Compensating tax is an excise tax imposed on persons using property or services in New Mexico. This tax is also called “use tax,” or “buyer pays.” Compensating tax helps to protect New Mexico businesses from unfair competition from out-of-state businesses that are not subject to gross receipts tax.
The compensating tax is imposed at a rate of 5.125% on certain property used in New Mexico and 5% on certain services used in New Mexico. For specifics on when the compensating tax is due, please refer to the FYI-230 Compensating Tax linked below.
Compensating tax is reported on a Combined Reporting System (CRS) form and is due on or before the 25th day of the month following the report period in which the taxable transaction occurs.
This tax is deposited in the tax administration suspense fund at the state treasury. After necessary refunds and interest are paid, the state distributes 10% of receipts to the small cities assistance fund and 10% to the small counties assistance fund. The remainder goes to the general fund.
To contact the Department
Who Must Register?
FYI-102: Information for New Businesses
FYI-230: Compensating Tax
Statutory Reference: Look for Section 7-9-7 NMSA 1978 in the New Mexico State Statutes