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Note: Our tax lesson is not as step-by-step as our other forming an LLC in New Mexico lessons, due to the uniqueness and variation among businesses in the state. Taxes are usually not as straightforward as forming an LLC in New Mexico, and therefore, the information below is an overview, and not a comprehensive guide.
You will most likely need to hire a tax professional to make sure you meet all your New Mexico state and local tax obligations. We recommend using Thumbtack.
Do it yourself in New Mexico
Tax Help is a free service for people whose household income is $54,000 every year or less or those who are 65 years or older: Tax Help New Mexico
How to Register with the Taxation and Revenue Department
New Mexico Taxation and Revenue Department Contact Page
Other Taxes
Depending on your industry, where your business is located, how you are taxed by the IRS, and whether or not you have employees, will determine which additional taxes and forms are due.
Some examples of other taxes and forms due are:
- Sales and use tax
- Property tax
- Local taxes
- Personal income tax
- Excise tax
- Pass-through entity tax
- Gross receipts tax
- Wage withholding tax
- Compensating tax
- Corporate income & franchise tax
- Workers’ compensation
- Alternative fuel tax
- Boat excise tax
- Oil, natural gas, and mineral extraction tax
- Motor vehicle tax
- Monthly alcohol beverage excise tax report
- Monthly cigarette stamps distribution report
- Monthly combined reporting system distribution matrix
- And more
Federal Taxes with the IRS
By default, single-member LLCs are taxed as Sole Proprietorships by the IRS, and by default, multi-member LLCs are taxed as Partnerships by the IRS. The bulleted list above refers to state and local taxes, not federal taxes filed with the IRS. Remember, the income/losses from your LLC will “flow through” to your personal 1040 tax return on a Schedule C, as well as additional Schedules depending on how you derive your income.
Tip: The above language really confuses a lot of people. Notice that we said “taxed as”. This means, in the eyes of the law, your LLC is still a separate legal entity from you, but the IRS is treating your LLC differently (just for tax purposes). Technically, your LLC is still an “LLC legal entity” with the state and the law, but your LLC is a “tax entity” (either a Sole Proprietorship or Partnership) with the IRS.
Additionally, your tax professional may recommend that your LLC be taxed as a Corporation with the IRS. In that case, your LLC can be taxed as a C-Corp or your LLC can be taxed as an S-Corp. You’ll need to discuss this with your tax professional though, as this usually only works for certain types of businesses, and those businesses that are making close to (or over) $100,000 per year.
Our Recommendation
Calculating your tax obligations in New Mexico (and with the IRS) can be complicated and if done improperly can negatively impact your LLC.
We recommend that you get help from a tax professional once your LLC is formed. You can use Thumbtack or Yelp.
Hiring a tax professional will not only help you keep your New Mexico LLC in compliance, but it will also give you an advisor to go to for other business questions.
You’ll want someone who’s a good fit for your company, makes you feel comfortable, and is willing to answer all of your questions. It should be someone you like personally as well as professionally. We recommend talking with at least 2-3 people before making your final decision.
References
New Mexico Taxation and Revenue Dept: FAQs
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.
NEW MEXICO LLC GUIDE
Follow the lessons below to form your New Mexico LLC.
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.