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Basic Business Taxes

Personal income tax:
The New Mexico personal income tax is based on federal adjusted gross income. Allocation and apportionment of income among states is governed by UDITPA factors of relative property, payroll, and sales in New Mexico. Tax rates are being phased down to 1.7 percent to 6.0 percent (2005), 1.7 percent to 5.3 percent (2006), and 1.7 percent to 4.9 percent (2007).

New Mexico imposes a tax on the net income of every resident. Residents are taxed on the net income from employment, unearned income, gambling, pensions, annuities, and income from real or personal property in this state or from businesses located in this state. Nonresidents are taxed on the net income from property, employment, or business in New Mexico. New Mexico's personal income tax "piggybacks" on the federal return and uses the federal adjusted gross income figure as its base. Net income usually equals federal taxable income, although some special deductions are available. New Mexico uses the same dollar amounts as the federal government for personal exemptions, standard deductions and itemized deductions. The 2003 New Mexico legislature cut the capital gains by half over a period of five years.

Gross receipts tax:
New Mexico's gross receipts tax differs from a sales tax in that it is levied on the total amount of money or other consideration a business receives from four kinds of transactions in New Mexico: selling property in New Mexico, including tangible personal property and such intangibles as licenses, trademarks, franchises, patents, and copyrights; leasing property used in New Mexico performance of services in New Mexico (construction is a service that includes all the ingredient and component materials and subcontracted construction services), and sale of research and development services performed outside New Mexico when initial use of the product of the R&D service occurs in New Mexico.

The gross receipts tax is not the customer's tax, but rather the business's liability. Statutes do not prevent the business from recovering its tax costs from the customer just like any other overhead expense. This is the prevailing practice. The law presumes all transactions taxable unless statute provides a specific exemption or deduction.

Exemptions include: wages of employees; receipts from interest and dividends; vehicles and boats; receipts of 501(c)(3) nonprofit groups. Deductions include: sales-for-resale (goods, services, leases); exports (when title and risk of loss pass outside New Mexico); sales by suppliers of components in manufacturing processes; all construction materials and construction services sold to a construction contractor for use in a construction project; receipts from selling tangible personal property to governments (including equipment bought under industrial revenue bonds) or 501(c)(3) organizations; but generally receipts from performing services, which include all construction and receipts from leasing, are not deductible.

A basic five percent (5 percent) state gross receipts tax is supplemented by local option gross receipts tax available to all counties and municipalities. Tribal taxes imposed by certain pueblos are included. The state collects the taxes at the same time and in the same manner as the state gross receipts tax and then distributes the counties' and municipalities' share for their use. Because the taxes are optional, they range from 5.125 percent to 7.25 percent depending on location. Businesses report according to their locations. There are some exceptions for point-of-delivery businesses like utilities and construction services that report and pay according to the rate in effect at the delivery or construction site.

The tax is on the businesses gross receipts. Whether the receipts (net of returns and allowances) are taxable depends on whether the business can take advantage of an exemption or deduction. Transactions among affiliates generally will be treated no differently than transactions among unrelated parties.

Compensating tax:
The compensating tax is a companion tax to the gross receipts tax. It is a "use" tax that is typically levied on the purchaser of the product or service for using tangible property in the state. The tax applies to imports of factory and office equipment, and other items. It is also used to enforce the conditions of many of the gross receipts tax deductions.

Rate is 5 percent of the value of the property or service at the time of acquisition or introduction into New Mexico, or at the time of conversion to taxable use, whichever is later. Compensating tax is imposed on persons using property and, in some cases, services in New Mexico on which tax has not been paid to New Mexico or any other state. The tax "compensates" for the absence of a gross receipts tax on the purchase of property for use and is intended to protect New Mexico businesses from unfair competition; hence its name.

Corporate income tax:
Corporate income tax is imposed only on the net income of domestic corporations or foreign corporations' business within the state or from the state, or deriving income from property or employment within this state. "Corporation" means corporations, joint stock companies, real estate trusts organized and operated under the Real Estate Trust Act, and limited liability companies and partnerships taxed as corporations under the Internal Revenue Code. "Net income" is federal taxable income adjusted to exclude amounts not taxable by states.

The corporate tax structure levies taxes only on net income of the corporation's business within the state. Separate filing is permitted. There is a double-weighted sales apportionment factor option for manufacturers. The corporate income tax piggybacks onto the Internal Revenue Code. The rates, based on federal taxable income rates, are: up to $500,000: 4.8 percent; $500,000–$1 million: $24,000 plus 6.4 percent over $500,000; $1 million plus: $56,000 plus 7.5 percent over $1 million.

Corporate franchise tax fee:
A uniform fee of $50 per corporation is levied annually. The franchise tax is imposed on each corporation included in the combined unitary or the consolidated tax returns if the corporation exercises its corporate franchise in New Mexico whether or not income tax is due. The requirement to file and pay the franchise tax also falls on anyone who files a federal S-corporation return.

Property tax:
New Mexico's property taxes are among the lowest in the country. The median value of an owner-occupied property in New Mexico is approximately $108,000. The statewide average property tax on a property assessed at $108,000 is approximately $900. Taxes on a property with $100,000 market value in 2003 are about $1,000 in Albuquerque, falling to about $260 in rural parts of the state.

Most property is appraised by county assessors in the county in which it is located. The Taxation and revenue Department assesses certain types of nonresidential property however, typically industrial property that extends across county boundaries, including property associated with railroads, pipelines, communication systems, and mineral extraction. Taxes are imposed on one-third of assessed value, which is typically between 80 and 100 percent of market value. Property taxes are collected and distributed by county treasurers. Major revenue recipients include counties, municipalities and school districts.

Rates vary substantially and depend on property type and location. Rates applicable to residential property range from about $9 to $38 per $1,000 of net taxable value after exemptions are taken. Nonresidential property tax rates range from $12 to $41 per $1,000 of net taxable value. The statewide average rates are about $26 per $1,000 for residential property and $29 per $1,000 for nonresidential property, or about .8 percent of assessed value. Taxable value is one third of assessed value.

Property-in-transit through the state or warehoused for delivery out-of-state is exempt.

Severance taxes:
New Mexico taxes the extraction of minerals from its soil from a series of taxes, generically called severance taxes. The two main groups are (1) taxes on oil, natural gas, liquid hydrocarbons, and carbon dioxide; and (2) taxes on hard-rock minerals, including copper and coal. Of the two groups, the oil and gas taxes account for over 90 percent of the revenues from severance taxes.

Oil and gas: In this group, four virtually identical taxes are collected monthly on production; one is collected annually on production; and one is collected monthly on processing of natural gas. About 60 percent of the total derives from natural gas. (These taxes are all ad valorem taxes, i.e., assessed as percentages of product value.) The wide and frequent swings in natural gas and oil prices are reflected in the continuous fluctuation of severance tax revenues.

Hard rock taxes: There are two — the severance tax and the resources excise tax. Resource excise tax is generally 0.75 percent of the gross value; copper is an exception at 0.25 percent. The severance tax on coal is a unit tax of either $1.18 per ton or $0.57 per ton, depending on when the contract was signed; all other minerals face ad valorem rates varying from 0.125 percent to 2.5 percent on net value (gross value less large deductions which vary by type of mineral) for use; hence its name.

Worker's compensation tax fee:
This fee is collected by the Taxation and Revenue Department on behalf of the Worker's Compensation Administration. Fees are $4 per quarter for every employee at end of quarter — $2 from employee via withholding plus $2 from employer.

Unemployment insurance contribution:
Employers pay unemployment taxes to state and federal governments, which support the Unemployment Insurance (UI) Program. The law prohibits an employer from deducting money from employees' wages. A new employer in New Mexico starts out with a UI tax rate of 2 percent and remains at that rate for a minimum of four years. After four years, each employer is given an experience rating which can cause a rate to increase or decrease. Employers use the taxable wage base to calculate their employment insurance taxes. The taxable wage base for the year 2005 is $17,200.

Insurance premiums tax fee:
Traditional insurance companies of all varieties are covered, but so also are property bondsmen, health maintenance organizations, prepaid dental plans, and prearranged funeral plans. The program is administered by the Insurance Division of the Public Regulation Commission. The fee equals 3 percent of gross premiums. It is due by April 15, but quarterly estimated payments are required.

Tax exemptions/deductions:
High wage jobs tax credit: A taxpayer who is an eligible employer may apply for and receive a tax credit for each new high-wage economic-based job. The credit amount equals 10 percent of the wages and benefits paid for each new economic-base job created.

Qualified jobs:
• • pay at least $28,000/year in a community with a population of less than 40,000;
• • pay at least $40,000/year in a community with a population of 40,000 or more;
• • are created on or after July 1, 2004 and prior to July 1, 2009 and are occupied for at least 48 weeks by the employee.

Qualified employers can take the credit for four (4) years. The credit can be applied to the state portion of the gross receipts tax, compensating tax, and withholding tax. Any excess credit will be refunded to the taxpayer. The credit shall not exceed $12,000 per year, per job.

Qualified employers:
• • make more than 50 percent of their sales to persons outside New Mexico during the most recent 12 months of the employer's modified combined tax liability reporting periods ending prior to claiming this credit;
• • are eligible to the Job Training Incentive Program (manufacturing facilities and non-retail services industries);
• • are growing with employment greater than the year before.

Qualified employee must be a resident of New Mexico and cannot be a relative of the employer or own more than 50 percent of the company.

Rural Job Tax Credit: Eligible employers may earn the rural job tax credit for each qualifying job created after July 1, 2000, applying it to taxes due on the CRS return or to corporate or personal income tax. An "eligible employer" is one whom the Economic Development Department (505-827-0300) has approved for Job Training Incentive Program assistance. A qualifying job is a job filled by an eligible employee for 48 weeks in a 12-month qualifying period.

Employers receive a credit of 6.25 percent of the first $16,000 in wages paid for a qualifying job. If the job is located in Tier One, the employer receives credit for four consecutive years. A Tier Two employer may take it for two consecutive years. (Tiers are defined below.) The application deadline is June 30, 2006. If the amount of credit for a qualifying period exceeds the owner's tax liability for the period, the excess may be carried forward for up to three years.

Rural New Mexico is defined as any part of the state other than Los Alamos County, certain municipalities (Albuquerque, Rio Rancho, Las Cruces, Santa Fe) and a ten-mile zone around those select municipalities. The rural area is divided into two tiers: Tier 2 — all the rural area municipalities that exceed 15,000 in population (Alamogordo, Carlsbad, Clovis, Farmington, Gallup, Hobbs, Roswell); Tier 1 — everywhere else in the rural area.

For each new qualifying job created, the amount of credit that may be earned:

• • Tier 1: 25 percent of the first $16,000 in wages paid — to be claimed in installments of 6.25 percent per year (a maximum annual credit of $1,000 per job) for 4 years;
• • Tier 2: 12.5 percent of the first $16,000 in wages paid — to be claimed in installments of 6.25 percent per year (a maximum annual credit of up to $1,000 per job) for 2 years.

An eligible employer may apply to the Taxation and Revenue Department for the credit. As part of the application, the business must certify its eligibility for the credit, the amount of wages eligible for credit, and whether the jobs are in Tier 1 or Tier 2. If approved, a document will be issued in the amount of the credit. The document is numbered, carries its date of issuance, and is transferable. If transferred, the parties notify the Taxation Department of the transfer within ten days of transfer. The document remains valid for three years after its date of issuance. The owner of the tax credit document may offset the approved credit against state taxes owed on the CRS-1 form (state gross receipts tax, compensating tax, and withholding tax) or against income tax (personal or corporate, depending on how the owner is organized). Not all of the credit earned, however, may be taken at once. If the job is in Tier 2, 50 percent of the credit may be taken within each qualifying period (the 12 months beginning on the anniversary date of the day an eligible employee filled a qualifying job). For Tier 1 jobs, only 25 percent of the credit may be taken within any qualifying period. Only jobs created within the period July 1, 2000 through June 30, 2005 are eligible. Employers have until June 30, 2006 to apply to the Tax Department for this credit.

Welfare-to-work tax credit: The credit equals 50 percent of the federal welfare-to-work credit for which the employer is eligible, up to $1,750 for the first year of employment and rising to $2,500 for the second year. The state credit piggybacks on the federal credit of the same name and can be applied to New Mexico personal or corporate income tax.

For a person hired, employer receives from the state 50 percent of the credit earned for federal purposes. Credit can be earned on the same individual employed by the same employer for up to two years.

State maximum credit amounts are $1,750 for the 1st year, $2,500 for the second year per qualifying employee, and any part of the remaining credit may carry forward at the end of the taxable year for three consecutive taxable years. An employer must first qualify for the federal credit.

Additional criteria:
• • Hiring of the individual must increase the employer's total number of jobs (over the average in the preceding calendar year) or replace a previous qualified employee.
• • Wage, benefits, and working conditions must be comparable with similar jobs of that same employer.
• • Employee must live in a high unemployment county determined by the Department of Labor to have had an unemployment rate exceeding 10 percent in six or more months in the previous calendar year (determined every January).
• • Corporations or individuals attach their N.M. Department of Labor certification to the appropriate tax forms and submit to N.M. Tax and Revenue Department

Community Development Incentive Act (Property Tax Exemption): Municipalities and counties may exempt commercial personal property of a new business facility from property tax for up to 20 years. This incentive is designed to give communities a less expensive alternative to Industrial Development Bonds, particularly when the project is too small to warrant the expense associated with these bonds.

A "facility" means any factory, mill, plant, refinery, warehouse, dairy, feedlot, building, or complex or buildings located within the state, including land on which the facility is located and all machinery, equipment, and other real and tangible personal property located at or within the facility and used in connection with the operation of the facility. A "new business facility" means a facility that is employed by the taxpayer in the operation of a revenue-producing enterprise. The facility may not be a replacement business facility (by the taxpayer or a relative). The facility must be acquired by or leased to the taxpayer on or after July 1, 2003.

Child care corporate income tax credit: Corporations providing or paying for licensed child care services for employees' children under 12 years of age may deduct 30 percent of eligible expenses from their corporate income tax liability for the taxable year in which the expenses occur. For a company operating a value-added day care center for its employees, this credit reduces the cost to provide this benefit to employees. The corporate income tax credit is 30 percent of eligible costs up to $30,000 in any taxable year. Unused credit amounts may be carried forward for three years.

Gross receipts, compensating and property tax exemption for sales of property to governments: Applies to industrial revenue bond (IRB) projects. The gross receipts tax is New Mexico's version of a sales tax. Sales of tangible personal property (other than construction materials) to governments are deductible from this tax. Similarly, importation of tangible personal property for use by governments is also exempt. When the property is purchased with proceeds of an industrial revenue bond, the government unit issuing the IRB takes title to the property, whether purchased locally or imported. Accordingly, purchases of machinery, office equipment, furniture, and similar tangibles as part of an IRB project are not taxed. Tangible personal property (other than building materials and related construction services) purchased with IRB proceeds is also included.

Cultural property preservation tax credit: Taxpayers may take this credit on corporate or personal income tax returns for restoring, rehabilitating, or preserving properties listed on the NM Register of Cultural Properties. Specifically, a tax credit is available where historic structures are certified as having received rehabilitation to preserve and enhance their historic character.

To qualify, the property must be listed on the official New Mexico Register of Cultural Properties that is maintained by the Historic Preservation Division of the Office of Cultural Affairs. Any given taxpayer can be involved with more than one project and claim a credit for each qualifying project.

The maximum credit is 50 percent of the cost of restoration, rehabilitation, or preservation; $25,000 credit maximum per project. The taxpayer may apply the credits against existing tax liabilities only, and may carry unused amounts forward for four years.

Texas/Mexico border residents' tax exemption: Nonresident employees may allocate their compensation to their home state. Since Texas does not have a personal income tax, Texas residents working at the enterprise won't have to pay any state income tax on their compensation from the enterprise.

The enterprise must be in the manufacturing business, physically located within 20 miles of the Mexican border, have at least 5 employees who are New Mexico residents and not receiving Job Training Incentive Program funds.

Industry-Specific Incentives

Agri-Business:
Ag Production Tax Deductions and Exemptions: Gross receipts tax deductions are available for selling to agribusinesses (1) feed for livestock, including the baling wire or twine used to contain the feed, fish raised for human consumption, poultry or animals raised for hides or pelts and seeds, roots, bulbs, plants, soil conditioners, fertilizers, insecticides, germicides, insects, fungicides, weedicides, and water for irrigation; and (2) warehousing, threshing, cleaning, harvesting, growing, cultivating, or processing agricultural products including ginning cotton and testing and transporting milk. Gross receipts tax exemptions are permitted for feeding, pasturing, penning, handling, or training livestock and, for agribusinesses, selling livestock, live poultry, and unprocessed agricultural products, hides, and pelts.

Film:
Film production tax credit: Filmmakers may ask for a credit equal to 15 percent of the total direct production costs incurred in New Mexico after January 1, 2002. "Film" includes live action or animated features, shorts, and national advertisements regardless of delivery medium (film, laser disk, digital medium, etc.). Most direct costs are eligible.

The list of eligible costs aligns closely with "direct production costs" as used in the industry's standard accounting terminology but only costs incurred in New Mexico and subject to New Mexico taxation count.

This is an income tax credit only and is applied to a company's New Mexico income tax return. Inquiring companies may apply for either the 15 percent tax credit or the 6 percent gross receipt tax exemption (see below), but not both.

The production company registers with the Film Division of the Economic Development Department to let the state know when the filmmaker will be working in New Mexico and that it intends to ask for the credit. After production in New Mexico for a tax year is completed, the filmmaker applies for the credit with the Taxation and Revenue Department. Detailed records of costs incurred in New Mexico are submitted for review and approval. The filmmaker can then claim the amount of approved credit on the filmmaker's income return (PIT, CIT, PTE or FID form). Each owner then may claim its share of the approved credit on the owner's income tax return. If the film production tax credit amount claimed exceeds the film production company's tax liability for the taxable year in which the credit is being claimed, the excess shall be refunded. If the filmmaker is a pass-through entity (e.g., partnership or LLC), the approved credit amount will be split among the owners in whatever manner they see fit.

Filmmaker gross receipts tax deduction: Film production companies operating in New Mexico may give Type 16 nontaxable transaction certificates to their New Mexico vendors for purchase of most goods and services counted as "direct costs" by industry accounting standards — except food and lodging. This provides gross receipts tax relief at the point of purchase. Certificates are obtained only from the Taxation and Revenue Department.

A qualified production company may execute nontaxable transaction certificates with its supplies for tangible personal property or services. The suppliers may then deduct their receipts from the gross receipts tax. Film production companies intending to take the income tax credit (see above) may not use the nontaxable transaction certificates.

Energy:
Renewable energy production credit: Each qualified energy generator may earn one cent ($.01) per kilowatt-hour for the first four hundred thousand megawatt-hours (=400,000,000 kilowatts) of electricity using a qualified energy source for ten consecutive years, beginning with the first year of production. Qualified energy generators are producers with at least ten megawatts generating capacity located in N.M. that produces electricity using a qualified energy resource and that sells that electricity to an unrelated person. Qualified energy resource means a resource that generates electrical energy by means of a fluidized bed technology (or similar low emissions technology) or zero-emissions generation technology that has substantial long-term production potential and that uses only biomass, solar light, solar heat, or wind.

Manufacturing:
Double weight sales factor: A corporation (or family of corporations filing together) with income from sources within N.M. as well as from sources outside the state apportions the income based on a three-factor formula. N.M. taxes the total corporate income times the average proportion of corporate sales, payroll, and property in N.M. The three factors (sales, payroll, and property) have equal weight (33.33 percent each) in the formula. For a limited time (through the year 2010) manufacturers may elect to use a modified formula that gives the sales factor a 50 percent weight, reducing the other two to 25 percent apiece. The sales factor now has twice the significance of the other two, thus, the "double-weighted sales factor formula."

For purposes of electing the four-factor apportionment method, "manufacturing" excludes construction, farming, power generation, and processing of natural resources, while allowing certain natural-gas-fired, wholesale power plants to qualify. The taxpayer, having elected to use the double-weighted formula, must use it for at least three consecutive years.

Investment tax credit (Investment Credit Act): Manufacturers may take a credit equal to 5 percent of the value of qualified equipment imported and put into use in a manufacturing plant in New Mexico, provided the manufacturer meets the criteria of hiring additional workers to earn the credit, as follows: for claims, one new worker employed for each; 0-$30,000,000 — $500,000 qualified equipment; over $30,000,000 — $1 million in qualified equipment.

The credit may be claimed for equipment acquired under an IRB. This is a double benefit because no gross receipts or compensating tax was paid on the purchase or importation of the equipment.

The credit is taken through the CRS-1 form. This is the form on which state and local gross receipts, compensating, and withholding taxes are paid to the state. The manufacturer simply reduces its payment of those state taxes (by as much as 85 percent per reporting period) until the amount of investment credit is exhausted. There also are provisions for issuing a refund when the credit balance falls under $500,000. The credit does not apply against local gross receipts taxes, so the full amount of those taxes remains due every month. Excluded from the manufacturer definition are construction, farming, certain types of power generation, and processing natural resources and hydrocarbons.

Aerospace:
Research and development tax deduction: Aerospace services are the research and development services sold or for resale to an organization for resale by the organization to the U.S. Air Force. When R&D services are sold to Phillips Laboratory for resale to the Air Force, the seller's receipts are deductible. If the R&D services are sold to an intermediary for resale to Phillips Laboratory for resale to the Air Force, those receipts are also deductible.

Aircraft manufacturing tax deduction: This incentive provides a gross receipts tax deduction for sale of aircraft by an aircraft manufacturer. To be deductible, sale must be by manufacturer; sale made by someone other than a manufacturer may still be taxable.

Aircraft refurbishing or remodeling tax deduction: Receipts from refurbishing, remodeling, or otherwise modifying transport category aircraft over sixty-five thousand pounds gross landing weight may be deducted from gross receipts.

Space gross receipts tax deductions: There are three separate deductions connected with the operation of a spaceport in New Mexico:
1. Receipts from launching, operating. or recovering space vehicles or payloads
2. Receipts from preparing a payload in New Mexico
3. Receipts from operating a spaceport in New Mexico
"Space" is defined as any location beyond altitudes of 60,000 feet above mean sea level. "Payload" means a system, subsystem, or other mechanical structure designed and constructed to perform a function in space. "Space operations" is defined as the process of commanding and controlling payloads in space. "Spaceport" is defined as the installation and related facilities used for the launching, landing, operating, recovering, servicing, and monitoring of vehicles capable of entering or returning from space.

Technology-Intensive Companies:
Research and development gross receipts tax deduction: Any service that is exported from the state, including research and development services, is not subject to New Mexico gross receipts tax. These services must be produced by a business with a New Mexico office, sold to an out-of-state buyer, and delivered and initially used out-of-state. This makes R&D a deductible transaction.

Rural software gross receipts tax deduction: A taxpayer whose primary business is providing software development services and who had no business location in New Mexico other than in a qualified area during the period for which a deduction under this section is sought. The company must have been established after July 1, 2002. Software development services include custom software design and development and web site design and development, but do not include software implementation or support services.

Rural, for purposes of this tax deduction, is defined as statewide except for an incorporated municipality with a population of more than 50,000 (Albuquerque, Las Cruces, Rio Rancho, and Santa Fe).

Technology jobs tax credit: This credit has two parts: a basic credit and an additional credit, each equal to 4 percent of the qualified expenditures on qualified research at a qualified facility. The credit amount doubles for expenditures in facilities located in rural New Mexico (as defined for this tax credit as anywhere outside Rio Rancho or more than three miles outside Bernalillo, Dona Ana, San Juan, or Santa Fe counties).

Eligible uses include: (1) Expenditures: Include a wide range of nonreimbursed expenses such as payroll, consultants, and contractors performing work in New Mexico; software, equipment, technical manuals, rent, operating expenses of facilities; but excludes expenditures on buildings owned by a government pursuant to an IRB or already owned by the taxpayer or an affiliate before February 2, 2000. (2) Research: Must be technological in nature and constitute elements of a process of experimentation leading to new or improved function, performance or reliability (not cosmetic, style). (3) Facility: A building or group, with land and machinery, equipment, and other real or personal property used in connection with the operation of the facility; excludes national labs.

Rates and Terms: (1) Basic credit: The taxpayer claims the credit within one year following the end of the year in which the expenditure was made. The claim is made by filing a form for approval with the Tax and Revenue Department. The amount approved is applied against the taxpayer's state gross receipts, compensating, and withholding liabilities until the credit is exhausted. (2) Additional credit: A taxpayer earns the additional credit by increasing its payroll. The annual payroll must increase by at least $75,000 over the base period and by at least $75,000 for each $1 million in qualified expenditures (=$40,000 in credit) it wishes to claim. The base period floats; it is defined as the 12-month period ending on the day one year prior to the day the taxpayer applies for the additional credit. The base period payroll amount is also to be adjusted for inflation so that merely keeping up with the inflation will not earn any credit. The taxpayer applies for approval of the credit by filing the appropriate form with the tax department; approved credit amounts may be applied against the taxpayer's income or corporate income tax liability; it is not refundable so any excess of credit over liability is carried forward.

Web hosting gross receipts tax deduction: Receipts from hosting worldwide web sites may be deducted from gross receipts. Hosting means storing information on computers attached to the Internet.

Telemarketing:
Telemarketing gross receipts tax exemption: Receipts from WATS (wide area telephone service) and private communications services are exempted from gross receipts tax and interstate telecommunications gross receipts tax act.

Tribal land
Intergovernmental business tax credit: A corporation engaged in growing, processing, or manufacturing may receive a credit for up to 50 percent of the total of all taxes imposed by an Indian nation, tribe, or pueblo located wholly or partly in New Mexico on income derived from new business activity on Indian land. This credit is limited to income from a new business established on tribal land after July 1, 1997. The credit is nonrefundable and can be applied against the existing tax liabilities only; an excess can be carried forward.

Other:
Distilling and brewing preferential tax rate: Microbreweries producing less than 5,000 barrels of beer annually and small wineries producing less than 560,000 liters of wine per year qualify for a preferential tax rate.

The Liquor Excise Tax Act imposes taxes on beer, wine, and spirituous liquors. The basic tax rate for wine is 45 cents per liter. Wine produced by a small winery (definition in opening sentence above) carries a tax of 10 cents per liter on the first 80,000 liters and 20 cents on production over that level up to 560,000 liters. The basic tax rate for beer produced by a brewery is 41 cents; beer produced by a microbrewery (defined above) is taxed at 8 cents per gallon.

New Mexico State Contact:
New Mexico Economic Development Partnership
851 University Boulevard S.E., Suite 200
Albuquerque, NM 87106
(505) 247-8500