New Mexico Contractor Taxes and Licensing Guide

Yes. New Mexico has no classic sales tax, but its gross receipts tax (GRT) covers construction services, labor and incorporated materials included. The contractor owes it on total receipts at the rate for the construction site and may pass it to the customer as a separate line. Materials go into the job tax-free with a Type 6 NTTC.

Do New Mexico contractors pay tax on labor?

Yes, and that sets New Mexico apart from most of its neighbors. The tax isn't a sales tax on the buyer. It's the gross receipts tax (GRT), which the Taxation and Revenue Department (TRD) says "is imposed on businesses." Construction is squarely in it: TRD's filing guide says "service includes construction and all construction materials that will become part of the construction project." So your labor, the materials you install and your markup all land in gross receipts.

You owe the tax either way, but you can bill for it. TRD notes it's common for a business to pass GRT on to the purchaser, and if you do, show it as its own line on the invoice. Compare Arizona, where repair work carries no tax line and the contractor pays tax on parts at purchase instead.

Location matters more than where your shop sits. In TRD's GRT return instructions (revised July 1, 2025), the reporting location for "construction services and construction-related services performed for a construction project in New Mexico" is "the location of the construction site." A Las Cruces outfit doing a job in Albuquerque reports under Albuquerque's location code. See our labor vs. materials guide for how other states treat the same job.

How do NTTCs work for construction materials?

A nontaxable transaction certificate (NTTC) is the paper (or electronic record) that lets a supplier deduct a sale from its own gross receipts. For contractors the key one is Type 6. TRD's FYI-204 (revised August 24, 2026) says a Type 6 covers sales of construction materials "that will become ingredients or components of a construction project" that is subject to GRT on completion or is on tribal territory, plus construction services sold to you and leases of construction equipment used at the job site.

• Getting one. You request NTTCs through TRD's Taxpayer Access Point (TAP) with a New Mexico Business Tax Identification Number. A Type 6 requires a contractor's license verification, or a written statement if your trade doesn't need a CID license.
• Subs. A subcontractor can deduct receipts from construction services sold to a contractor who gives it a Type 6 NTTC.
• Wrong project. FYI-204 warns that materials bought with an NTTC become taxable if used on a project not subject to GRT on completion. TRD's example is lumber bought in New Mexico and built into a job out of state.
• Tools and supplies. The Type 6 language covers materials that become part of the project. Ask TRD before using a certificate for anything you don't build into the job.

When do you owe New Mexico compensating tax?

Compensating tax is New Mexico's use tax. TRD calls it a tax "imposed on persons using tangible property, services, licenses or franchises in New Mexico" when the out-of-state seller didn't owe GRT. The rate matches the GRT rate for the location where you use the item. You report it on Form TRD-41412, due by the 25th of the month after the period. Our use tax for contractors page covers when this comes up.

Which licenses does New Mexico's CID require?

The Construction Industries Division (CID) of the Regulation and Licensing Department licenses businesses, not just people. RLD says CID issues licenses to business entities that "employ or are owned by one or more Qualifying Parties (QP)." The QP passes the trade exam for the classification plus a business and law exam (or an approved course), and the company files with a license bond and a tax registration certificate from TRD. Read our contractor license guide for the general picture.

What does New Mexico charge in income and franchise tax?

Owners of sole proprietorships, partnerships and most LLCs pay personal income tax on profit at graduated rates. TRD's 2025 rate table tops out at 5.9% on taxable income over $210,000 for single filers ($315,000 for joint filers), with a 4.9% bracket starting at $100,000. Corporations file corporate income tax and pay a "$50 annual Franchise Tax," per TRD. GRT is on top of all that, and it's owed on receipts, not profit. Plan your quarterly payments with the quarterly estimated tax calculator.

Who needs workers' comp in New Mexico?

The general rule, per the Workers' Compensation Administration (WCA): "All employers of three or more workers are required to carry workers' compensation coverage." Construction is stricter. If your work requires a license under the Construction Industries Licensing Act, you must carry coverage "regardless of the number of employees." Covered employers also pay a quarterly assessment of $4.80 per covered employee, split $2.25 from the worker and $2.55 from the employer. The WCA points employers to an insurance agent to buy a policy. More on premiums in our workers' compensation guide.

What local taxes should I watch in New Mexico?

• Local GRT. Counties and cities add their own increments, so the combined rate differs by location code. TRD says that starting July 1, 2025, rates change only in July unless there's a special situation such as a natural disaster.
• Look it up per job. Use TRD's Gross Receipts Location Code and Tax Rate Map for each job address before you invoice.
• Get paid. New Mexico has its own notice and filing rules for mechanics liens; learn them before a slow payer tests you.
• Neighbors. Cross-border work? See Arizona, Colorado and Utah for their rules.