Tax Deductions

Gross Receipts Tax Deduction for Services Sold Out-of-State (NM Taxation & Revenue Dept.)
Services exported from New Mexico are not subject to gross receipts tax. To qualify for the deduction, the services must:

  • be produced by a business with a New Mexico office,
  • sold to an out-of-state buyer,
  • then delivered and initially used out-of-state.

Manufacturing Consumables Tax Deduction (NM Taxation & Revenue Dept.)

New Mexico is phasing in a deduction for components and raw materials used in manufacturing or production. The deduction is:

  • 40% of receipts received in calendar year 2014,
  • 60% of receipts received in calendar year 2015,
  • 80% of receipts received in calendar year 2016, and
  • 100% of receipts received on or after January 1, 2017.

Deductible consumables are defined as tangible personal property that is used, incorporated into, destroyed, depleted, or transformed in the process of manufacturing a product. Approved consumables include electricity, fuels, water, manufacturing aids and supplies, chemicals, gases, repair parts, spares and other tangibles used to manufacture a product.

Deductible consumables do not include inputs for the preparation of meals for immediate consumption, power generation, or processing natural resources – including hydrocarbons.

Rural Software Development Gross Receipts Tax Deduction (NM Taxation & Revenue Dept.)

New Mexico allows a gross receipts tax deduction for the sale of software development services when the service is performed in a rural area. The company must have been established after July 1, 2002.

Software development services include:

  • custom software design and development, or
  • web site design and development. but

However, qualifying software development services does not include software implementation or support services.