Summary:

 Senate Bill 141 (SB 141) proposes amendments to New Mexico’s tax laws, including an increase in the corporate income tax rate, expanded nexus requirements for businesses without a physical presence in the state, and the introduction of a new gross receipts tax deduction for qualifying small businesses. The bill also includes a $100,000 appropriation to the Taxation and Revenue Department (TRD) to improve tax administration systems to accommodate these changes. SB 141 takes effect on January 1, 2026, with the provisions for corporate income tax rate changes applying to taxable years beginning on or after January 1, 2026. 

Legislation Overview:

 Senate Bill 141 (SB 141) increases the corporate income tax rate from 5 percent to 6.9 percent for taxable years starting in 2026, aiming to generate additional revenue for the state. This adjustment represents a significant increase in the tax liability for corporations operating in New Mexico. The bill also modifies the nexus rules for businesses without a physical presence in the state by redefining engaging in business to include entities with gross receipts exceeding $100,000 in the previous calendar year from sales or services sourced to New Mexico. This change ensures that remote sellers and marketplace providers are subject to gross receipts tax, aligning New Mexico’s tax code with current economic realities and national trends in taxation.

Additionally, SB 141 introduces a new gross receipts tax deduction of up to $100,000 for businesses that did not claim any other deductions, exemptions, or credits under the Gross Receipts and Compensating Tax Act during the prior calendar year. This provision is designed to benefit small businesses, encouraging compliance while simplifying the tax burden for those that do not utilize other tax benefits. To prevent abuse, companies that restructure to create subsidiaries to claim this deduction will be treated as a single entity for the purposes of determining eligibility. Businesses taking advantage of this deduction must report the amount separately, as required by TRD.

To support the implementation of these changes, SB 141 appropriates $100,000 from the general fund to TRD for contracting services and upgrading tax administration software. Any unspent funds will revert to the general fund at the end of fiscal year 2026.

Fiscal Implications

The proposed increase in the corporate income tax rate is expected to generate substantial revenue for the state, but it may also increase the tax burden on businesses, potentially impacting decisions regarding expansion or relocation to New Mexico. Expanding nexus rules to include remote sellers and marketplace providers is likely to increase gross receipts tax collections, as these entities will now be required to remit taxes on sales exceeding $100,000. The introduction of the new gross receipts tax deduction could slightly reduce revenues, but the impact is limited by the $100,000 cap and targeted eligibility criteria. Administrative costs for implementing the new deduction and nexus requirements are addressed by the $100,000 appropriation for TRD’s software and operational improvements. 

Current Law:

 Under current law, the corporate income tax rate is set at 5 percent, and remote sellers or marketplace providers without a physical presence in New Mexico are not taxed unless they meet existing nexus thresholds. Additionally, there is no gross receipts tax deduction specifically targeting businesses that have not claimed deductions, exemptions, or credits in the previous calendar year.