What is a Tax Clearance?
Under New Mexico law, the tangible and intangible property used in any business remains subject to liability for payment of certain taxes incurred by the business. Consequently, a successor to that business may become liable for taxes incurred and not paid by that business if the successor does not receive a tax clearance. Such liability applies to all taxes administered and enforced under the Tax Administration Act, including corporate income and franchise taxes, gross receipts tax and withholding tax. New Mexico personal income tax is excluded from this liability (Section 7-1-61NMSA 1978).
To avoid being assessed for outstanding taxes owed by a business, you may request a tax clearance from us if you are going to become a successor in business by buying, or otherwise obtaining, that business. The successor in business must place in a trust account enough money to cover any outstanding tax owed by the business. That money may be withheld from the purchase price of the business or obtained from other sources (Section 7-1-61 NMSA 1978).
Within 30 days of receiving a complete and correct request for a tax clearance from a successor in business, we must issue a tax clearance relieving the successor of any obligation for taxes incurred by the business before its transfer to the successor or mail to the successor in business a notice of the amount of tax due The successor in business must pay any outstanding tax within 30 days of the mailing date the notice of tax due, or we will assess the successor for the tax due (Section 7-1-63 NMSA 1978).
The balance remaining in the trust account after all tax is paid may be released to the former owner, who will be credited with the payment of the tax.
If we fail to respond to a request for a tax clearance within the required time period, the purchaser is released from the obligation to withhold part, or all, of the purchase price to cover any unpaid taxes (Section 7-1-62 NMSA 1978). Should an audit be required in order to determine whether the business owes any taxes, we must issue a tax clearance or a notice of taxes due within 60 days of receiving a complete and correct request for a tax clearance.
The lessor of a liquor license may also request a tax clearance to ensure payment of outstanding taxes owed by the lessee of the license.
Requesting a Tax Clearance
A seller or buyer, lessor or lessee, or their properly designated agent may initiate a request for a tax clearance.
To request a Tax Clearance, complete form ACD-31096, Tax Clearance Request, and submit it to:
Taxation and Revenue Department
Audit and Compliance Support Office
P. O. Box 5557
Santa Fe, NM 87502-5557
For further assistance, please call (505) 827-0951.