Compensating Tax  

Compensating tax (Section 7-9-7 NMSA 1978) 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.

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.


Contact Information

To contact the Department


Links

E- File
Who Must Register?
FYI-102, Information for New Businesses

Frequently Asked Questions

Q. What is the purpose of compensating tax?

Answer:
Compensating tax helps to eliminate unfair competition from out-of-state businesses. It levels the playing field when New Mexico buyers buy property, services, or some combination of property and services from out-of-state sellers who otherwise have no gross receipts tax obligations to New Mexico.

Q. Does New Mexico have a use tax in addition to compensating tax?

Answer:
No, New Mexico’s compensating tax is our form of “use tax,” a term used in most other states.

Q. What is an agent for the collection of compensating tax?

Answer:
Under certain circumstances, persons selling property or a combination of property and service to someone engaged in business in New Mexico may be required to collect compensating tax. The seller must not owe gross receipts tax on the sales, and the buyer must use the property, or property and service, in New Mexico (Section 7-9-10 NMSA 1978 Link . Here are some examples of common business activities that incur agency for out-of-state businesses:- Regularly soliciting orders in New Mexico;
- Advertising in New Mexico media or soliciting orders through programs broadcast by New Mexico radio, television, or cable television systems, or
- Maintaining a stock of goods in this state.

Q. How is the compensating tax reported?

Answer:
Report compensating tax on Line 2 of the CRS-1 Form. Multiply the value of the taxable property or service by the appropriate compensating tax rate. 

Q. What must I do if I owe compensating tax for a transaction which occurred during a prior reporting period?

Answer:
Amend the CRS-1 Form for that period. Send the amended CRS-1 Form to the Department with the additional tax due. Amended CRS-1 Forms should be sent to the same address as monthly CRS-1 Forms.
  • Message from the Secretary
    Thank you again for making the 2012 tax-filing season a success. Largely because of your efforts, we were able to process nearly $260 million in personal income tax refunds in a timely and efficient fashion with very few errors. Read More     ​

E-File for accurate returns and faster refunds.
Federal automatic extensions also extend New Mexico income tax returns.
E-File and E-Pay and extend your income tax due date.
Get your refund faster when you E-File.
Low-income residents may qualify for income tax credits.
You may qualify for the Working Family Income Tax Credit.
You may qualify for the Earned Income Tax credits.
Estimated tax payments may be required if you withhold too little.
Manage your account online using Taxpayer Access Point.
Business closed? Update your CRS account online.
Gross receipts tax rates are subject to change in January and July.
NTTCs may be required to support tax-deductible sales.
Changing your address? Update your tax records online.
View payments and returns using Taxpayer Access Point.
Keep up with recent tax changes. See the instructions.
Keep accurate tax records for up to 10 years.
Double-check your figures. Errors will delay your return.
Get your money faster using refund express direct deposit.
Pay online by electronic check or credit card.
Avoid delays, submit a complete return.
Tax Fraud in New Mexico, call 1-800-457-6789.
Check the status of your refund, visit Taxpayer Access Point.
Pay your property taxes to your county treasurer.
Delinquent property taxes? See your local county treasurer’s office.
Find out who is managing your county government.
Property tax auctions are often held at the county treasurer’s office.
April property tax valuation determines your November tax bill.
Property taxes pay for schools, police, and hospitals.
Property was sold at auction? We may have your money.
Stop penalty and interest by paying your principal tax quickly.
Make sure you use correct tax ID numbers.
Refund express? Double-check your bank account and routing numbers.
Include your phone number and e-mail address when filing.
Secure your tax records from identity theft.
Generally, both spouses are responsible for liability on a joint return.
Sign and date your return.
Avoid preparers who base their fee on a percentage of the refund.
Tax fraud is the responsibility of the taxpayer
Visit Website