New Mexico Franchise Tax: The $50 Annual Corporate Franchise Tax and Who Owes It
New Mexico Franchise Tax: The $50 Annual Corporate Franchise Tax and Who Owes It
The New Mexico franchise tax is one of the smallest bills a business will ever receive, but it causes more confusion than almost any other state tax. The fee is $50 a year. It applies to corporations, including S corporations, whether or not the corporation earned income that year. It does not apply to a standard LLC. Because the rule depends on how your entity is taxed rather than what you call it, many owners either pay it when they don't owe it or miss it when they do.
This guide covers the $50 annual corporate franchise tax, who owes it, who is exempt, how it fits with the other taxes New Mexico businesses deal with, and what to confirm with the Taxation and Revenue Department (TRD) before you file.
This is informational content, not legal or tax advice. Your tax treatment depends on your entity type, any tax elections you have made, and your activity in New Mexico. Talk with a qualified CPA or attorney before you make decisions about your entity or your filings.
What the New Mexico franchise tax is
The corporate franchise tax is a flat $50 per year. It is separate from the corporate income tax, which is based on taxable income. New Mexico charges the franchise tax for the privilege of a corporation doing business or exercising its corporate franchise in the state. That privilege is the basis of the tax, which is why it can apply even to a corporation with no income or no activity in a given year.
The tax is reported on Form CIT-1, the Corporate Income and Franchise Tax Return. The same form is used for the corporate income tax, so a corporation that files a CIT-1 reports the $50 franchise tax on that return.
The fee itself is small. The costly mistake is assuming a quiet year is a zero year. A corporation that lost money or had no sales still owes the $50 if it was doing business in New Mexico during that tax year.
Who owes the $50 corporate franchise tax
Every domestic and foreign corporation that does business or exercises its corporate franchise in New Mexico owes the tax. That includes:
- New Mexico corporations formed in the state with Articles of Incorporation filed with the Secretary of State.
- Foreign corporations organized under another state's law that are doing business in New Mexico.
- S corporations. A federal S corporation election does not remove the New Mexico franchise tax. An S corporation still files and pays the $50 each year it is subject to the tax.
- Corporations with no income. The tax applies even when the corporation reports a loss or no revenue.
Whether a particular activity counts as doing business in New Mexico is a question to confirm with TRD. Do not assume that a small amount of activity, or activity from an out-of-state office, falls outside the tax without checking.
Who does not owe it
New Mexico exempts a few categories from the franchise tax. Insurers, pension trusts and tax-exempt nonprofit organizations do not owe it. If your organization believes it fits one of these categories, confirm the exemption and any paperwork required with TRD before you stop filing, since an exemption you assume but never documented can cause problems later.
A standard LLC does not owe the franchise tax. That includes a single-member LLC treated as a disregarded entity and a multi-member LLC treated as a partnership for federal tax purposes. These entities are taxed as pass-throughs, so the franchise tax does not apply to them by default.
The LLC trap: when an LLC owes the franchise tax
An LLC owes the franchise tax only if it elects to be taxed as a corporation. An LLC that makes that election files a CIT-1 and owes the $50 annual corporate franchise tax, the same as any other corporation. The election changes the tax treatment, not the state filing status, so an LLC that is taxed as a corporation has more filings than a default LLC.
Owners often ask whether New Mexico charges a separate LLC franchise tax. It does not. New Mexico LLCs have no LLC franchise tax and no annual report fee. The only LLC filing fee at formation is the $50 for the Articles of Organization. New Mexico LLCs file no annual or biennial report with the Secretary of State.
If you are choosing between an LLC and a corporation, the franchise tax is rarely the deciding factor. The bigger issues are how profits will be taxed to owners, how you plan to pay yourself, and whether you need to raise outside capital. Those questions belong with a CPA.
How the franchise tax fits with other New Mexico business taxes
Most New Mexico businesses face a short list of state obligations. The table below summarizes the items covered in this guide.
| Item | Who owes or files it | Amount or rate | Agency |
|---|---|---|---|
| Corporate franchise tax | Corporations, including S corporations, doing business in New Mexico | $50 per year | TRD, on Form CIT-1 |
| Corporate income tax | Corporations with taxable income | Flat 5.9% for tax years beginning on or after January 1, 2025 | TRD, on Form CIT-1 |
| Corporate biennial report | Corporations | $25 | Secretary of State |
| LLC annual or biennial report | LLCs | Not required | Not applicable |
| Articles of Organization | LLCs at formation | $50 | Secretary of State |
| Articles of Incorporation | Corporations at formation | $100 filing fee | Secretary of State |
| Gross receipts tax | Businesses receiving gross receipts from taxable activity | State rate 4.875%, combined rates 5.25% to 9.4375% depending on location | TRD |
| Business Tax Identification Number | Businesses registering with TRD | No charge | TRD |
Note that the Business Tax Identification Number, formerly known as the CRS number, is a tax registration rather than a license. New Mexico has no general statewide business license. Cities and some counties may charge their own flat annual registration, and the amount varies by jurisdiction, so confirm it with your city or county clerk.
The corporate income tax and the 5.9% rate
The corporate income tax is a flat 5.9% of taxable income for tax years beginning on or after January 1, 2025. The corporate income tax and the $50 franchise tax are both reported on CIT-1, so a corporation with taxable income files one return and pays both amounts.
Owners of pass-through entities deal with a different tax. New Mexico's personal income tax is graduated, with rates from 1.5% to 5.9% for tax years beginning on or after January 1, 2025. For single filers, the 5.9% top rate applies to taxable income above $210,000. Owners of pass-through businesses generally report their share of business income on their personal returns, so ask a CPA how your structure affects your personal filing.
Gross receipts tax instead of a sales tax
New Mexico has no sales tax. It uses a gross receipts tax, which is imposed on the seller's receipts rather than charged to the customer as a separate sales tax line. The state gross receipts tax rate is 4.875%. Combined state and local rates run from 5.25% to 9.4375% under the schedule effective July 1, 2026 through June 30, 2027. Local rates vary by location, so confirm the rate that applies where you do business.
Many new owners confuse the gross receipts tax with the franchise tax because both are paid to TRD. They are separate obligations with separate purposes. Registering for a Business Tax Identification Number is the usual first step if you will receive taxable gross receipts. You can check whether you must register on TRD's page at https://www.tax.newmexico.gov/businesses/who-must-register-a-business/.
Corporate biennial report and related filings
A New Mexico corporation files a corporate report with the Secretary of State, and the fee is $25. The first report is due within 30 days after the certificate of incorporation is issued. After that, reports are due biennially on or before the fifteenth day of the fourth month following the end of the corporation's taxable year.
Keep the report and the franchise tax on separate calendars. The Secretary of State report is a corporate filing with a $25 fee, and the franchise tax is paid through TRD on Form CIT-1. Missing one does not excuse the other.
New Mexico also has no statewide DBA or assumed-name registration. A sole proprietor, general partnership, LLC or corporation that trades under a different name does not file a separate statewide assumed-name form. An LLC that will trade under a different name states that name in its Articles of Organization.
How New Mexico compares with Texas and Delaware
Texas and Delaware also have franchise taxes, and they are calculated differently from New Mexico's flat $50 fee. Texas uses its own franchise tax structure, and Delaware has its own franchise tax calculation for corporations. Because the headline numbers are not comparable, check each state's tax agency or corporate filing site before you decide where to form or where to register. For Texas, use the Texas Comptroller of Public Accounts. For Delaware, use the Delaware Division of Corporations. Compare the actual filing obligations and the annual cost for your structure, not just the state's name on the franchise tax.
Questions to confirm with TRD before you file
Confirm these details directly with TRD before relying on them:
- The CIT-1 due date for your tax year, and the filing method you should use.
- Whether the full $50 applies in a partial first year or whether it is prorated.
- What level of activity counts as doing business or exercising the corporate franchise for your specific situation.
- How an S corporation should report its franchise tax and income tax on CIT-1.
- The local gross receipts tax rate for each location where you sell taxable goods or services.
Write down the answers and the name of the TRD representative or the date of the online guidance you used. That record protects you if a notice arrives years later.
Official New Mexico resources
- New Mexico Taxation and Revenue Department: https://www.tax.newmexico.gov/
- TRD guidance on who must register a business: https://www.tax.newmexico.gov/businesses/who-must-register-a-business/
- New Mexico Secretary of State business services: https://www.sos.nm.gov/business-services/
- SOS Enterprise Business Filing System: https://enterprise.sos.nm.gov/
- Business entity search: https://enterprise.sos.nm.gov/search
- New Mexico Small Business Development Center: https://www.nmsbdc.org/
The bottom line
If you own a standard LLC, you generally do not owe the New Mexico franchise tax, and you do not file an annual report with the Secretary of State. If you are a corporation, including an S corporation, or an LLC that elects corporate treatment, you owe the $50 annual corporate franchise tax even in a year with no income. Confirm your status, your filing deadline, and any local registration before the first filing season.
This article is informational only and is not legal, tax or accounting advice. For complex situations, including multistate activity, changes in ownership, or a choice between entity types, consult a qualified CPA or attorney licensed in New Mexico.