D & O Number and Date

Subject

1994

Taxpayer

Subject

Assessment of Penalty and Interest for Failure to File/Pay Taxes after Receipt of Revenue Agent Report

Inclusion of Income Earned out of state by a NM Resident

1995

Taxpayer

Subject

Definition of "Special Mobile Equipment" as a "Vehicle"

What Constitutes Registration of Contract for Coal Surtax Exemption.

Computation of Interest for Failure to Pay Tax is Due. Failure for NM to Catch error does not Reduce Liability

Penalty & Interest for Failure to Properly Pay Taxes Due under Special Payment Method.

Tax due on Sale of Service to a Federal Agency.

Definition of Reimbursements vs. Gross Receipts.

Interest Continues to Accrue Until Tax is Paid - Regardless of any Delays in Assessing.

Confidentiality in Relation to Inspection of Public Records Act and a "Working Interest Owner".

Presumption of Correctness of Department Assessment and Responsibility of TP to Maintain Adequate Records.

1996

Taxpayer

Subject

Interest Accrual While in Protest.

Interest Accrual on Revenue Agent Report.

Denial of Claim for Refund - Construction vs. Sale of Tangible Personal Property

Statute of Limitations on Claims for Refunds – Overpayment vs. Late Payment of Tax.

Interest on Non-receipt of PIT Timely Payment.

Inclusion of Military Retirement Benefits as NM Income Subject to Taxation of a NM Resident.

Definition of residency.

Tax Settlement Agreements require Attorney General Approval to be enforceable and create Estoppel. Nexus agreements do not compromise assessed taxes.

Penalty & Interest Inclusion of Lump Sum Distributions.

Presumption of Correctness of Assessment when Books and Records not provided.

Discount membership books vs. membership services and burden of proof.

Denial of Claim for Refund – Receipt of NTTC.

Federal vs. Indian Preemption - Construction of hospital for agency of US on Navajo Land.

Federal Retirement Benefits - Penalty & Timely filing of Claims for Refund.

Section 7-9-69 - affiliated corporation does not mean limited partnership or other non-corporate entities

Sale of Service vs. Sale of Tangible Personal Property & Extending Assessment Period beyond 3 years - Bookbinding is predominately a service; Extending assessment period was warranted under Section 7-1-18(D)

Section 7-1-67 – Interest on income tax returns where TP failed to file. [Lack of knowledge]

Penalty and Interest on non-filed CRS-1 return.

Offset of Investment Credit against Penalty and Interest due on compensating tax liability.

NTTC - failure to provide proof that TP was in possession of timely certificate. NTTC law prior to 7/1/92 was repealed with change in statute by Laws 1992, Chapter 39, Section 3.

Natural Gas Processors Tax – TP as interest owner is subject to NGPT; removal of carbon dioxide is processing; NGPT is applied to both the natural gas and any byproducts

Gross Receipts Tax – rental of real property or granting of a license to use; equipment rental; is TP an agent; validity of assessment for 6 year statute of limitation; Penalty; DECISION - agreements are not for rental of real property-receipts were for granting a license to use; equipment rental receipts are taxable; TP not an agent; assessment was valid and due; Penalty abated - TP not negligent.

Claim for Refund - Penalty/Interest; Failure to inquire about GRT does not preclude the assessment of penalty and interest for failure to file and pay GRT.

Penalty & Interest for acceptance of NTTC’s for leasing of equipment to contractors / government; Penalty not due - TP not negligent; Interest remained due.

Assessment of tax for leasing equipment employed in NM [TECO] & Denial of Claim for refund-prior years [Chino]; [TECO] argues equitable recoupment of taxes paid by Chino {1988-1991} – Commerce Clause & Penalty & Interest [Chino] argues equitable recoupment of compensating tax for prior years {1988-1991}; Both protests Denied in full.

TP argues use of Judgemental Sampling or non-Statistical Sampling is invalid & Penalty/Interest; Protest denied - TP failed to establish assessment or method utilized was incorrect & Penalty/Interest were due.

Schedule C matching - TP in the remodeling business; TP protested Penalty & Interest; TP was negligent and was late in paying GRT - Penalty & Interest due.

Leasing of Liquor License - Lease Receipts do not fairly represent market value; TP received consideration in excess of actually monies received; TP’s protest Denied.

1997

Taxpayer

Subject

TP argues receipts are from services performed both instate and out-of-state or are services commerce; Protest Denied.

TP argues interest is due on several timely submitted and approved investment credits which refunded a year or more after filing; Interest was refunded to TP since claim for refund of investment credits were claims for refund of tax which were subject to accrual of interest under Section 7-1-68.

TP was issued a 1099 and filed Sch C for tax year 1988 - claimed to be an employee and that statute of limitations for assessing has expired; Protest was denied - TP was not an employee and statute of limitations had not expired.

Late filed and paid CRS-1 returns because of bookkeeper health problems and computer problems - penalty and interest were initially protested - only penalty remains at issue - Penalty was properly due since TP chose to ignore the tax issue until after being contacted by department - TP was negligent and/or in disregard of rules and regulations of the department.

TP protested designation as Successor in Business; TP is a successor even though no formal "sale" took place - TP acquired the business, customers, employees, etc. from predecessor.

TP protested a portion of an audit claiming Section 7-9-13.1 applies to the services performed out-of-state; Section 7-9-13.1 does not apply because the contracts were for R&D the product of which was delivered into NM for initial use in NM.

Lack of NTTC’s for resale of construction services after 60 day notice and penalty and interest assessed; TP improperly took deductions because of the lack of timely receipts of an NTTC and penalty and interest was properly assessed on taxes not paid.

Reimbursement of moving expenses were deducted from federal adjusted gross income for NM purposes on belief that the reimbursement was not subject to state taxation – TP protested the tax, penalty and interest assessed; Department agreed penalty not due and that assessed was beyond statute of limitations; TP owes the tax on the moving expenses to NM and interest is properly due on the unpaid tax - the statute of limitations had not expired and the department is not barred by the doctrine of equitable recoupment.

TP argued it as selling tangible personal property not construction services - TP also argued that the date of 1991 contract governed which NTTC it must have in its possession -pre 1992 vs. post 1992 – TP further argued methodology was improper; Hearing officer ruled that GR 3(C):6 exceeded the definition of Section 7-9-3(C) - TP was selling Tangible Personal Property not construction therefore sales to 501(c)(3)’s and governmental entities were properly deducted where NTTC or other required documentation was present - HO agreed that certain transactions "skewed" the percentage of error.

Lack of NTTC’s for sales made by spouse - Greater than 25% under reporting and penalty and interest from 1998; Taxes were due for lack of NTTC; penalty and interest were properly assessed and due.

TP argued "double taxation" - TP failed to obtain and execute NTTC’s to suppliers and began deducting the cost of goods and materials from gross receipts; Herring Officer denied TP protest - the tax, penalty and interest is due and there is no "double taxation".

Is TP excused from Gross receipts taxes because TP did not understand that services for federal government were taxable and because the department did give TP a firm answer; -- Lack of knowledge about taxes does not relieve the liability and TP was negligent - penalty and interest due.

Schedule C assessment - Hauling in interstate commerce and employee vs. independent contractor – TP was determined to be an employee based on control exercised by payor.

TP argues that a Type 6 or 4 NTTC is acceptable for the sale of traffic control devices and signs to contractors who are working on a project which will ultimately be sold to the Highway Dept. Protest denied.

TP did not make a claim for refund within the allowed amount of time under 7-1-26(B) - Protest Denied.

TP entered into an installment agreement but failed to provide security and the department placed a lien on the property - Protest denied. TP did not file a timely protest to challenge the assessments underlying the lien.

Gross receipts tax on services to the Postal Service by a contract mail carrier. Penalty and Interest abated prior to the issuance of the assessment.

TP failed to amend their NM state return after amending their federal return. Penalty was abated, interest is due. Protest denied.

TP failed to file a NM return since the income was earned on an Indian reservation. TP challenges interest since he acted on good faith. Protest denied.

TP challenged the application of the Petroleum Products Loading Fee to gallons placed into fuel supply tanks in NM but burned in vehicles outside NM. TP revised his protest and claimed the fee did not apply to him since he was an instrumentality of the U. S. Government. Protest denied.

TP did not have current series NTTC’s to support deductions. Equipment was purchased without tax and used in the business. Gross receipts tax where a valid NTTC was not obtained. Compensating tax has been adjusted to exclude one piece of equipment. Protest is granted in part.

Schedule C tapematch - Gross receipts tax on commissions; TP claims the tax has already been paid. Tap claims unfair treatment of employee vs. independent contractor. Protest denied.

TP claimed that his services were performed on "Indian county" and therefore exempt from the gross receipts tax. The property is not "Indian country" as defined in 18 U.S.C. § 1151. Protest denied.

TP claims his wages were improperly subject to NM income tax. Protest denied.

TP denied certain deductions upon audit for accepting incorrect NTTC’s and in some cases no NTTC’s. TP claimed that they were not negligent for the following reasons: 1)they were not aware of the law’ 2) prior business practice; 3) false information from customers and 4) misleading language on the face of the NTTCs. Protest denied.

TP claimed that they were not negligent for filing a late payment (special payment method) and penalty should not be imposed. TP also protested the assessment of interest when the payment was only one day late. Protest denied.

TP claimed that the department should pay interest on a claim of investment credit – from the time the application was made to when it was approved. Protest denied.

TP failed to prove that the services being performed were not R&D services and that the product was not initially used in NM. The receipts are subject to the GRT. The TP is also liable for CIT. Protest denied.

TP argues that his wages are not subject to federal income tax or NM income tax. TP is not entitled to a refund of the taxes withheld from this wages. Protest denied.

TP argues that imposing the compensating tax on the purchase of a mobile home purchased out-of state is a violation of their constitutional right to establish a home. Protest denied.

TP argued that interest should not be assessed on the amount of tax due because of the length of time it took the department to assess the tax. Protest denied.

TP claimed their services were being resold and were 100% deductible. Sufficient documentation to claim a deduction could not be produced for most of the transactions. When a Type 5 NTTC was produced the requirements under 7-9-48 were not met. Protest denied.

TP claimed that the imposition of the gross receipts tax on their commissions was a "double taxation" and that their receipts were received in a disclosed agency capacity. TP also argued that they were not negligent for the purposes of Section 7-9-69. Protest denied in part and granted in part.

TP claimed that they did not have sufficient nexus in NM for the gross receipts tax to be imposed. Protest denied.

TP believes that the amount of his receipts are so minimal that they should not be subject to the gross receipts tax. TP also feels that it is unfair to tax him (independent contractor) differently than an employee. Protest denied.

TP received an assessment for GRT which resulted from a Schedule C tape match. TP claimed that he was not engaged in business and that his sales were isolated and occasional. Protest denied.

TP claimed that the department could not determine what their federal adjusted gross income was independently of what was reported to the IRS. TP also claimed that they were non-resident aliens of the US and that the IRS had no authority to enforce the Internal Revenue Code. Protest denied.

TP was issued a Type 7 NTTC for the performance of construction staking services and claimed the deduction under Section 7-9-52. Upon audit the deductions were disallowed. Protest granted.

TP was assessed GRT which resulted from a C-SPAN tape match. TP was unable to provide any information that would explain the discrepancy between state and federal reporting because her deceased husband handled all of the paperwork pertaining to the business. Protest denied.

TP claimed a 50% deduction under Section 7-9-62 for the sale of agricultural implements. The deduction was denied but penalty was abated based on the department’s previous approval of a refund on the same facts. Protest granted in part and denied in part.

TP (two corporate officers) claimed that they were not liable for the amounts deducted and withheld by their corporation that were not paid to the department. Protest denied for one corporate officer and granted and denied in part for the other corporate officer.

TP claimed that the department should not have assessed penalty on receipts from sales to out-of-state buyers. TP claimed to be non-negligent because they relied on regulation 3 NMAC 2.55.12.2 and Ruling 450-89-10. Protest denied.

1998

Taxpayer

Subject

TP performed "handyman" services on a house owned by himself and his wife. TP filed a Schedule C and reported the income from providing handyman services for himself. The department received the Schedule C information through a tape match and assessed the TP for the GRT. The income was not gross receipts. Protested granted.

An assessment was sent to the TP’s address of record. TP did not receive the notice because the department was not notified of a change of address. The assessment was not protested in a timely manner. Protest denied at untimely.

TP argued that his wages were not subject to federal income tax or NM income tax. TP is not entitled to a refund of the taxes withheld from his wages. Protest denied.

TP claimed that they were not engaged in business and that their receipts are deductible under Section 7-9-66. TP also claimed penalty should not be assessed because there was no intention to defraud the state. Protest denied.

TP was assessed gross receipts tax, penalty and interest on the receipts from a software licensing agreement for which the TP accepted a Type 9 NTTC. TP claimed that they were not negligent and should not be assessed penalty. Protest denied.

TP claimed to be an employee and that the receipts from performing engraving services were exempt from GRT under Section 7-9-17. TP was found to be an independent contractor not entitled to the exemption. A deduction under Section 7-9-48 was available to the TP, however the TP did not obtain the documentation required. Protest denied.

TP argued that their wages earned in NM were not subject to NM income tax on various grounds which challenged the federal income tax system. TP is not entitled to a refund of the taxes withhold from their wages. Protest denied.

TP claimed that their receipts were exempt under Section 7-9-29. TP was not granted tax exempt status under the provisions of Section 501(c)(3) of the Internal Revenue Code. TP also claimed that they were not negligent because they relied on the advice from their bookkeeper/accountant. TP was found to be not negligent for tax years 1991-1993. Protest denied in part and granted in part.

TP claimed that he was an employee and therefore his receipts were exempt under Section 7-9-17. TP was an independent contractor. Protest denied.

TP was held liable for 50% fraud penalty. Evidence established the TP’s officers were aware of the GRT, knew they would be liable for payment of GRT if the corporation maintained a presence in NM and knowingly misrepresented the nature of the corporation’s activities in order to evade payment of GRT. Protest denied.

TP amended their federal income tax return and failed to amend their NM personal income tax return. TP was assessed for additional tax plus penalty and interest. TP objected to the assessment of penalty and interest because the department did not notify them in a timely manner. TP was found to be negligent in underreporting their taxes. Protest denied.

TP claimed that she was unaware that her activities were subject to the GRT and had she known about the liability the taxes would have been paid. TP claims that to impose penalty and interest on her would cause hardship. TP was found to be negligent. Protest denied.

TP made an ACH payment after the due date. TP argued that interest should not be imposed because they acted reasonable in attempting to pay their taxes. TP also argued that they were not negligent and therefore penalty should not be imposed. Protest granted in part.

TP incorrectly filed a NM personal income tax return. Through the department’s sharing agreement with IRS a discrepancy was found between the federal and state returns. TP amended the NM return and remitted the additional tax due. TP argues that penalty and interest should not be assessed because the department failed to notify the TP in a timely fashion and the error in completing the return was human error. Protest denied.

TP received a 5% or receipts royalty payment and 4% of receipts advertising fee from its NM franchisees upon which the department assessed gross receipts tax. TP argued that as an out-of-state corporation, it was neither engaged in business in NM nor was there sufficient nexus to impose tax. In the alternative, the TP argued that the royalty fee and advertising fee was imposed for services performed out-of-state. Held that entire amount of franchise fees represented payment for the leasing of TP’s intangible property in NM and was therefore subject to gross receipts tax. Protest denied.

TP claimed that he was an employee and therefore his income was exempt from GRT. TP also argued that since he relied on advice from a department employee and that it took three years to receive an assessment that the department should be estopped from assessing him for the GRT. Protest denied.

TP was engaged in business in NM as a Chiropractor. The TP had retired his CRS registration number some years ago and had not reported or paid gross receipts tax or income tax on his receipts or income from performing chiropractic services. The department issued estimated assessments of gross receipts and income tax, and assessed a 50% fraud penalty. The department failed to prove that the TP intended to defraud the state. The TP’s protest of the fraud penalty was granted, and the remainder of the protest was denied.

TP argued that he was a partner to a partnership and his receipts were distributions of partnership profits and not subject to the GRT. TP also argued that he was selling construction services which were deductible under 7-9-52 and that to deny this deduction would be a "double taxation". TP was found to be negligent.

TP was denied a refund because the statute of limitations for claiming the refund had expired. TP argued that the department’s failure to advise taxpayers on how the petroleum products loading fee is applied should estop the department from denying the refund. Protest denied.

TP claimed that she was an employee and that her receipts were wages and exempt under Section 7-9-17. TP argued that there would be a double taxation if she were assessed for the GRT on her receipts. Protest denied.

TP argued that as a subcontractor they were not responsible for paying the GRT and requiring them to do so would be "double taxation". TP also argued that they relied on their accountant for tax advice. Protest denied.

TP was assessed for penalty for late reporting and payment of taxes using a special payment method required under Section 7-1-13.1. TP argued that they should not be considered negligent because they made a good faith effort to comply with statutory requirements. TP also argued that to impose a penalty on them would serve no public purpose and it would reduce the resources for public classrooms. Protest denied.

TP argued that the NM Legislature intended the 1997 amendment to 7-9-43 to be retroactive. TP also claimed that they were not negligent. Protest denied.

TP argued that he was unaware that his withholding taxes were unpaid and that the department’s assessments were based on incorrect information. TP also argued that the department should have notified him in a timely manner. Protest denied.

TP argued that the assessment of penalty & interest was excessive and that it should only be assessed for criminal activity. TP also argued that the department did not make an effort to provide her with accurate information. Protest denied.

TP argued that the gross receipts on his commissions were unfair. TP also claims that he should not be assessed for penalty and interest because the department did not notify him in a timely manner and that paying it would create a hardship. Protest denied.

TP had not understood that she was subject to gross receipts tax and did not pay it for that reason. TP requested relief from assessment of gross receipts tax, penalty and interest in return for her agreement to pay future taxes after date of assessment. TP also requested relief from assessment because of financial hardship payment would cause. Held TP failed to overcome presumption of correctness of assessment and financial hardship is not grounds for abatement of assessment. Protest denied.

TP failed to pay the gross receipts tax on income earned as an independent contractor based on incorrect advice from an accountant. TP claimed that the assessment of interest would create a financial hardship for her. Protest denied.

TP claimed a refund for an overpayment of corporate income taxes that were offset against a prior tax liability of penalty & interest for late estimated payments. TP argued that the penalty & interest was not due under the provisions of Section 3001(d) of the Revenue Reconciliation Act waiving penalties under IRC Section 6655. TP also argued that the department had no authority to offset their refund since the tax liability had not been assessed. Held that federal law does not govern imposition of penalty and interest under state law and that offset was authorized by Tax Administration Act. Protest denied.

TP, a licensed contractor, constructed three homes, lived in them for a short period of time and then sold them. TP protested the assessment of gross receipts tax, arguing 1) the sales were isolated and occasional; 2) because he paid gross receipts tax on the materials & services used to build the homes, taxing his receipts would be a double taxation; and 3) some of the bank deposits picked up by the auditor were loans, not receipts from services. Held: sales of three homes in three years do not qualify as isolated or occasional; there is no prohibition against double taxation; taxpayer failed to meet his burden of proof concerning the loans. Protest denied.

TP was assessed gross receipts tax upon commissions received as a commodities futures broker. Taxpayer argued that imposition of tax was barred because commodities futures trades were transactions in interstate commerce and because the comprehensive federal regulation of commodities futures trading preempted imposition of state tax. Held that imposition of tax was not prohibited under the Commerce Clause nor was tax preempted by federal regulation of commodities futures trading. Protest denied.

TP was assessed interest for the failure to pay the gross receipts tax on income earned as independent contractors. TP requested that the interest be abated because his failure to pay the tax was unintentional and it would create a hardship for his family. The department does have the discretion to abate interest. Protest denied.

TP, first-year resident incorrectly allocated income on his New Mexico personal income tax return and was assessed for the additional tax, penalty and interest. TP argued that 1) the instructions for completing the return were confusing; 2) a department employee failed to provide clear directions on how to file the taxes; and 3) the department was negligent in failing to notify him of the error in a more timely fashion. Hold that the Department’s instructions gave TP sufficient notice of allocation requirements and it was TP’s responsibility to correctly determine his tax liability to the state. Protest denied.

The Department had seized the assets of the taxpayer's bank account pursuant to two Warrants of Levy served upon the Taxpayer's bank on the same day. The Department's letter informing the Taxpayer of the Department's action only referred to one of the two Warrants of Levy. The Department conceded that the Warrant of Levy referenced was invalid because the assessments secured by the levy were not yet delinquent, and never became delinquent because the Taxpayer protested those assessments. The Taxpayer protested the seizure of his bank account on the grounds that the levy referenced in the Department's notification levy was invalid. Protest denied because the assessments secured by the second levy were delinquent and the proceeds of the levy were applied to those delinquent assessments.

Taxpayer is a securities broker-dealer. Taxpayer protested assessment of gross receipts tax, claiming its receipts from dealer concessions for its role in handling purchases of mutual fund shares for its customers are exempt as receipts from the sale of securities pursuant to Section 7-9-25, or alternatively, that they are not gross receipts as defined at Section 7-9-3(F). Additionally, Taxpayer argued that its receipts from "trails" or 12(b)(1) fees were not gross receipts from performing services and were not subject to gross receipts tax. Held that although taxpayer did not act as an agent for its customers in handling mutual fund purchase transactions, the receipts did amount to commissions or fees from acting as a broker and are gross receipts as defined in Section 7-9-3(F) and thus are not receipts from the sale of securities. Additionally, the trails are receipts from performing the service of encouraging its clients to retain their holdings of mutual funds. Protest denied.

Taxpayer was audited by the Department and given a 60-day notice pursuant to Section 7-9-43 that all NTTCs and other evidence to support the taxpayers deductions must be provided to the auditor by January 2, 1998. On December 31, 1998 the Department issued its assessment. Taxpayer filed a motion for summary judgment arguing that until expiration of the 60-day period, his deductions were presumed to be correct. Held: No presumption of correctness was created by the 60-day notice, nor does the notice provision affect the Department’s authority to issue an assessment against the taxpayer. Motion for summary judgment denied.

Taxpayer protested the imposition of penalty and interest on the grounds that he is unable to pay. Inability to pay is not a basis for compromising or abating an assessment. Grounds existed for both imposition of penalty and interest. Protest denied.

Taxpayer was assessed penalty and interest for failure to file and pay New Mexico CRS taxes. Taxpayer claimed that it should not be held liable for the negligence penalty since it was a specific corporate officer in charge of the financial affairs who failed to file and pay the taxes. A corporation is liable for penalties arising out of the acts of a corporate officer. Protest denied.

TP was assessed gross receipts tax upon its receipts from hauling hot mix asphalt and other materials for Western Mobile, Inc. TP protested the assessment arguing that it was an employee of Western Mobile and therefore its receipts were wages, exempt from gross receipts tax pursuant to Section 7-9-17. Held that although there were some elements of control which would indicate and employee-employer relationship, fact that TP owned own truck and could have any qualified driver perform the work established that TP was an independent contractor. Protest denied.

Taxpayer had timely mailed CRS return and payment, but the Department never received them. Taxpayer protested imposition of interest based upon his history of timely payment, the fact that he discovered the fact that his check had never cleared his bank and took it upon himself to send in a new report and payment without notice or demand from the Department, and the Taxpayer argued that Section 7-1-67(A)(3) requires that the Department make a demand for payment before interest can accrue for nonpayment of taxes. Protest denied.

Taxpayer protested a denial of his claim for refund of interest paid on a 1990 PIT liability. Taxpayer claimed the Department misapplied a payment he made for his 1990 PIT liability to his 1991 PIT liability. Taxpayer also argued that he would have paid the 1990 liability if the Department had sent him billing notices. The Department has no obligation to remind the taxpayer of an existing liability, protest denied on this issue. Protest granted on the misapplication of payment issue. The amount of interest assessed on the payment that was misapplied to the 1991 liability should be refunded to the taxpayer.

Taxpayer was assessed interest on gross receipts tax assessed after a Schedule C tapematch. Taxpayer argued that his failure to pay the gross receipts tax was unintentional, therefore interest should be abated. The Department does not have the authority to abate interest. Protest denied.

Taxpayer granted to three hunters a non-exclusive right to go onto its ranch to hunt during the hunting periods designated by the state. Taxpayer did not pay gross receipts tax on the receipts from selling hunting access to its land. Taxpayer protested an assessment by the Department for gross receipts tax, penalty and interest from these receipts. Taxpayer argued that the receipts from the granting of hunting rights is deductible under Section 7-9-53 as the receipts from the sale or lease of real property. Taxpayer was actually granting a license to use its property which is subject to the gross receipts tax. Protest denied.

Taxpayer protested the Department's determination that the Department's discretion to grant extensions of time to file a protest under Section 7-1-24(B) is limited to protests of assessments of tax or of other peremptory notices and demands. Held that the Secretary's discretion to grant extensions of time to file protests pursuant to Section 7-1-24(B) does not apply to protests to denials of or failure to act upon claims for refund under Section 7-1-26. Since that was the nature of the Taxpayer protest, the protest was denied.

Taxpayer was denied a portion of a claim for refund attributable to a child day care credit. The Department determined that the Taxpayer was not gainfully employed or disabled during the months for which the credit was claimed as required in Section 7-2-18. Taxpayer argued that he was entitled to the credit because he was disabled and unable to perform the heavy physical labor required by his previous jobs. Protest granted, Taxpayer was disabled for the period in question and entitled to the credit.

Taxpayer was notified of a limited scope audit (C-SPAN) based on a discrepancy between the business income reported on his federal income tax return and the receipts reported to New Mexico. Taxpayer was notified that he had a 60-day period to provide evidence (NTTCs) to support any deductions. Taxpayer made the following arguments against the assessment resulting from the limited scope audit: 1) his contract labor did not constitute "engaging in business"; 2) his possession of a Type 7 NTTC would make his receipts deductible; and 3) to deny the deduction under Section 7-9-52 would be double taxation. Taxpayer was engaging in business and the taxpayer did not submit the NTTC to the Department within the 60-day period provided by statute nor was it the appropriate NTTC for the transaction. Protest denied.

TP protested the manner in which the Department calculated interest on an assessment of corporation income tax. TP's original income tax returns showed overpayments of tax for the three tax years for which deficiencies were later assessed. TP's original returns had requested that the overpayments be credited to the next year's liability and TP applied the overpayments to its estimated quarterly tax payments for the following tax year. TP requested that the overpayments be applied to offset its assessed underpayments for calculation of interest without regard to the fact that the overpayments had already been applied in accordance with TP's instructions. Protest denied.

TP protested the assessment of interest on late gross receipts tax payments. TP claimed that the Department should be estopped from assessing interest since the TP received erroneous advice from a Department employee as to when the payment of tax was due. TP did not meet its burden of showing that the Department’s assessment was incorrect. Protest denied.

Taxpayer was notified of discrepancies between his federal Schedule C and NM gross receipts tax filing during a limited scope audit. Taxpayer was notified that he had 60 days to provide any NTTC’s or other documentation that would support any deductions taken. The Department assessed the taxpayer because he did not provide the NTTC until after the deadline had expired. Taxpayer protested the assessment claiming that his services were for resale and therefore should be deductible under Section 7-9-48. Receipts from sales for resale are not deductible unless the taxpayer is in possession of an NTTC within the 60-day period provided in Section 7-9-43. Protest denied.

Taxpayers were shareholders of two small, closely held family corporations. The Taxpayers performed all of the management functions for the corporations. The corporations had no other employees. The corporations reported the compensation to the Taxpayers as non-employee compensation on a federal form 1099 and the Taxpayers reported their income on their federal income tax return on Schedule C as income from a business or profession. The Department assessed gross receipts tax upon this compensation. The Taxpayers argue that they are employees of the corporations and that their compensation was exempt as wages or salary pursuant to Section 7-9-17. The Taxpayers were unwilling to amend their federal returns to reflect the compensation as wages. Because of the requirement that taxpayers file their state and federal returns consistently, they will not be considered employees in the absence of amending their federal corporate and personal returns to reflect the compensation as wages. Protest denied.

Taxpayer purchased a division of another New Mexico business without following the procedures outlined in the successor in business statutes, Sections 7-1-61 to 7-1-64 that require a purchaser to escrow a portion of the purchase proceeds for taxes and to seek a determination of taxes due from the business being purchased or obtain a tax clearance. Subsequent to the purchase, the Department audited the predecessor business and assessed a liability for periods occurring before Taxpayer's purchase of the business. The Taxpayer was not notified of the assessment or the basis for the assessment until almost six years after the assessment, when the Department made a demand for payment of the Taxpayer as a successor in business. The Taxpayer protested the demand on the basis that its failure to escrow a portion of the purchase price was not wrongful as required by the statute. The Taxpayer also argued that the Department's test month's audit procedure was improper but that Section 7-1-24, which prohibits the Taxpayer from contesting the underlying basis of the assessment because it did not protest the assessment within thirty days of its issuance, unconstitutionally deprived the Taxpayer of the opportunity to dispute the assessment in violation of procedural due process. Held that because the Taxpayer did not follow the statutory procedures requiring the escrow of a portion of the purchase price, this amounted to a wrongful failure to withhold under Section 7-1-64(A) and the Taxpayer was liable for the tax as a successor in business. Also held that the Department improperly applied its test months audit procedure resulting in an incorrect assessment of taxes and in the circumstance of this case where the Taxpayer was not given notice of the assessment of tax or the basis for the assessment until after the time for protest had expired, that Section 7-1-24, to the extent it denies the Taxpayer an opportunity to contest the basis for the assessment, denies the Taxpayer due process of law. The Department was ordered to adjust the assessment underlying the demand for payment.

The Taxpayer protested the Department's denial of a deduction claimed for receipts from a customer which had given the Taxpayer a nontaxable transaction certificate but the Taxpayer could not produce a copy of the certificate. The Taxpayer also contested the amount of interest assessed based upon its attempt to pay taxes before the commencement of the audit, but the payment was not accompanied by returns providing the Department information as to what tax programs, what tax amounts and what tax periods the tax payment should be applied to. Held that the Department properly denied the deduction for failure to possess a nontaxable transaction certificate within 60 days of notice to produce such certificates. Also held that tender of a payment does not amount to a payment of tax without concurrent tender of a return or returns showing how the payment is to be applied. Thus, the calculation of interest was correct. Protest denied.

The Taxpayer primarily engages in surveying for road construction contractors. The Taxpayer failed to keep up with the changes to Section 7-9-43, which was amended in 1992 to require that sellers claiming deductions which require nontaxable transaction certificates obtain the new 1992 series nttcs and have them in their possession at the time they file returns claiming deductions based upon the nttcs. Upon audit, the Department denied claimed deductions for failure to have the new nttcs in its possession at the time the deductions were claimed. The Taxpayer claimed that it was impossible for small taxpayers to keep up with the statutory changes and that it should be allowed the deductions claimed even though it did not have the required nttcs because the transactions otherwise met the statutory criteria for deduction. Held: statutory requirements cannot be waived by the Department or its Hearing Officer. Protest denied.

Taxpayer filed a $833.68 claim for refund in April 1998 for the period of Jan. - June 1994. This claim was filed after the three-year limitations period set out in Section 7-1-26(C). The taxpayer acknowledged that the claim was not made timely, however, he maintained that he is still entitled to the refund ($833.68) because he submitted amended reports for this amount with a different claim for refund filed in Sept. 1997. The taxpayer is not entitled to the refund claimed in April 1998 because the claim was not filed within the limitations period set out in Section 7-1-26(C). The taxpayer is not entitled to the $833.68 claimed in Sept. 1997 because he did not exercise either of the remedies available to him when the Department failed to act on the refund request within 120 days. Protest denied.

Taxpayers (husband and wife) were assessed gross receipts tax on business income reported on their 1994 federal income tax return. Taxpayers argued they were employees entitled to the deduction from gross receipts provided in Section 7-9-17. The Department agreed to abate tax on wife’s income if the Taxpayers amended their 1994 income tax return to reflect wife’s income as wages rather than as business income. The Taxpayers declined to file amended returns. Held: Taxpayers could not deduct husband’s income because he was an independent contractor, not an employee; Taxpayers could not deduct wife’s income because they were required to report their income consistently for both federal and state tax purposes. Taxpayers could not claim wife’s compensation as business income for federal income tax purposes and as employee wages for state gross receipts tax purposes. Taxpayers were also liable for penalty and interest assessed for late payment of gross receipts tax. Protest denied.

The Taxpayer, a production credit association created under federal law, protested the Department's denial of its claims for refund of corporate income tax for tax years 1992-1996. The Taxpayer claimed it was exempt from state income taxes because Congress has designated production credit associations as federal instrumentalities. Under the Supremacy Clause of the U.S. Constitution, federal instrumentalities are immune from state taxation in the absence of congressional authorization to tax. In the case of production credit associations, since their creation in 1933, Congress had provided that once they were no longer owned in whole or in part by the United States, that they would be subject to state income taxes. In 1985, however, as part of some technical amendments to the Farm Credit Act, the language giving congressional permission to impose income taxes was removed from 12 U.S.C. Section 2077. The issue was whether the general rule of immunity from state taxation for federal instrumentalities applied or whether we should determine the congressional intent behind the 1985 amendments. Because the doctrine of immunity for federal instrumentalities is based upon an implied immunity in the absence of direction from Congress, it is appropriate to determine the congressional intent behind the 1985 amendments. When that is done, it is clear that Congress did not understand that these amendments would create immunity from state income taxation for production credit associations. Protest denied.

Taxpayer provided dental services to patients from the dental office of another dentist. Taxpayer claimed that there was a TS-22 agreement between him and the other dentist, but could not provide evidence of agreement’s existence or payment of tax. The Taxpayer is liable for the gross receipts tax on the non-employee compensation he received from the other dentist. Protest denied.

1999

Taxpayer

Subject

Taxpayer provides janitorial services in New Mexico. Taxpayer requires its customers to provide a place to store cleaning supplies and cleaning equipment on the customer's premises and it informs its customers that they own the cleaning supplies and may use them when they are not being used by the Taxpayer's employees performing janitorial services. When soliciting new business, the Taxpayer breaks out the cost of the monthly janitorial services fee, which includes a cost of 10% of the labor cost for cleaning supplies and 4.7% of the labor cost for cleaning equipment. However, when billing its customers, the Taxpayer most commonly only bills the agreed upon monthly charge for janitorial services and does not break out the cost of the cleaning supplies and equipment.
The Taxpayer was assessed compensating tax on the value of cleaning supplies and equipment purchased using a type 2 nontaxable transaction certificate, which is used for purchasing tangible personal property for resale. The Taxpayer also was assessed gross receipts tax for claiming a deduction from gross receipts tax for the sale of tangible personal property. The Department's assessment gave credit against the assessment of compensating tax and gross receipts tax in all instances where the Taxpayer could demonstrate that it separately reflected the charge for the supplies and equipment on its invoices to its customers from the charge for janitorial services pursuant to Regulation GR 47:3.
The Taxpayer's protest was denied. Where the Taxpayer used the supplies and equipment in providing janitorial services to its customers and the charges for supplies and equipment were not separately reflected on the Taxpayer's billings to its customers, the Taxpayer was not reselling tangible personal property to its customers. Rather, it was selling janitorial services and the supplies and equipment were used by the Taxpayer in performing those services. Because the value of the supplies and equipment were incidental to the value of the janitorial services provided, they become part of the services sold to the Taxpayer's customers.

The Taxpayer is a roofing consultant to licensed contractors. In the ordinary course of his business, the Taxpayer uses a special tool he invented to drill into a customer’s roof and remove a cross section of the roof itself. The Taxpayer then evaluates the cross section to determine the condition of the roof. The Taxpayer was advised by a Department employee that he was performing construction services and should obtain Type 7 NTTCs from the contractors who hire him. The Taxpayer followed this advice. During a later audit, the taxpayer was told he was not performing a construction service and could not claim the deduction under Section 7-9-52. Based on testimony of a bureau chief with the Construction Industries Division, it was determined that the Taxpayer was performing construction services and was entitled to the deduction under Section 7-9-52. Protest granted.

The Taxpayer protested the assessment of gross receipts tax and interest based upon her inability to pay the assessment. A taxpayer's inability to pay an assessment is not a defense to the assessment. The Department may only compromise assessments when there is a good faith doubt as to the taxpayer's liability pursuant to Section 7-1-20 NMSA 1978. Additionally, Article IV, Section 32 of the New Mexico Constitution prohibits the forgiveness of debts owing to the state. Protest denied.

Taxpayer contested the assessment of penalty and interest based upon the undue amount of time (over one year) which elapsed between the time the audit of the taxpayer commenced and when the assessment was issued. Although the Department did not explain or justify the excessive delay in issuing the assessment in this case, such delay does not provide a basis for the abatement of penalty or interest. The language of Section 7-1-67 governs the imposition of interest and mandates that it is imposed for any period in which a tax remains unpaid, regardless of the reason the tax is unpaid. The assessment of penalty is based upon whether the taxpayer was negligent in underreporting and paying taxes. New Mexico has a self-reporting tax system which places the responsibility upon the taxpayer to understand the requirements for reporting and paying taxes and the fact that the Department could have been faster at assessing an underpayment of tax does not shift the responsibility for accurately reporting taxes from the taxpayer. Protest denied.

The taxpayer was audited for Highway Use Taxes under Section 7-15A-1 et seq. and Section 7-16A-1 et seq. As a result of the audit the taxpayer was assessed based on the calculation of a 37.3% error rate. The taxpayer successfully challenged the method of calculating this error rate as well as the Department’s denial of the taxpayer’s use of the reduced weight distance tax rate under Section 7-15A-6(B). The Department is ordered to abate the assessment in full. Protest granted.

Taxpayer is an authorized Sears retailer who operates a Sears Retail sales facility on behalf of Sears. All merchandise it sells is owned by Sears and Sears pays gross receipts tax on 100% of the sales price of merchandise sold by the Taxpayer. The Taxpayer receives a commission from Sears on the merchandise it sells. Taxpayer was assessed gross receipts tax, penalty and interest upon the commissions it received from Sears. Taxpayer protested the assessment arguing that Sears had already paid the gross receipts tax, that the assessment constituted illegal double taxation, that the imposition of tax deprived the Taxpayer of equal protection of the laws and violated the equal and uniform taxation provision of the New Mexico Constitution. Taxpayer also argued that the commissions were not gross receipts under Section 7-9-3 (F)(2) (f) because the commissions were received on behalf of another in a disclosed agency capacity. Taxpayer also protested penalty based upon its reliance upon the Department's treatment of another Sears retailer where the Department concluded that Sears had paid the tax on the commissions on behalf of its retailer. Protest was denied with respect to the tax because there are two separate taxable transactions, the sale of merchandise by Sears and the receipt of a commission by the Sears retailer. Additionally, double taxation is not inherently illegal. The Taxpayer failed to carry its burden of proving that no rational basis exists for the differential taxation alleged and thus there is no denial of equal protection. The equal and uniform taxation clause, Article VIII, Section 1, applies to property taxes and not gross receipts taxes. Finally, the commissions were gross receipts. They were not received on behalf of another in a disclosed agency capacity. The penalty was ordered to be abated because the taxpayer was not negligent in failing to pay taxes because it reasonably relied upon the Department's treatment of the other Sears retailer whose tax was abated.

Taxpayer is an authorized Sears retailer who operates a Sears Retail sales facility on behalf of Sears. All merchandise it sells is owned by Sears and Sears pays gross receipts tax on 100% of the sales price of merchandise sold by the Taxpayer. The Taxpayer receives a commission from Sears on the merchandise it sells. Taxpayer was assessed gross receipts tax, penalty and interest upon the commissions it received from Sears. Taxpayer protested the assessment arguing that Sears had already paid the gross receipts tax, that the assessment constituted illegal double taxation, that the imposition of tax deprived the Taxpayer of equal protection of the laws and violated the equal and uniform taxation provision of the New Mexico Constitution. Taxpayer also argued that the commissions were not gross receipts under Section 7-9-3 (F)(2) (f) because the commissions were received on behalf of another in a disclosed agency capacity. Taxpayer also protested penalty based upon its reliance upon the Department's treatment of another Sears retailer where the Department concluded that Sears had paid the tax on the commissions on behalf of its retailer. Protest was denied with respect to the tax because there are two separate taxable transactions, the sale of merchandise by Sears and the receipt of a commission by the Sears retailer. Additionally, double taxation is not inherently illegal. The Taxpayer failed to carry its burden of proving that no rational basis exists for the differential taxation alleged and thus there is no denial of equal protection. The equal and uniform taxation clause, Article VIII, Section 1, applies to property taxes and not gross receipts taxes. Finally, the commissions were gross receipts. They were not received on behalf of another in a disclosed agency capacity. The penalty was ordered to be abated because the taxpayer was not negligent in failing to pay taxes because it reasonably relied upon the Department's treatment of the other Sears retailer whose tax was abated.

Taxpayer is an authorized Sears retailer who operates a Sears Retail sales facility on behalf of Sears. All merchandise it sells is owned by Sears and Sears pays gross receipts tax on 100% of the sales price of merchandise sold by the Taxpayer. The Taxpayer receives a commission from Sears on the merchandise it sells. Taxpayer was assessed gross receipts tax, penalty and interest upon the commissions it received from Sears. Taxpayer protested the assessment arguing that Sears had already paid the gross receipts tax, that the assessment constituted illegal double taxation, that the imposition of tax deprived the Taxpayer of equal protection of the laws and violated the equal and uniform taxation provision of the New Mexico Constitution. Taxpayer also argued that the commissions were not gross receipts under Section 7-9-3 (F)(2) (f) because the commissions were received on behalf of another in a disclosed agency capacity. Taxpayer also protested penalty based upon its reliance upon the Department's treatment of another Sears retailer where the Department concluded that Sears had paid the tax on the commissions on behalf of its retailer. Protest was denied with respect to the tax because there are two separate taxable transactions, the sale of merchandise by Sears and the receipt of a commission by the Sears retailer. Additionally, double taxation is not inherently illegal. The Taxpayer failed to carry its burden of proving that no rational basis exists for the differential taxation alleged and thus there is no denial of equal protection. The equal and uniform taxation clause, Article VIII, Section 1, applies to property taxes and not gross receipts taxes. Finally, the commissions were gross receipts. They were not received on behalf of another in a disclosed agency capacity. The penalty was ordered to be abated because the taxpayer was not negligent in failing to pay taxes because it reasonably relied upon the Department's treatment of the other Sears retailer whose tax was abated.

Taxpayer is an authorized Sears retailer who operates a Sears Retail sales facility on behalf of Sears. All merchandise it sells is owned by Sears and Sears pays gross receipts tax on 100% of the sales price of merchandise sold by the Taxpayer. The Taxpayer receives a commission from Sears on the merchandise it sells. Taxpayer was assessed gross receipts tax, penalty and interest upon the commissions it received from Sears. Taxpayer protested the assessment arguing that Sears had already paid the gross receipts tax, that the assessment constituted illegal double taxation, that the imposition of tax deprived the Taxpayer of equal protection of the laws and violated the equal and uniform taxation provision of the New Mexico Constitution. Taxpayer also argued that the commissions were not gross receipts under Section 7-9-3 (F)(2) (f) because the commissions were received on behalf of another in a disclosed agency capacity. Taxpayer also protested penalty based upon its reliance upon the Department's treatment of another Sears retailer where the Department concluded that Sears had paid the tax on the commissions on behalf of its retailer. Protest was denied with respect to the tax because there are two separate taxable transactions, the sale of merchandise by Sears and the receipt of a commission by the Sears retailer. Additionally, double taxation is not inherently illegal. The Taxpayer failed to carry its burden of proving that no rational basis exists for the differential taxation alleged and thus there is no denial of equal protection. The equal and uniform taxation clause, Article VIII, Section 1, applies to property taxes and not gross receipts taxes. Finally, the commissions were gross receipts. They were not received on behalf of another in a disclosed agency capacity. The penalty was ordered to be abated because the taxpayer was not negligent in failing to pay taxes because it reasonably relied upon the Department's treatment of the other Sears retailer whose tax was abated.

Taxpayer is an authorized Sears retailer who operates a Sears Retail sales facility on behalf of Sears. All merchandise it sells is owned by Sears and Sears pays gross receipts tax on 100% of the sales price of merchandise sold by the Taxpayer. The Taxpayer receives a commission from Sears on the merchandise it sells. Taxpayer was assessed gross receipts tax, penalty and interest upon the commissions it received from Sears. Taxpayer protested the assessment arguing that Sears had already paid the gross receipts tax, that the assessment constituted illegal double taxation, that the imposition of tax deprived the Taxpayer of equal protection of the laws and violated the equal and uniform taxation provision of the New Mexico Constitution. Taxpayer also argued that the commissions were not gross receipts under Section 7-9-3 (F)(2) (f) because the commissions were received on behalf of another in a disclosed agency capacity. Taxpayer also protested penalty based upon its reliance upon the Department's treatment of another Sears retailer where the Department concluded that Sears had paid the tax on the commissions on behalf of its retailer. Protest was denied with respect to the tax because there are two separate taxable transactions, the sale of merchandise by Sears and the receipt of a commission by the Sears retailer. Additionally, double taxation is not inherently illegal. The Taxpayer failed to carry its burden of proving that no rational basis exists for the differential taxation alleged and thus there is no denial of equal protection. The equal and uniform taxation clause, Article VIII, Section 1, applies to property taxes and not gross receipts taxes. Finally, the commissions were gross receipts. They were not received on behalf of another in a disclosed agency capacity. The penalty was ordered to be abated because the taxpayer was not negligent in failing to pay taxes because it reasonably relied upon the Department's treatment of the other Sears retailer whose tax was abated.

Taxpayers performed road construction services for governmental entities who told Taxpayers that they were exempt from gross receipts tax. No part of the Taxpayers' receipts were exempt or deductible from tax because there is no exemption or deduction for services provided to governmental entities. Taxpayers also failed to present evidence to establish the amount which can be deducted, pursuant to Section 7-9-53 for the value of land which was sold along with houses the Taxpayer built and sold. Taxpayers also failed to carry their burden of proving the Department's lien to be improper or illegal. Finally, the Department is not bound by the court order filed in Mr. and Mrs. Hetter's divorce proceedings to the extent it divides responsibility for payment of this tax liability because the Department was not a party to the divorce proceedings. Protest denied.

Taxpayer filed a 1994 personal income tax return as a first-year resident having income earned in New Mexico and another state. Taxpayer did not understand New Mexico’s method of allocating income between New Mexico and the other state and therefore devised his own method of allocating his income and the allowable federal exemption amount. While processing the Department noticed an error in the federal exemption amount and recalculated the taxpayer’s tax liability, which increased the taxpayer’s refund amount. In 1997, the Department discovered a discrepancy between amounts reported on the taxpayer’s federal return and their New Mexico return. Based on this information the Department recalculated the taxpayer’s liability again and assessed the taxpayer for additional tax, penalty and interest. Taxpayer claimed that penalty and interest should not be imposed on the additional refund the Department had calculated. Taxpayer’s liability for penalty and interest was attributable to taxpayer’s lack of knowledge of New Mexico law and failure to seek advice concerning his tax obligation. Protest denied.

Taxpayer performed fishing guide services for a fly-fishing outfitter who resold Taxpayer's services to its customers. Taxpayer failed to report and pay gross receipts taxes on his receipt based upon his belief that the payment of taxes by the outfitter covered all applicable taxes and the Taxpayer's failure to understand that, as an independent contractor, he was a separate business from the outfitter. As part of the Department's desk audit, it gave the Taxpayer notice to produce all NTTCs relied on in support of deductions within sixty days. The Taxpayer failed to produce any NTTCs within sixty days, subsequently produced a type 2 NTTC rather than the proper type 5 NTTC. Eventually the Taxpayer produced a type 5 NTTC long after the deadline to produce an NTTC. Although the Taxpayer's receipts would have been deductible if a type 5 NTTC had been produced in a timely manner, the Department properly denied the deduction based upon the Taxpayer's failure to produce NTTCs in accordance with the requirements of Section 7-9-43. Protest denied.

The corporate officers of the Taxpayer had signed personal guarantees as security for an installment agreement between the Taxpayer and the Department in lieu of the Department filing a lien to secure its interest. The Taxpayer defaulted on the payments called for by the installment agreement and the Department defaulted the first agreement and negotiated a second installment agreement with the Taxpayer. The Department did not have the corporate officers sign new personal guarantees of the second installment agreement. When the Taxpayer defaulted on the terms of the second installment agreement, the Department proceeded to levy upon the personal bank accounts of the corporate officers for the tax debt. The corporate officers objected to the Department's levy, arguing that the personal guarantee only guaranteed payment of the first installment agreement, which was voided when the Department entered into the second installment agreement. Protest denied. In addition to guaranteeing the payment of the first installment agreement, the personal guarantees had language guaranteeing payment of the corporate liability, and much of that liability remained unpaid. The corporate officers also objected to the Department's levies against their personal account because the levy also referenced corporate liabilities which were not covered by the first installment agreement or their personal guarantees. Because the amount the Department collected from its levies against the corporate officers did not exceed the amount of liability covered by the first installment agreement, which the corporate officers had guaranteed, the Department's levies were not improper or illegal.

Taxpayer moved to NM to fulfill a service contract with a private company. After reviewing his wife’s CRS-1 Filer’s Kit the Taxpayer did not believe that his receipts from performing services in NM were subject to the gross receipts tax. In 1998 the Department discovered the non payment and assessed the Taxpayer for the tax, penalty and interest. The Taxpayer protested the penalty assessment claiming that the Filer’s Kit did not specify the tax was imposed on nonresidents performing services in NM. Taxpayer was found to be negligent. Protest denied.

The Taxpayer, a New Mexico corporation, entered into five research and development contracts with the federal government. The taxpayer protested the Department's assessment of gross receipts tax on its receipts from the contracts, The Taxpayer argued that it entitled to a deduction under Section 7-9-57 NMSA 1978 because the product of its services was neither delivered to nor initially used by the buyer in New Mexico. The Taxpayer also protested the assessment of gross receipts tax for failure to have timely possession of NTTCs. The protest was denied with regard to three contracts where the product of the Taxpayer's service was demilitarized munitions that remained in New Mexico and were subsequently transferred from the buyer to the Taxpayer in New Mexico. The protest was granted with regard to two contracts where the product of the service was limited to data and reports delivered and initially used outside New Mexico. The protest was also granted on the NTTC issue because there was no evidence the Department had delivered a 60-day letter to the Taxpayer, which meant that the Taxpayer's production of NTTCs after the audit was timely under Section 7-9-43 NMSA 1978.

Taxpayer filed a claim for refund by filing an income tax return showing a balance due to the taxpayer. The Department took no action on the Taxpayer's refund claim. More than a year later, the taxpayer inquired as to the status of its refund claim. The taxpayer was asked to send a letter setting out the details of its claim for refund. The taxpayer did so and also requested interest from the date of its original claim for refund. The Department ignored and did not respond to the taxpayer's correspondence. Twenty one months after submitting its original claim for refund, the taxpayer resubmitted its claim for refund and asked for interest from the date of filing its original claim. The Department granted the refund in the amount of tax principal, but did not pay any interest on that refund. Six months later, in November, 1997, the taxpayer submitted a refund claim for the interest it was not refunded previously. The Department took no action on that refund claim. When the taxpayer inquired as to the status of its November, 1997 refund claim it was informed that the Department had not received it. The taxpayer then wrote the Department, in March, 1998, enclosing a copy of the certified mail return receipt showing that the Department had received the claim for refund and it enclosed copies of everything it submitted with its claim for refund. The Department took no action with respect to either of the taxpayer's submittals requesting a refund of interest on its original claim and the taxpayer protested the Department's failure to grant a refund of interest.

The Department first argued that there was no jurisdiction to hear the taxpayer's protest because the time for protesting the Department's failure to act upon its November, 1997 refund claim had expired. It was determined that although the time for protesting the Department's inaction on its November, 1997 refund claim had expired, the taxpayer's March, 1998 correspondence was a refiling of its claim for refund and the taxpayer timely protested the Department's inaction on that claim.
The taxpayer's protest of the Department's failure to grant it a refund of interest on its original claim for refund was denied. Pursuant to Section 7-1-26, the taxpayer had 90 days to either file an administrative protest or a suit in district court to contest the Department's failure to grant its original claim for refund after the Department failed to act upon it after 120 days of its filing. Having failed to take either action to contest the Department's inaction on its original claim for refund, that claim was extinguished and any claim for interest which would be payable on that claim pursuant to Section 7-1-68 died with the claim for refund itself.

Taxpayer was a corporate officer responsible for hiring personnel and signing withholding tax returns. The Taxpayer knew that the corporation was liable for withholding tax and that the returns had to be filed. The corporation did not file returns or remit the withholding tax to the Department. The Department assessed the corporation for withholding tax, penalty and interest. The Department subsequently sent a demand letter to the Taxpayer notifying him that he was liable for the corporations unpaid withholding taxes. The Taxpayer claimed that the Department could not demand payment from him since he had not been assessed by the Department. The Department’s collection actions against the Taxpayer were not in compliance with the statutory provisions of the TAA. Taxpayer has overcome the presumption of correctness that attaches to the Department’s demand for payment. Protest granted.

Taxpayers, who had wages from employment in New Mexico, filed New Mexico PIT returns reporting zero income and requesting a refund of taxes withheld by their employers. The refund was denied and Taxpayers protested, claiming 1) they are not subject to federal income tax because they do not reside within a federal territory; 2) their wages are not taxable because wages are not derived from a taxable source; 3) they do not come within the definition of an "employee" set out in IRC § 3401(c); 4) the federal government does not have authority to impose tax on the wages of private individuals; 5) the federal income tax system is voluntary and they do not choose to volunteer; 6) they "inhabit" New Mexico but are not residents of New Mexico; 7) the Department is in default for failing to respond to Taxpayers’ demands for information. Taxpayers’ arguments are without merit. Taxpayers are liable for payment of New Mexico income tax and are not entitled to a refund of income taxes withheld by their employers. Protest denied.

Taxpayer was notified of a limited scope audit (C-SPAN) based on a discrepancy between the business income reported on her 1994 federal income tax return and the receipts reported to New Mexico. Taxpayer claimed that the Department’s method of calculating the tax, penalty and interest was incorrect. Taxpayer’s first argument is that the Department should have applied overpayments she had in one month to underpayments she had in another month. Taxpayer’s second argument is that the Department’s refund of tax in a subsequent year was evidence that she did not have a tax liability for any prior years. The Taxpayer is not entitled to offset overpayments in one month against underpayments in another month. The Department’s refund of tax was not a final determination of the Taxpayer’s gross receipts tax liability. Protest is denied.

Taxpayer, who had wages from employment in New Mexico, filed New Mexico PIT returns reporting zero income and requesting a refund of taxes withheld by his employer. The Department estimated the Taxpayer’s income based on prior years’ returns and issued assessments that included the 50 percent civil fraud penalty. Taxpayer protested, claiming 1) the wages are not taxable because they are not derived from a taxable source; 2) he does not come within the definition of an "employee" set out in IRC § 3401(c); 3) he was not required to file a federal income tax return because Form 1040 is not listed by the Office of Management and Budget as a form required to be filed under Treasury Regulation § 1.1-1. Taxpayer’s arguments are without merit. Taxpayer is liable for payment of New Mexico income tax, adjusted to reflect the actual wages and withholding shown on his W-2 forms. Taxpayer is not liable for the 50 percent fraud penalty because the Department failed to show that Taxpayer filed zero returns with willful intent to evade or defeat tax. Protest granted in part and denied in part.

2000

Taxpayer

Subject

2001

Taxpayer

Subject

[WITHDRAWN]

[WITHDRAWN]

From 1991 through April 1999, Dean/Krueger & Associates, Inc. (“DKA”) was engaged in the business of providing architectural services in New Mexico. Hal Dean and Eugene Baker were the sole shareholders and officers of DKA and were the only persons who had signature authority on DKA’s bank accounts.  Beginning in 1991, DKA stopped reporting and paying New Mexico CRS taxes, including withholding taxes that had been deducted from the wages of DKA’s employees. In February 2000, the Department assessed DKA for gross receipts and withholding taxes due for tax periods January 1993 through April 1999.  At the same time, the Department issued separate assessments to Mr. Baker and Mr. Dean, as corporate officers, for the withholding tax portion of the assessment issued to DKA. Mr. Baker protested his individual assessment on the following grounds: (1) the assessment was not valid because it used the same assessment number assigned to DKA and did not have a unique number that the Department’s computer system could identify to Mr. Baker; (2) Section 7-1-18 limits the period for which Mr. Baker could be assessed to three years because he only became a “taxpayer” after he was assessed by the Department; and (3) the Department’s estimate of withholding tax due should be adjusted to reflect the actual withholding tax shown on business records introduced at the hearing.   Held:  (1) The assessment issued to Mr. Baker met all the requirements of Section 7-1-17 NMSA 1978 and was a valid assessment. (2) Pursuant to Sections 7-1-3(W) and 7-3-5 NMSA 1978, Mr. Baker was a taxpayer personally liable for payment of withholding tax deducted from the paychecks of DKA’s employees, and the Department correctly assessed Mr. Baker under the seven–year limitation period in Section 7-1-18; (3) The additional withholding tax records introduced at the administrative hearing were sufficient to overcome the presumption of correctness of the Department's estimate of taxes due and provided a reasonable basis for adjusting the Department's assessment.  Protest granted in part and denied in part.

The Taxpayer entered into an agreement to perform services as a subcontractor on a federal contract.  The general contractor agreed to assume responsibility for the Taxpayer's gross receipts tax, but did not honor its agreement and never reported or paid gross receipts tax on the Taxpayer's behalf.  In July 2000, the Department assessed the Taxpayer for gross receipts tax, penalty and interest. The Taxpayer protested the assessment making the following arguments: 1) all of his services were performed for the general contractor's customer and not for the general contractor; 2) he did not bill the general contractor for gross receipts tax and it is now impossible for him to recover the tax; 3) his agreement with the general contractor shifted the responsibility for payment of his gross receipts tax to the general contractor; and 4) payment of the tax will create a financial hardship. Held: 1) Although the Taxpayer performed his services only once, there were two  taxable transactions:  the Taxpayer's sale of services to the general contractor and the general contractor's resale of services to its customer.  The Taxpayer is liable for gross receipts tax on his receipts from performing services as a subcontractor. 2) The gross receipts tax is imposed directly on the seller, and the Taxpayer's failure to collect gross receipts tax from the buyer of his services does not relieve the Taxpayer of this liability.  3) A taxpayer may not delegate responsibility for payment of tax to a third party, and the Department is not bound by the terms of the Taxpayer's private agreement with the general contractor. 4) The hearing officer is required to enforce the tax laws as written and does not have authority to order abatement of tax, penalty or interest based on a taxpayer's individual economic circumstances.  Protest denied.

Perez Trucking

2002

Taxpayer

Subject