New Mexico – Compensating Tax Updates

SALT Report 1746 – The New Mexico Taxation and Revenue Department recently updated their compensating (use) tax guide.  Compensating tax is imposed on anyone using tangible property or certain services in New Mexico and tax has not been paid to New Mexico or any other state.

Generally, compensating tax is imposed if:

  • The item is acquired inside or outside New Mexico from a person located outside New Mexico and the sale would have been subject to New Mexico gross receipts tax if the seller had nexus with New Mexico,
  • A business purchases, either in state or out of state, an item or service in a nontaxable exchange but subsequently uses the item or service, or
  • A manufacturer uses in New Mexico property that they have manufactured

Updates to the guide include:

  • Transmission using voltage source conversion technology is now included in the electricity exemption, and
  • Taxpayers who produce advanced energy products may claim a credit against compensating tax for their purchases of manufacturing equipment used in a manufacturing operation that produces “advanced energy products.”

Advanced energy products are defined as vehicles powered by advanced energy sources, fuel-cell systems, and renewable-energy systems as well as components of integrated coal facilities and facilities related to the extraction of carbon from integrated gasification combined cycle coal plants.

For Further Information:

New Mexico Taxation and Revenue Department – FYI-230 Compensating Tax