The Southwest is the fastest growing region of the country and New Mexico is right at the heart of it, offering the lowest effective tax rate for manufacturers in the nine-state Western region, and no inventory tax. In 2013, Governor Susana Martinez signed the New Mexico Jobs Package which will reduce the state’s corporate income tax rate 22 percent—from 7.6 percent to a top rate of 5.9 percent—by January 1, 2018. The state also has the lowest property tax burden in the nation—property here is assessed at only 33% of its market value.
Additionally, the state has also enacted a single sales factor for manufacturers without an investment threshold in New Mexico that will phase in over a five-year period to 100 percent beginning at 50 percent in taxable year 2014. This will abate the state corporate tax liability for most manufacturers and eliminates any penalties or obstacle for new investment.
New Mexico is supported by three interstate freeways, a vast railway system, and a number of regional and international airports, New Mexico offers direct access to much of the United States, as well as the international borders of Canada and Mexico. From New Mexico, it’s possible to reach Texas, Arizona, Colorado, Kansas, Oklahoma and Utah within one day’s trucking, and California markets in two days. Distribution companies, manufacturers, and other businesses are well-positioned here to serve both east and west coast clients.
- Electronics and semiconductors
- Aerospace and automotive
- Outdoor equipment
- Maquiladora suppliers
- Medical devices and pharmaceuticals
- Food and beverage products
- Renewable energy products
- No inventory tax
- Low property taxes
- Single-weighted sales factor
- No GRT on consumables
- Available labor supply
- Competitive wages and operating costs
- Efficient distribution network
- Low energy costs
- Access to the Borderplex / maquiladora region
- Exceptional R&D facilities
- Intel Corp.
- Honeywell Aerospace
- Ethicon Endo-Surgery
- Adelante Development Center
- Leprino Foods Co.
- Thomas & Betts Corp
- Mizkan Americas
- OSO BioPharmaceuticals
- Southwest Cheese
- Rio Grande
- Shamrock Foods CO.
- TransCore, Amtech Tech.
- S. Cotton
- El Encanto
- UTC Aerospace Systems
- Solitaire Homes
- R M S Foods
- Tyson Prepared Foods
Manufacturers Investment Tax Credit
Manufacturers may take a credit against gross receipts, compensating or withholding taxes equal to 5.125% of the value of qualified equipment when the following employment conditions are met:
- For every $500,000 of equipment, one employee must be added up to $30 million
- For amounts exceeding $30 million, one employee must be added for each $1 million of equipment
The credit may (also) 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 manufacturer simply reduces its tax payment to the state (by as much as 85% 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.
Single-Weighted Sales Factor
In January 2014, New Mexico began phasing in a single-weighted sales factor apportionment methodology for corporations whose principal business activity is manufacturing.
For the purposes of apportioning income, “manufacturing” excludes construction, farming, power generation, and processing natural resources including hydrocarbons.
Five-year policy changes are as follows:
- 2014: Double-weighted sales
- 2015: Triple-weighted sales
- 2016: 70% sales
- 2017: 80% sales
- 2018: Single-weighted sales
For more information on all incentives New Mexico has to offer, click here.
Brochure: Manufacturing in New Mexico