Free guide for contractors
Do contractors charge sales tax in New Mexico?
General information, not tax advice. Tax rules change and depend on the details of each job. Confirm how they apply to your business with your accountant or the state's revenue department before relying on them.
NM New Mexico
Tax usually chargedYes, as gross receipts tax. New Mexico taxes construction receipts, labor and materials together, and tax passed on must be shown on the bill.
New Mexico's gross receipts tax (GRT) is imposed on the business, but it is commonly passed on. If it is passed on, it must be separately stated on the invoice. Since July 1, 2019, a bill must either separately state the tax or tell the customer that GRT is included.
Construction is a taxable service, and it includes the construction materials that become part of the project. GRT billed to the buyer is excluded from gross receipts, so there is no tax on the tax. Construction services are reported at the location of the construction site.
A subcontractor selling to a person in the construction business deducts those receipts with a Type 6 nontaxable transaction certificate (NTTC). Work for a government is still taxable: the sale-to-government deduction excludes construction materials. The 501(c)(3) deduction does not cover construction either, except for organizations providing homeownership to low-income families.
The state rate is 4.875% from July 1, 2026 to June 30, 2027. Combined state and local rates run from 5.25% to about 9.44%. Local rates change only in July, unless there is a special situation.
It turns on: the job site's location code, which sets the combined rate; whether the customer is a contractor that gave a Type 6 NTTC.
Watch out for
- Carpet and drapery installation are not construction under the regulation, but they are still taxable; only the reporting location and deductions differ (3.2.1.11 NMAC).
- Materials sold to a contractor are deductible by the seller with a Type 6 NTTC only if the finished project will be subject to GRT (NMSA 7-9-51, per FYI-105).
“If GRT is passed on to the customer, it is required to be separately stated on the invoice.”NM TRD, Gross Receipts Tax: Business Overview