed as a C-Corp can help large employers save money on healthcare fringe benefits.
Note: This election is not common. Most of our readers don’t choose to have their LLC taxed as a C-Corporation.
New Mexico State Income Tax for New Mexico LLCs
Single-Member LLCs in New Mexico: The LLC itself usually doesn’t file a state-level return. However, the owner files a personal state-level return that includes the LLC’s profits or losses.
Multi-Member LLCs in New Mexico: The LLC itself may need to file a Partnership return at the state-level. And the owners file a personal state-level return that include the LLC’s profits or losses.
There are other types of New Mexico business tax that apply to certain industries and types of businesses.
We recommend hiring an accountant to prepare and file your state income taxes.
You can also contact Tax Help. Tax Help is a free service for people whose annual household income is $60,000 or less, or who are 65 years or older: Tax Help New Mexico.
And you can contact the New Mexico Taxation & Revenue Department for more information about New Mexico state taxes.
Pass-through Entity Tax
New Mexico also offers the option of a Pass-through Entity Tax (PET) for certain businesses. The PET election allows your LLC to be taxed at the business entity level instead of the individual level.
The PET election is completely voluntary. Meaning, if you want your LLC taxed at the entity level instead of the individual income tax level, you’ll need to let the New Mexico TRD know by filing Form PTE NM.
You can find out whether your LLC is eligible for the PET election from the New Jersey Taxation & Revenue Department: Pass-through Entity Tax.
Or, contact the NJ Taxation & Revenue Department at 505-827-0825.
Local Income Tax for New Mexico LLCs
You and/or your LLC may need to file and pay income taxes with your local municipality (town, city, county, etc.).
We recommend hiring an accountant to prepare and file your local income taxes.
You can also contact your municipality to check on their requirements.
New Mexico Sales Tax
If you sell products to consumers in most states, you usually need to collect sales tax and get a Seller’s Permit.
A Seller’s Permit is the license that allows you to collect sales tax on retail sales in the state where you do business. It’s sometimes also called a:
- resale license
- wholesale license
- sales tax permit/license
- reseller permit
However, New Mexico doesn’t have a state-wide sales tax. Instead, it has a Gross Receipts Tax.
If your business activities are subject to this tax, your LLC must register for the Gross Receipts Tax when you file your Business Tax Registration Application. You can file this registration with the New Mexico Taxation & Revenue Department using their Taxpayer Access Portal.
And you can read more information about New Mexico Gross Receipts Tax from these New Mexico TRD resources:
For more information on permits, read New Mexico Business Licenses and Permits.
And if you have any questions about Gross Receipts Tax, you can contact the New Mexico Taxation & Revenue Department at 1-866-285-2996.
Tip: Save time by hiring an expert. We recommend using TaxJar. They'll help you register for, collect, and pay sales tax.
New Mexico LLC Payroll Taxes
If your New Mexico LLC will have employees, you must submit payroll taxes. Payroll taxes are essentially a group of taxes and filings, including:
- Federal income tax withholding
- State income tax withholding
- Social Security tax
- Medicare tax
- Federal unemployment taxes (FUTA)
- State unemployment taxes (SUTA)
- Local/county deductions
- Employee deductions
As an employer in New Mexico, you need to set up payroll, withhold payroll taxes from employees’ paychecks, and then submit those filings and taxes to various state and government agencies.
Although you can file payroll taxes yourself, the calculations can be burdensome and very complex. And if done improperly can lead to penalties and fines. Most people hire a payroll company or ask their accountant for help.
Our favorite payroll company is Gusto Payroll. They’ll automate and take care of your payroll taxes.
For more New Mexico payroll tax resources, please see the references section at the bottom of this page.
Managing your books & staying organized
You can keep track of income and expenses using Microsoft Excel or Google Sheets. Or you can use software to help automate things and save time.
The accounting software we recommend is Quickbooks Online.
Working with an accountant
As you can see, figuring out the different types of taxes you owe can be complicated, let alone how to properly fill out all the forms. And doing taxes improperly or missing deadlines can be harmful to your business
We strongly recommend working with an experienced accountant in New Mexico to help make sure you file your federal, state, and local taxes correctly.
Check out our guide on how to find an accountant.
New Mexico Taxation & Revenue Department Contact Information
There are other types of New Mexico business tax that apply to certain industries and types of businesses.
You can contact the New Mexico Taxation & Revenue Department for more information about New Mexico state taxes.
New Mexico LLC Taxes FAQs
Do I have to pay an annual fee for my LLC in New Mexico?
No, you don’t have to pay an annual fee to keep your LLC open.
You may have heard that all LLCs have to pay an annual fee to file an Annual Report. While that’s true in many states, there is no New Mexico Annual Report or associated fee.
How much is an LLC in New Mexico?
A New Mexico LLC Costs $50 (to file your LLC Articles of Organization). This is a one-time fee.
Do I need to file a New Mexico state tax return for my LLC?
Maybe – it depends on what type of LLC you have.
Single-Member LLC taxed as a Sole Proprietorship: No. You only need to file your personal tax return (Federal Form 1040 and New Mexico Form PIT-1) and include your LLC profits on the return.
Multi-Member LLC taxed as a Partnership: Yes. Your LLC must file an IRS Form 1065 and New Mexico may require you to file the equivalent of a New Mexico Partnership Return or Pass-through Entity Tax. We recommend checking with your accountant.
LLC taxed as a Corporation: Yes. Your LLC must file tax returns with the IRS and the New Mexico Taxation & Revenue Department to pay your New Mexico income tax. Check with your accountant to make sure you file all the correct documents.
How do I know my LLC tax classification?
You can tell your LLC’s tax classification by looking at how many Members are in your LLC.
This is because LLCs receive their tax classification from the IRS based on the number of Members (owners) your LLC has.
If you have one Member, your LLC is taxed as a Sole Proprietorship.
If your LLC has more than one Member, your LLC is taxed as a Partnership.
This is called being taxed in your default status. Meaning, you don’t have to file any paperwork to let the IRS know that’s how your LLC will be taxed because they tax LLCs that way by default.
However, in order for your LLC to be taxed as a Corporation, you or your accountant would have to file paperwork with the IRS letting them know you’ve chosen to be taxed as a Corporation.
And then the IRS would mail you an Approval Letter to confirm you’ve chosen the Corporate tax election for your LLC.
Note: Being taxed as a Corporation is rare for LLCs, so most people don’t need to worry about this.
And if you’re still unsure about how your LLC is taxed, we recommend calling your accountant or the IRS (1-800-829-4933). To speak to a live person at the IRS, press option 1, option 1 again, and then option 3.
How to start an LLC in New Mexico?
Here are the steps for starting an LLC in New Mexico:
- Choose an LLC name and make sure it’s available
- Choose who will be your New Mexico Registered Agent
- File the New Mexico LLC Articles of Organization
- Complete and sign an LLC Operating Agreement
- Get a Tax ID Number (EIN) from the IRS
- Open an LLC bank account
- Check whether you need a business or sales tax license in New Mexico
References
IRS: Tax Information for Businesses
New Mexico Economic Development: Starting a Business
New Mexico Taxation & Revenue Department: Wage Withholding Tax
New Mexico Taxation & Revenue Department: Withholding Tax Rates
New Mexico Taxation & Revenue Department: New Mexico Tax FAQs
New Mexico Department of Workforce Solutions: Unemployment for a Business
New Mexico Department of Workforce Solutions: Unemployment Insurance Tax Information
Matt holds a Bachelor's Degree in business from Drexel University with a concentration in business law. He performs extensive research and analysis to convert state laws into simple instructions anyone can follow to form their LLC - all for free! Read more about Matt Horwitz and LLC University.
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Hi Matt, Thank you for giving us so many invaluable insights! I am considering registering an LLC in New Mexico as a Canadian citizen (for an affiliate marketing business.) Someone told me that on top of company incorporation and EIN, there is a “Gross Tax” requirement to be filled with New Mexico. Have you heard of such a filling? If yes, when does that filling needs to be done? Thank you in advance!
Hi Martin, you’re very welcome! We recommend speaking with an accountant. Ideally, a Canadian accountant who also understands US taxes. Typically, Canadians with an LLC (taxed in its default status) files taxes with the CRA and the IRS. There are different structures to get around that and/or changing the tax classification of the LLC (for example, electing for the LLC to be taxed as a C-Corporation). We don’t specialize in this area (hopefully we’ll have more information in the future), however, you’d first want to determine the structure and LLC taxation (if you use an LLC). If you formed a New Mexico LLC and it was taxed by the IRS as a C-Corporation, it would be taxed the same way in New Mexico (they honor the federal election). And in that case, the LLC would need to pay franchise tax and file a corporate income tax in New Mexico. Hope that helps.
Sorry Matt, I was not clear. I was referring to a “Gross Sales Tax.” I did some research and it seems that people selling goods may have to register/pay an extra tax if they are in New Mexico. It does not apply to me as I only take affiliates commissions. Thank you for the answer and keep up the good work!
Ah, I see! Sales tax can often be a complicated set of requirements. Thank you Martin :)
I understand taxes in general aren’t your forte but maybe you can help shed some light on the sales tax.
I understand it depends on where customers are and whether or not the seller has nexus in the state. I also understand a reseller will be exempt as long as he has a Non-Taxable Transaction Certificate (or whatever it’s called in his state).
But if a company doesn’t qualify for a Non-Taxable Transaction Certificate OR (more likely) hasn’t got it yet but still want to start doing business and:
– is registered in state A
– buys goods from supplier in state B
– has the goods sent to state C (in an Amazon fulfillment center…or several)
=> will sales tax be due on his purchase? In state A or state C (provided the supplier has nexus there)?
To give you more context: I don’t have a Non-Taxable Transaction Certificate because I can’t create a tax payer account online in the state my company is registered in without an EIN…and I won’t have an EIN for 2-3 months since I had to do send it by mail.
Hi Nick, apologies, but sales tax nexus can be quite involved and it’s not something we cover. Thanks for your understanding.
Was it really a nexus question, though?
My hypothesis was that the supplier had nexus in all three states. I was wondering which state he would collect sales tax for (i.e. the state of the buyer or the state where delivery is made)
Hi Nick, I still don’t know the answer. Apologies.
No worries, Matt, you’ve been incredibly helpful along my journey of registering a company in the US. Thanks for everything
Thanks for your understanding Nick. You’re very welcome :)
Based on New Mexico having no annual filing fees and no annual report due (and the same privacy and pro-business stance as WY), this seems like the perfect state for a Roth IRA LLC. Am I correct in thinking that because I’m talking about a Roth IRA LLC, that no income or corporate taxes would need to be paid on any capital gains or dividends?
Thank you for the info!
Hi Joshua, not 100% sure on this as this an area we don’t go too deep with yet. I recommend running it by a few accountants. Feel free to follow back up though… curious as to what you find out.