New Mexico Gross Receipts Tax (GRT) Audit Protest

The situation

Mesa IT Consulting LLC is a 9-person software development and IT services firm in Albuquerque, NM. In March 2026 they received an NM TRD Notice of Assessment: $28,400 in Gross Receipts Tax + $2,840 in penalties + $1,890 in interest = $33,130 total, covering the 2022–2024 period. TRD's theory: Mesa IT collected GRT on its software licenses but not on "IT consulting and support services," which TRD says are also GRT-taxable.

Mesa IT has 45 days to protest to TAHO. Their accountant quoted $4,500 for "protest preparation."

What the Mesa IT owner doesn't know: NM has a deduction under NMSA § 7-9-46 for receipts from professional services, but it's narrow (applies only to licensed professionals practicing their licensed profession). NM also has § 7-9-47: receipts from services performed for customers outside NM are deductible if the customer received the benefit outside NM. Mesa IT has ~35% of its consulting revenue from clients in Texas and Colorado, those receipts may be deductible under § 7-9-47. TRD's assessment appears to have applied GRT to all service receipts without analyzing the out-of-state client deduction.

Who receives this

New Mexico service businesses (IT, consulting, contractors, leasing companies) receiving NM TRD GRT audit assessments. Primary segment: professional services firms and software companies with mixed NM/out-of-state customer bases that incorrectly had GRT applied to out-of-state service receipts.

Why the agency will not advise you

NM's unique GRT structure (taxes services, not just goods) creates widespread confusion about what is and isn't taxable, and what deductions apply. TRD cannot explain to audit respondents how to challenge its own assessments. No self-serve NM GRT protest navigator found.

Key facts, with sources

• New Mexico's Gross Receipts Tax (NMSA §§ 7-9-1 through 7-9-116) differs fundamentally from most states' sales taxes: it taxes the SELLER on ALL gross receipts from business activities in NM, including services, software, leases, and sales, rather than taxing the purchaser only on tangible personal property. NM GRT rates are combined state + county/municipality rates, ranging from approximately 5.125% (state only, remote areas) to 9.6875% (Taos Pueblo). NM TRD administers GRT compliance; when TRD concludes an audit and issues a Notice of Assessment, the business has 45 days to file a written protest to the Tax Administration Hearings Office (TAHO), an independent hearing body. If TAHO rules adversely, the taxpayer can appeal to the New Mexico Court of Appeals. NM TRD's Taxpayer Access Point (TAP) portal handles GRT filings, payments, and account management, not audit protest strategy. The most common GRT audit findings: (1) uncollected GRT on service receipts that the business incorrectly treated as non-taxable; (2) disputed application of the professional services deduction (§ 7-9-46); (3) incorrect GRT rate applied (wrong combined state+local rate for the delivery location); (4) nexus disputes (business with NM customers but limited NM physical presence). Source: Gross Receipts Tax Overview — New Mexico Taxation and Revenue Department · Audit — New Mexico Taxation and Revenue Department · New Mexico Sales Tax Guide: Rates and Compliance — Numeral

When to bring in a professional

Self-serve responses fit routine cases: clear facts, amounts a business can absorb, and a deadline still ahead of you. Bring in a licensed professional when the amount at stake is large relative to their fee, the facts are genuinely disputed, criminal exposure is possible, or the deadline has already passed. A short paid consultation to sanity-check your plan is often worth it even when you handle the filing yourself.

All sources for this guide

1. Gross Receipts Tax Overview — New Mexico Taxation and Revenue Department
2. Audit — New Mexico Taxation and Revenue Department
3. New Mexico Sales Tax Guide: Rates and Compliance — Numeral