Starting a Business in New Mexico
New Mexico is consistently ranked as one of the best pro-business states for manufacturing companies. In fact, it has one of the lowest corporate tax rates for manufacturing companies in the entire US. These policies have also helped make New Mexico the leading state in the nation in regards to wage increases. Even though the states has a burdensome regulatory system (especially in relation to red tape for acquiring business licenses), it makes up for it with a friendly tax system. It also offers many benefit programs for businesses looking to move forward. There are numerous loans & grants, tax credits, and Sales Tax deduction (called gross receipts in New Mexico) incentives available.
STEPS TO STARTING A BUSINESS IN NEW MEXICOThe New Mexico Department of Taxation & Revenue issues gross receipts notices. A gross receipt tax in New Mexico is the equivalent to sales tax and should not be confused with regular gross receipts tax which is an excise tax on gross revenues of a company. The New Mexico Department of State regulates business formations. There are some administrative actions you can perform after you have filed a company registration with the New Mexico Secretary of State, You can apply online for a New Mexico CRS Number (Seller’s Permit) so your business can collect and remit sales tax to the correct agency. Another state level measure you can take is looking for the appropriate Business Licenses your company needs to remain compliant. Some other tasks you can perform are checking on the status of form ACD-31015, finding a specific New Mexico sales tax rate, and seeing how to issue New Mexico resale certificates. Once you have completed the administrative tasks involved in setting up your businesses, you can move onto looking at the different programs offered. Here are some of the business incentive programs available to help you expand your business presence inside New Mexico:
- One popular New Mexico workforce expansion incentive is known as the Rural Jobs Tax Credit. This program offers tax credits against corporate and personal income tax as well as gross receipts (sales tax). A business must be in manufacturing or other related industry (except retail) and must be located in a rural area and provide a qualifying job. A qualifying job is categorized as one filled by a qualified employee working at least 48 out of a 52 week period. The program is broken down into 2 tiers.
- Tier 1: All rural areas in New Mexico excluding tier 2 areas. The maximum tax credit allowed per qualifying job in this category is 25% of paid wages up to a cap of $16,000. It is available to be taken at $1000 per year over 4 years.
- Tier 2; Municipalities that are outside the boundaries of metro areas that exceed a population of 15,000. These include Hobbs, Gallup, Alamogordo, Clovis and Carlsbad. The maximum tax credit allowed per qualifying job in this category is 12.5% of paid wages up to a cap of $16,000. It is available to be taken at $1000 per year for 2 years.
- There is a service based gross receipts tax deduction for software development services that are performed in a rural area. To qualify as a rural area it must be outside the boundaries of Las Cruces, Albuquerque, Santa Fe, and Rio Rancho. Any services performed within those areas will not qualify for the deduction. A sales tax license will be required to qualify for this deduction.
- The Investment Tax Credit for Manufacturers is a tax credit given to any manufacturing related business. It provides a 10% credit against corporate income tax, state gross receipts tax, withholding tax or compensating tax. One employee must be taken on for every $500,000 of equipment up to $30 million. After that it is one employee for every $1 million of equipment. The maximum credit is approximately 5% of the equipment value.
- New Mexico has another workforce expansion program called the High Wage Jobs Tax Credit. This tax credit intends to promote higher paying jobs for employees as well as an economic incentive for a business that is able to create these jobs. It provides a 10% credit against corporate income tax, state gross receipts tax, withholding tax or compensating tax. The maximum credit allowed is $12,750. A qualifying job is categorized as one filled by a qualified employee, who is a New Mexico resident, and working at least 48 out of a 52 week period. Additionally, the minimum salary per job is $40,000 per year for an employee in an area under 60,000 residents or $60,000 per year for an area over $60,000 residents.
- The New Mexico Research & Development Program is designed to assist companies in cultivating high technology jobs by offering a tax credit. To qualify, a company must conduct R & D activities from a location in New Mexico. Additionally, it must have less than 50 employees and less than $5 million in expenditures. A base tax credit of 5% of expenditures is allowed. The credit can be taken against state gross receipts tax, withholding tax or compensating tax.