New Mexico taxes adult-use cannabis sales two ways: a state cannabis excise tax and the regular gross receipts tax that applies to most sales in the state. The excise tax is 13% through June 30, 2026 and rises to 14% on July 1, 2026, with another one-point increase every July 1 until it caps at 18% in 2030.1New Mexico Taxation and Revenue Department. Cannabis Excise Tax Gross receipts tax adds roughly another 5% to 9% depending on where the store is located. Medical cannabis sales are exempt from both.
The Cannabis Excise Tax Rate
The excise tax is charged on the price the customer actually pays for adult-use cannabis, and the retailer owes it directly to the state.2Justia. New Mexico Code 7-42-3 – Cannabis Excise Tax It covers flower, edibles, extracts, and every other non-medical cannabis product.
The legislature wrote the annual increase into the statute, so each July 1 brings a scheduled jump:1New Mexico Taxation and Revenue Department. Cannabis Excise Tax
- July 1, 2025 through June 30, 2026: 13%
- July 1, 2026 through June 30, 2027: 14%
- July 1, 2027 through June 30, 2028: 15%
- July 1, 2028 through June 30, 2029: 16%
- July 1, 2029 through June 30, 2030: 17%
- July 1, 2030 and after: 18% (permanent cap)
The mid-year change matters for retailers. A sale on June 30 owes the lower rate; the same product rung up the next morning owes the higher one. Point-of-sale systems need to flip over at midnight, and any return covering a straddle period has to apply the correct rate to each transaction by actual sale date.
Gross Receipts Tax Stacks on Top
Cannabis retailers also owe New Mexico’s gross receipts tax, which applies to nearly every business in the state. The state base rate is 4.875%, and cities and counties layer their own increments on top. Combined rates run from under 5% in some unincorporated areas to over 10% in a few municipalities.
Most retailers pass gross receipts tax to the customer as a separate line item at the register. The two taxes compound at checkout: a customer buying adult-use cannabis in a location with an 8.5% combined gross receipts rate during the first half of 2026 pays the shelf price plus 13% excise tax plus 8.5% gross receipts tax. The two obligations go to different accounts and have to stay separate in the books.
Medical Cannabis Is Exempt From Both
Medical cannabis sales carry no excise tax. The exemption covers qualified patients, primary caregivers holding a registry identification card, and reciprocal participants from other states who present equivalent documentation at the time of purchase.2Justia. New Mexico Code 7-42-3 – Cannabis Excise Tax
Medical sales also qualify for a gross receipts tax deduction. Under NMSA 1978, § 7-9-73.2, receipts from cannabis products sold in accordance with the Lynn and Erin Compassionate Use Act can be deducted from the retailer’s gross receipts, provided the deduction is reported separately as the department requires.3Justia. New Mexico Code 7-9-73.2 – Deduction Gross Receipts A medical purchase therefore carries neither tax, which can save a patient 20% or more compared with the adult-use price for the same product.
To apply the exemption, the retailer verifies the buyer’s status before completing the sale, confirming the registry card through the state’s BioTrack system. Documentation of each exempt sale needs to be kept on file in case the department audits the deduction.
Federal Section 280E and the 2026 Rescheduling
The federal picture is where cannabis retailers get hit hardest. Under 26 U.S.C. § 280E, any business trafficking in a Schedule I or Schedule II controlled substance cannot deduct ordinary business expenses from its federal taxable income.4Office of the Law Revision Counsel. 26 USC 280E – Expenditures in Connection With the Illegal Sale of Drugs Rent, payroll, marketing, and utilities, all deductible for a normal retailer, are not deductible for a cannabis seller. Only cost of goods sold survives. The practical effect is federal income tax on what would be a net loss in almost any other industry.
In April 2026 the Department of Justice rescheduled certain categories of cannabis from Schedule I to Schedule III. Cannabis in FDA-approved products and cannabis held under a state medical license moved to Schedule III, which takes those operations outside 280E.5U.S. Department of the Treasury. Treasury, IRS Announce Process for Tax Guidance Following DOJ Rescheduling Adult-use cannabis not covered by a medical license stays on Schedule I. For a New Mexico retailer selling both, the medical side can now claim ordinary deductions while the adult-use side still cannot.
The IRS has not yet issued final guidance on how to allocate shared expenses between the medical and adult-use sides of a single business. Working through this with a tax professional familiar with both 280E and the rescheduling order is close to essential. Overclaiming invites an audit; underclaiming means paying tax you don’t owe.
Where the Excise Tax Money Goes
About a third of cannabis excise tax revenue goes to the municipality where the sale happened, another third to the surrounding county, and the final third to the state general fund.6Justia. New Mexico Code 7-1-6.68 – Distribution Cannabis Excise Tax Municipalities and Counties The Taxation and Revenue Department may withhold up to 3% of the local distributions to cover its administrative costs.
Registering, Filing, and Paying
Three credentials have to be in place before a cannabis retailer makes a first sale: a federal Employer Identification Number from the IRS,7Internal Revenue Service. Get an Employer Identification Number a New Mexico Business Tax Identification Number (NMBTIN) obtained by filing form ACD-31015 and selecting both the cannabis excise tax and gross receipts tax programs, and a retail or micro-business license from the Cannabis Control Division.
Cannabis excise returns are filed monthly on Form TRD-41415, which asks for total cannabis sales for the month broken out by taxable adult-use sales and exempt medical sales.1New Mexico Taxation and Revenue Department. Cannabis Excise Tax Gross receipts tax is reported separately on the standard gross receipts return. Both filings and payments are due by the 25th of the month following the reporting period, so January sales must be reported and paid by February 25.8Justia. New Mexico Code 7-42-4 – Date Payment Due Everything runs through the Taxpayer Access Point (TAP) portal, which accepts electronic payment and issues a confirmation number as the receipt.9New Mexico Taxation and Revenue Department. Online Services
Penalties for Late Filing or Nonpayment
Under the Tax Administration Act, a negligent late filing or late payment draws a penalty of 2% of the unpaid tax per month, capped at 10%. If the department finds the business willfully tried to evade tax, the penalty rises to 50% of the amount owed. Interest accrues daily on top at the federal underpayment rate.
These penalties apply to both the cannabis excise tax and the gross receipts tax, and repeated violations can jeopardize a retail license at renewal time, because the Cannabis Control Division weighs tax compliance when it reviews license applications. The 25th is a hard deadline.