Forgetting the $50 corporate franchise tax on a dormant or unprofitable New Mexico S corp. It is expressly owed "whether actively engaged in business or not," is owed even under P.L. 86-272 immunity, and is owed for any fraction of a year — so a zero-revenue New Mexico S corp still must file Form S-Corp and pay $50. Compounding it, the corporate franchise tax is easy to miss because national guides frequently and wrongly report that New Mexico repealed it.
Recognized automaticallyPTET available
S-corp election in New Mexico
In short
$50 annual corporate franchise tax owed by every S corporation, regardless of income or activity, plus 5.9% corporate income tax on any entity-level income and 4.9% withholding on nonresident owners.
Does New Mexico recognize the federal S election?
New Mexico automatically recognizes the federal S election for income-tax purposes — no separate state election is required. But New Mexico is unusual: the S corp files Form S-Corp, formally titled the "Sub-Chapter S Corporate Income and FRANCHISE Tax Return," and remains liable for the $50 corporate franchise tax even though its income passes through. The return is due on the due date of the federal return, and filing/paying electronically extends the due date to the last day of that month. The entity must also withhold on nonresident owners.
Tax the entity still owes
FRANCHISE TAX: $50 per year or any fraction of a year. FYI-350 (Rev. 01/02/2025) states it is "the obligation of every domestic and foreign corporation, INCLUDING S CORPORATIONS, that either engages in business in New Mexico or exercises its corporate franchise in this state whether actively engaged in business or not." It is due at the same time as the corporate income tax and is reported on the Form S-Corp return. It is owed even where the corporation is immune from income tax under P.L. 86-272, and even where a QSub is disregarded federally but is registered, doing business, or exercising its franchise in New Mexico. Each member of a unitary/consolidated group registered in the state pays its own $50. CORPORATE INCOME TAX: for taxable years beginning on or after January 1, 2025 the rate is a flat 5.9% of taxable income (previously 4.8% up to $500,000 and $24,000 plus 5.9% on the excess). An S corp can owe this on built-in gains and excess net passive income. NONRESIDENT WITHHOLDING: the entity must deduct and withhold 4.9% of each nonresident owner's allocable share of net income and remit annually. New Mexico's gross receipts tax also applies broadly to services and is a separate, often larger, cost.
Registering for payroll
Register with the New Mexico Taxation and Revenue Department for a Business Tax Identification Number (BTIN) through the Taxpayer Access Point (TAP) — this single registration covers wage withholding AND, importantly, gross receipts tax, which most service S corps in New Mexico will also owe. Register separately with the New Mexico Department of Workforce Solutions for unemployment insurance (SUTA). Annual withholding information returns are governed by FYI-330. There is no state paid-family-leave payroll tax.
Annual filings
Form S-Corp (New Mexico Sub-Chapter S Corporate Income and Franchise Tax Return) — due on or before the due date of the federal return; taxpayers who file AND pay electronically get an extended due date to the last day of the month in which the federal return is originally due. The $50 franchise tax is remitted with it. New Mexico Schedule K-1 equivalents to owners; annual nonresident withholding remittance at 4.9%. Gross receipts tax returns (monthly/quarterly/semiannual depending on volume) via TAP. Quarterly UI wage reports to the Department of Workforce Solutions. New Mexico Secretary of State BIENNIAL report for corporations — $25, due on or before the fifteenth day of the third month following the end of the taxable year, with a $200 late penalty and an additional $200 reinstatement fee if revoked.
Pass-through entity tax
Yes — New Mexico offers an entity-level tax election for pass-through entities. The election is made ANNUALLY and is made simply by filing the required return (Form PTE, Form S-Corp, or Form FID-1) and completing the entity-level tax computation section on that return; it applies only to that tax year. The rate is the higher of the top personal or top corporate income tax rate, currently 5.9%. Note the two different 5.9% and 4.9% figures are distinct: 5.9% is the entity-level/PTET and corporate income tax rate, while 4.9% is the mandatory nonresident owner withholding rate under FYI-350 — do not conflate them. The Taxation and Revenue Department's pass-through entity page fetched 2026-07-30 shows the election as currently available with no federal-SALT-cap sunset.
The mistake owners make most often in New Mexico
Filing your federal Form 2553
Businesses operating in New Mexico send Form 2553 to the IRS Ogden service center — fax 855-214-7520. Full address and filing checklist for New Mexico.
Frequently asked questions
Does New Mexico require a separate S-corporation election?
No. New Mexico does not require a separate state election. New Mexico automatically recognizes the federal S election for income-tax purposes — no separate state election is required. But New Mexico is unusual: the S corp files Form S-Corp, formally titled the "Sub-Chapter S Corporate Income and FRANCHISE Tax Return," and remains liable…
What tax does an S corporation pay in New Mexico?
$50 annual corporate franchise tax owed by every S corporation, regardless of income or activity, plus 5.9% corporate income tax on any entity-level income and 4.9% withholding on nonresident owners.
Where do I file Form 2553 from New Mexico?
With the IRS Ogden service center. Fax 855-214-7520, or mail to Department of the Treasury, Internal Revenue Service, Ogden, UT 84201.
What is the most common S-corp mistake in New Mexico?
Forgetting the $50 corporate franchise tax on a dormant or unprofitable New Mexico S corp. It is expressly owed "whether actively engaged in business or not," is owed even under P.L. 86-272 immunity, and is owed for any fraction of a year — so a zero-revenue New Mexico S corp still must file Form S-Corp and pay $50. Compounding it, the corporate franchise tax is easy to miss because national guides frequently and wrongly report that New Mexico repealed it.
Compare with other states: New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon.
Sources
File your Form 2553 correctly
Scorply completes your federal election and includes a New Mexico guide in your packet, so you know exactly what else you owe here.
Start my Form 2553Researched from official New Mexico sources and verified July 30, 2026. State tax rules change. This is general information, not tax advice — confirm with the state or a CPA before you rely on it.