Reminder: New Mexico sales tax sourcing changes effective July 1

Jul 07, 2021
Jul 07, 2021
0 min. read

The New Mexico Department of Taxation and Revenue recently reminded taxpayers of several important changes to the sourcing and collection of the state gross receipts and compensating tax (sales and use tax). Effective July 1, 2021, legislation enacted in 2019 (House Bill 6) and 2020 (House Bill 326), will significantly impact the sourcing of sales and purchases from both in and out-of-state sellers and make several other changes to the gross receipts and compensating tax code as highlighted below.

Destination sourcing

Effective July 1, 2021, sales of certain services and tangible personal property will transition from an ‘origin-based’ methodology to a ‘destination-based’ methodology. Property received by a purchaser at the location of the seller will remain subject to tax at the seller’s location. Property received by the purchaser at a location other than the seller’s will now be sourced using a hierarchy of locations as follows: 

  • If the property is not received by the purchaser at a business location of the seller, the location indicated by instructions for delivery to the purchaser, or the purchaser's donee, when known to the seller
  • If the above section does not apply, the location indicated by an address for the purchaser available from the business records of the seller that are maintained in the ordinary course of business; provided that use of the address does not constitute bad faith
  • If the sections above do not apply, the location for the purchaser obtained during consummation of the sale, including the address of a purchaser's payment instrument, if no other address is available; provided that use of this address does not constitute bad faith, or
  • If the sections above do not apply, including a circumstance in which the seller is without sufficient information to apply those standards, the location from which the property was shipped or transmitted.

The performance of certain services are also subject to the transition to destination-based sourcing. Services will now be sourced as follows:

  • For professional services performed in New Mexico, other than construction-related services, or performed outside New Mexico when the product of the service is initially used in New Mexico, the location of the performer of the service or seller of the product of the service, as appropriate,
  • For construction services and construction-related services performed for a construction project in New Mexico, the location of the construction site,
  • For services with respect to the selling of real estate located in New Mexico, the location of the real estate,
  • For transportation of persons or property in, into or from New Mexico, the location where the person or property enters the vehicle, and
  • For services other than those described above, the location where the product of the service is delivered.

Amended sourcing regulations (N.M. Code R. section are also being promulgated by the department and will replace existing regulations, effective July 1, 2021. 

Impact of sourcing changes on remote sellers

On July 1, 2019, New Mexico began enforcement of a $100,000 economic nexus threshold for remote sellers without a physical presence in the state making sales to in-state customers. Remote sellers were generally required to collect the state gross receipts tax rate on goods of 5.125%, but did not collect local gross receipts taxes. Because of the sourcing changes discussed above, remote sellers may need to begin collecting additional local gross receipts taxes based on the location of the customer effective July 1, 2021. 

Additionally, some remote sellers providing services may not have been subject to New Mexico gross receipts tax because the services were performed entirely outside the state, even though the ultimate customer was located in New Mexico. Effective July 1, 2021, remote sellers performing services outside New Mexico for in-state customers may need to begin collecting gross receipts tax on those sales. The rates and sourcing are dependent on the type of service and the specific facts involved in providing the service. 

Remote sellers should evaluate these sourcing changes and make any necessary implementation adjustments in order to properly collect applicable local taxes.


Historically, New Mexico taxpayers reported gross receipts, compensating and withholding taxes on a combined form CRS-1. Beginning July 1, 2021, new forms have been created to report gross receipts, compensating and withholding taxes separately. Taxpayers utilizing New Mexico’s online Taxpayer Access Point site should see these changes reflected in their account beginning July 6, 2021.


New Mexico’s new sourcing and reporting rules have significant implications for companies that sell products and services into the state. Service providers that may have avoided nexus with New Mexico historically should re-evaluate their nexus and reporting profile. New Mexico taxpayers or remote sellers with questions about these changes should contact their state and local tax adviser.

RSM contributors

  • James Barash

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