Nexus 

Establishing nexus means that your business has sufficient connection or presence in New Mexico for the state to have taxing authority. This connection might mean that you have a permanent presence in the state; for example, you may have a business location, resident employees or property (tangible or intangible). The other type of connection may be a temporary presence in which you engage in regular and systematic solicitation of business. You or your employees or representatives conduct activities here to establish and maintain the business’s economic market, for example.



Determining Corporate Income Tax Nexus

Liability for New Mexico corporate income tax often depends on whether your corporation has nexus in New Mexico. Any corporation with income from the transaction of business in, into or from New Mexico or from property or employment in the state has nexus. This means that the business has enough presence for New Mexico to impose the corporate income tax. An example of “enough presence” is employees or representatives who conduct business activities in the state to establish and maintain the business’s economic market. The only exception is if the business’s activities are immune under federal Public Law (P.L.) 86-272 (31 USCA 351).



Gross Receipts Tax Nexus

A person may perform research and development services outside New Mexico but then use the product of the service in New Mexico. In this case the person is subject to gross receipts tax if he or she has gross receipts tax nexus. Criteria sufficient to establish nexus in New Mexico include any of the following:



  • having a business location in New Mexico;having property stored in New Mexico;
  • employing any person in New Mexico;
  • contracting with a salesperson or other agent in New Mexico;
  • leasing equipment used in New Mexico;
  • performing services in New Mexico;
  • licensing the use of intangible property in New Mexico, or transporting property in New Mexico using the taxpayer’s vehicles.


Links

FYI-350: Corporate Income Tax and Corporate Franchise Tax
FYI-270: Information on Research and Development

 

Frequently Asked Questions

Q. Does intangible property such as franchises and licenses give a taxpayer nexus in New Mexico?

Answer:
Section 7-9-3(J) NMSA 1978 specifically defines intangible property as property. If it is sold or licensed to be used in New Mexico, the property is present in the state, and you have nexus with New Mexico.

Q. Are royalties derived from intangible property subject to tax?

Answer:
If an entity receives royalties for the license to use a franchise in New Mexico, the royalties are subject to gross receipts tax. If the taxpayer is:- a C-corporation, it is also subject to corporate income tax (CIT) and corporate franchise tax; - an S-corporation, it is subject to corporate franchise tax, and its shareholders are subject to personal income tax (PIT) and the gross receipts tax.

Q. Does an interstate motor carrier create nexus if it only passes through New Mexico?

Answer:
Section 7-4-19 NMSA 1978; regulation 3.5.19.15 Link to: http://www.conwaygreene.com/nmsu/lpext.dll?f=templates&fn=main-h.htm&2.0 applies to trucking companies and how they allocate and apportion their income to New Mexico. This regulation includes a de minimis nexus standard stating that any motor carrier traveling more than 25,000 mobile property miles within New Mexico or making more than 12 trips into New Mexico has created nexus.

Q. What filing requirements are there for an interstate motor carrier having nexus with New Mexico?

Answer:
Trucking companies that meet the de minimis nexus standard must file the appropriate tax returns with New Mexico. If the trucking company is a C-corporation, it files a CIT return and apportions income to New Mexico based on the regulation for calculating payroll, property and sales factors. It is also subject to corporate income tax and corporate franchise tax. If the trucking company is an S-corporation or a partnership, it files a New Mexico Pass-Through Entity (PTE) return. Withholding tax for non-resident shareholders is required unless there is a Non-Resident Owner Income Tax Agreement (PTE-TA) on file releasing the S-corporation from its withholding obligation. New Mexico resident shareholders file New Mexico PIT returns and apportion income to New Mexico based on the trucking company regulation. Only S-corporations are subject to the corporate franchise tax. An interstate motor carrier having nexus with New Mexico is required to file CRS-1 Forms to report its gross receipts from services performed in this state, even though its receipts may be deductible under interstate commerce. To file CRS-1 Forms, a business must obtain a New Mexico CRS identification number.

Q. What is representational nexus?

Answer:
Representational nexus is created when a third party provides in-state services that exceed mere solicitation on behalf of out-of-state clients.

 Summary Link Web Part
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