Biomass Equipment & Materials Compensating Tax Deduction

July 31, 2020


In 2005, New Mexico adopted a policy to allow businesses to deduct the value of biomass equipment and biomass materials used for the processing of biopower, biofuels, or biobased products in determining the amount of Compensating Tax due.

New Mexico's Compensating Tax is an excise, or "use" tax, which is typically levied on the purchaser of the product or service for using tangible property in the state. The tax applies to imports of factory and office equipment, and other items. The rate is 5.125% on certain property used in New Mexico and 5% on certain services used in New Mexico. Compensating Tax is designed to protect New Mexico businesses from unfair competition from out-of-state business not subject to a sales or gross receipts tax. This biomass Compensating Tax deduction is analogous to a sales tax exemption for renewable energy equipment available in some other states.

Deductions from compensating tax do not have to be reported to the New Mexico Taxation and Revenue Department but records substantiating the deduction should be kept in the taxpayer's records.

Program Overview

Implementing Sector: State
Category: Financial Incentive
State: New Mexico
Incentive Type: Sales Tax Incentive
Web Site:
Administrator: New Mexico Taxation & Revenue Department
Start Date: 06/17/2005
Eligible Renewable/Other Technologies:
  • Biomass
  • Hydrogen
  • Municipal Solid Waste
  • Combined Heat & Power
  • Landfill Gas
  • Anaerobic Digestion
  • Microturbines
Incentive Amount: 100% of value may be deducted for purposes of calculating Compensating Tax due


Name: NM Stat. § 7-9-98
Date Enacted: 04/05/2005
Effective Date: 06/17/2005


Name: Information Specialist
Organization: New Mexico Taxation & Revenue Department
Address: 1100 South St. Francis Drive
Santa Fe NM 87504
Phone: (505) 827-0700

This information is sourced from DSIRE; the most comprehensive source of information on incentives and policies that support renewables and energy efficiency in the United States. Established in 1995, DSIRE is operated by the N.C. Clean Energy Technology Center at N.C. State University.