Joseph Montoya Building
1100 St. Francis Drive
Santa Fe, NM 87505
New Mexico Taxation
and
Revenu Department
For any questions related to taxa-
tion, please contact our Call Center:
1-866-285-2996.
The Taxation and Revenue Depart-
ment conducts free, three-hour
workshops monthly around the
state. Please check the web site at
www.tax.newmexico.gov to find the
calendar under “News and Alerts” .
For more detailed information
about the tax treatment of nonprof-
it organizations, including 501(c)(3)
groups, please check publication
FYI-103, Information for Nonprofit
Organizations. FYI-103 is available
on our web site. Click on “forms
and publications” and scroll down,
or write to us at the above address
for a copy.
Other agencies also have responsi-
bility for nonprofit activity. A listing
follows.
OTHER AGENCIES:
1. The IRS is the agency that first
determines nonprofit status. Con-
sult the IRS first.
Internal Revenue Service
5338 Montgomery Blvd. NE
Albuquerque NM 87109
(213) 894-2289 (California)
www.irs.gov
Tax Advice for New Mexico’s Nonprofit Organizations...
Rev. 6/18
501(c)(3)
Nonprofit Groups
& New
Mexico’s
Gross Receipts
Tax
Tax Information &
Policy
2. The Attorney General oversees activi-
ties of charitable organizations in New
Mexico.
Attorney General of New Mexico
Registry of Charitable Organizations
111 Lomas Blvd. NW Ste. 300
Albuquerque, NM 87102
(505) 222-9000
www.ago.state.nm.us
3. The Regulation and Licensing Depart-
ment handles questions on games of
chance, alcohol at special events, and
similar issues.
Regulation and Licensing Department
Alcohol and Gaming Division
725 St. Michael’s Drive
Santa Fe, NM 87505
(505) 827-7066 and 827-7094
www.rld.state.nm.us
4. The Secretary of State registers cer-
tain nonprofits for incorporation.
Secretary of State
325 Don Gaspar, Suite 300
Santa Fe, NM 87503
(505) 827-3600
http://www.sos.state.nm.us/
501(c)(3) Organizations
Nonprofit organizations recognized by the federal
government under Section 501(c) of the Internal
Revenue Code enjoy tax-exempt status in New
Mexico to varying degrees for income (not pur-
chases) covered by their IRS letters of authoriza-
tion. Federal law distinguishes among many types
of nonprofit organizations. 501(c)(3) groups are
primarily religious, charitable or educational in
purpose.
New Mexico views 501(c)(3) nonprofit organiza-
tions as engaging in business. The exemptions the
state grants are for property tax, income tax, and
gross receipts tax. To be exempt from gross re-
ceipts tax, 501(c)(3) business income must relate
to the group’s mission authorized by the IRS. Unre-
lated income is fully taxable.
Tax-exempt status applies to the organization and
not to its individual members.
PLEASE NOTE: Gross receipts tax is the largest
area of misunderstanding. The 501(c)(3) organiza-
tion must distinguish between what it receives as
exempt income and what it buys. Purchases may
or may not be taxable. In New Mexico the gross
receipts tax structure holds the vendor or lessor,
not the buyer or lessee, responsible for taxes on
transactions. Unless the law provides the business
with a deduction for a transaction, the business
will likely recover its tax costs, like any other over-
head, from the customer no matter who the cus-
tomer is!
There is a fundamental difference between New
Mexico and sales tax states where liability for tax
usually rests on the buyer. In sales tax states an
exemption relieves the buyer from tax liability. In
New Mexico it is the business that must be re-
lieved of liability through a nontaxable transaction
certificate, or it will pass the tax to the customer.
What a Nonprofit May Buy
The only purchase a 501(c)(3) nonprofit organiza-
tion can make without paying a vendor’s passed-
along gross receipts tax is a purchase of tangible
personal property. Intangible personal property
and construction materials are ineligible, unless
the construction materials are sold to a 501(c)(3)
organized for the purpose of providing home own-
New Mexico is fortunate to have so
many nonprofit organizations willing to
give their time and effort to improve
quality of life here. Without them state
and local governments would be
stretched to provide many more goods
and services that residents and visi-
tors need and depend upon.
Nonprofit groups receive
income not only from donations but
from fees, sales of tangible personal
property, sales of services, space rent-
als — in short, anything most for-profit
businesses consider income sources.
Nonprofit organizations also
buy goods and services. It is this activ-
ity that gives rise to most of the mis-
understanding in New Mexico about,
“But we’re tax exempt!”
This brochure explains in
general terms how the gross receipts
tax affects the income of a group orga-
nized under 501(c)(3) of the Internal
Revenue Code. It discusses the 501
(c)(3)’s purchases and explains
“exemptions” and “deductions.” It
surveys the most frequent nonprofit
problems. Of specific value is a para-
graph on construction purchases,
often a difficulty for vendors and their
501(c)(3) customers.
Special to
501(c)(3)
Nonprofits
ership opportunities to low-income families.
Vendors of services performed in New Mexico
and lessors of property used in New Mexico do
not receive deductions for transactions with non-
profit organizations. Their gross receipts are fully
taxable, so they pass the tax to you either by
separately stating the tax at the time of sale or by
charging one price and later separating the tax at
report and payment time.
Vendors of tangible personal property receive
deductions when you give them our state’s Type
9 nontaxable transaction certificate (NTTC). That
certificate is the vendor’s evidence of a tax-
deductible transaction. When the vendor’s trans-
action is deductible, there is no tax to recover
from you. The vendor must report deductible
transactions even when no tax is due. Not all
501(c) categories may deliver NTTCs. Request
publication FYI-103, Information for Nonprofit
Organizations.
Construction is a service. All materials that be-
come ingredients or components of a construc-
tion project are part of the service. A construction
contractor will recover gross receipts tax from its
customer— nonprofit, government, or otherwise.
501(c)(3) organizations organized for the pur-
pose of providing homes for low-income families
may use a Type 9 NTTC to purchase construction
materials for use in these homes. Organizations
organized for other purposes may not give a Type
9 NTTC to the vendor of construction materials
even if your organization does its own construc-
tion. Such materials are not tangible personal
property when intended for a construction pro-
ject.
Use of hotel rooms, banquet halls and other rent-
ed spaces are licenses or “intangible” property.
Your organization and its members can expect to
pay gross receipts tax billed by the business.
Meals and other tangibles that a 501(c)(3) group
buys for conferences, retreats and meetings are
deductible to the vendor with your delivery of a
Type 9 NTTC. The vendor may not deduct sales of
tangibles to individual members of 501(c)(3)
groups.
What Is an “Exemption”?
An exempt receipt is not taxable. It requires no report.
If all receipts of a group are exempt, it need not regis-
ter with the Department unless it must do so for anoth-
er tax program; e.g., to withhold and pay withholding
tax for employees.
What Is a “Deduction” ?
A deduction is a receipt that is not taxable but is re-
portable to the Department. Any business with deduct-
ible receipts registers with TRD and maintains proof of
deductions taken. A business needs a Type 9 nontaxa-
ble transaction certificate or other evidence from you
to justify its deductible sale of tangible personal prop-
erty to your organization.
Applying for 501(c)(3) Status
The first stop is the Internal Revenue Service. Go to
the IRS web site at www.irs.gov and search for 501(c)
(3) information, or write to the IRS address in this bro-
chure.
After the IRS recognizes the group’s status, there is
nothing more to do for New Mexico gross receipts tax
unless you have employees, unrelated income, or you
wish to deliver Type 9 NTTCs to vendors of tangibles.
In the latter case you must register with TRD to receive
the CRS identification number that appears on the
NTTCs your organization presents to vendors.
How To Apply for Type 9 NTTCs
Attach a copy of your IRS letter of authorization to your
application for New Mexico business tax identification
number (form ACD-31015). Once you have received
your identification number, you may create an account
and access NTTCs online on the Taxpayer Access Point
(TAP) web site, www.tap.state.nm.us.
New Mexico Taxation and Revenue forms are available
on our web site at www.tax.newmexico.gov. Click on
“Forms and Publications”.■
