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Orders are written statements to implement a decision after a Department administrative hearing. 

A taxpayer may file an appeal with the New Mexico Court of Appeals within 30 days after the date of the decision. Appeals are decided based on the evidence and arguments presented at the administrative hearing. 



02/15/2018

18-05

CIBL INC. & Subsidiaries

On March 7, 2017, the Department notified the Taxpayer that its claim for refund was untimely because it was received after the statute of limitations and therefore was denied. The deadline to claim a refund for the period ending December 31, 2012 based on the statute of limitations was December 31, 2016. On April 28, 2017, the Taxpayer submitted a timely formal protest with the Department. The Taxpayer argues that based on prior communication that was sent to the Department the claim for refund should be considered timely. The Department argues that a complete request for refund required by Section 7-1-26, NMSA 1978 Regulation 3.1.98 NMAC was not filed with the Department until after December 31, 2016 and therefore had to be denied. The Taxpayer argued that the regulation was asking for an amended return when it was not required by statute. The Hearing Officer determined that the regulation is reasonable and relevant as the amended return helps the Department to determine that the refund claim being requested is accurate. Due to the Taxpayer failing to request a refund as outlined in statute, regulation, and in the forms issued by the Department before the expiration of the statute of limitations, the refund is barred. The Taxpayer’s protest is denied.


01/24/2018

18-04

Chamisa Hills Family Dental

On August 17, 2017, the Department assessed the Taxpayer for gross receipts tax, withholding tax, penalty, and interest. On August 23, 2017, the Taxpayer submitted a formal timely protest with the Department. In May of 2016, the Taxpayer purchased the business from the prior owner. Based on the prior owner’s high recommendation, the office manager stayed working at the business after the change of ownership. In or around May of 2017, the Taxpayer noticed that certain duties assigned to the office manager where not being completed. Among those duties were the Taxpayer’s CRS-1 returns. Upon the resignation of the office manager the Taxpayers filed all late CRS-1 returns. The Taxpayer is asking for an abatement of penalty and interest based on the circumstances surrounding the prior employee. The Department argued that multiple notices were sent to notify the Taxpayer that they were not filing returns and that there was an underpayment of tax due. Based on that underpayment, penalty and interest were calculated and assessed. The Hearing Officer determined that based on the information and Sections 7-1-67 NMSA 1978 and Section 7-1-69 NMSA 1978 the assessment of penalty and interest were properly assessed by the Department. The Taxpayer failed to establish non-negligence so penalty cannot be abated and interest cannot be abated per statute. For the forgoing reasons, the Taxpayer’s protest is denied.


01/10/2018

18-03

ACME Mechanical

On August 16, 2017, the Department assessed the Taxpayer for gross receipts tax, penalty, and interest for the tax period starting January 1, 2012 and ending December 31, 2014. On August 30, 2017, the Taxpayer filed a timely protest with the Department. During the time at issue, the Taxpayer was providing services in New Mexico as a plumbing contractor. The Taxpayer subcontracted with two companies to provide plumbing services on construction projects in New Mexico. The assessment was the result of an audit conducted in 2017. Unfortunately, both of those NTTCs were executed after the deadline given by the Department to the Taxpayer to obtain NTTCs. Due to the NTTCs not being submitted by the deadline of August 2, 2017, the Department rejected them and disallowed the associated deduction. The issue to be decided in this protest is whether the Taxpayer is liable for the gross receipts tax, penalty and interest assessed. The issue hinges on the timeliness of the Taxpayer’s acceptance and submission of the NTTCs. Per Section 7-9-43(A) NMSA 1978, the taxpayer should be in possession of the NTTC when the transaction of the receipts takes place but allows for the Department to give a 60 day window if a taxpayer is placed under audit to give those NTTCs to the Department. This statute specifies that if the taxpayer has not obtained the NTTC within the sixty day time frame the deduction is to be disallowed. It was not disputed that the Taxpayer’s receipts used to calculate the assessment would be deductible if the NTTCs could be allowed. However, the Department cannot allow the deductions based on when the NTTCs were executed and submitted to the Department. The Hearing Officer determined that by the Taxpayer not presenting the NTTCs in a timely manner, as required by statute, the Taxpayer waived its right to the claimed deduction. For the foregoing reasons, the Taxpayer’s protest is denied.


01/09/2018

18-02

Marc A. Gelinas

On March 17, 2017, the Department assessed the Taxpayer for gross receipts tax, penalty and interest for the reporting periods starting January 1, 2010 and ending December 31, 2010. The Taxpayer filed a formal protest with the Department on June 5, 2017. During the time at issue, the Taxpayer was a salesperson selling implantable medical devices, such as prosthetics for knees, hips and shoulders. The Taxpayer’s income was based on commissions from his sales and was reported on IRS form 1099-MISC from the medical devices distributors. When completing a sale the Taxpayer would prepare order forms, the payment of goods was made by the buyer to the manufacturer. Then the manufacturer would pay a portion of the sale price to the distributor, which would then pay the Taxpayer his commission from the sale. The Taxpayer never filed gross receipts reports or made any gross receipts tax payments in relation to this compensation. The assessment was the result of a Schedule C mismatch audit. The Taxpayer argued that the items that were being sold were eligible for the deduction in Section 7-9-73 NMSA 1978 for the sale of prosthetic devices and therefore the commissions would also be deductible under Section 7-6-66 NMSA 1978, which is the deduction of commissions from gross receipts tax. This statute indicates if the receipts are derived from a commission on the sale of tangible personal property that original sale was subject to a deduction the commission would also be deductible. This is further clarified in Regulation 3.2.1.18 HH (6) NMAC. The Hearing Officer indicated that this deduction does not require the use of an NTTC and that the deduction only requires that the originating receipts of the commission were deductible. The Hearing Officer determined that since the original sale that the commission is based on would be subject to a deduction so would the commission that was earned from that sale. The Hearing Officer determined that based on the information above the Department is ordered to abate the assessed gross receipts tax, penalty and interest and the Taxpayer’s protest is granted.


01/09/2018

18-01

Joel W. & Jacqueline R. Draham

On June 6, 2017, the Department issued a return adjustment notice for the Taxpayers’ 2016 personal income tax (PIT) return. On August 23, 2017, the Taxpayers submitted a formal protest with the Department. The adjustment was based on the W-2’s submitted with the return and the Taxpayers’ domicile. At the time of the hearing, the Department indicated that no further documentation was provided to establish that the Taxpayer had any entitlement to the refund amount in dispute. The issue to be decided in the hearing is whether the Taxpayers were entitled to a refund equivalent to the portion of taxes withheld and paid to the State of New Mexico on the W-2. One of the Taxpayers moved out of state for part of the year while the other Taxpayer remained in New Mexico with the Taxpayers’ dependent. The income from the Taxpayer residing in New Mexico with the Dependent is not in question. The Department argued that there was not sufficient evidence to show that the Taxpayer that had moved out of state had changed domicile to another state as early as asserted. The Taxpayers’ claim for refund is premised on an overpayment of tax based on one of the Taxpayers being domiciled in another state. The Department argued that the Taxpayer did not show enough evidence to support the time indicated that was spend out of the state. The Hearing Officer states that everyone is deemed to be domiciled somewhere and once that domicile is established it does not change until the person moves ‘with the bona fide intention” of making a new location that persons permanent home. Domicile is what helps to establish a taxpayer’s residency. Per Regulation 3.3.1.9(C)(4) NMAC, there are thirteen factors to help determine a taxpayer’s domicile. The Hearing Officer determined that eight of those factors weighed in favor of the Department, five were neutral, and zero weighed in favor of the Taxpayer. Based upon the information provided, the Hearing Officer determined that the Taxpayer failed to establish an entitlement to the refund that was subject of the protest. The Taxpayers’ protest was denied.


12/20/2017

17-50

Golden Services Home Health And Hospice

On August 12, 2016, the Department assessed the Taxpayer for gross receipts tax, penalty and interest for the tax periods from January 31, 2009 through December 31, 2014. On November 9, 2016, the Taxpayer filed a protest letter with the Department. The Taxpayer provides hospice services from health care practitioners. The services provided are commercial contract services or Medicare part C services that are paid for by managed health care providers or by health care insurers and are not otherwise deductible. During the time at issue, the Taxpayer claimed a deduction from gross receipts tax under Section 7-9-93 NMSA 1978. During an audit, the deductions under that section were denied and the Taxpayer was assessed. Section 7-9-93 NMSA 1978 was amended by the legislature during the 2016 legislative session to clarify the type of health care provider that may take certain deductions. The Taxpayer argued that the statute does not limit the entity that may take the deduction and that the regulations that attempt to create such a limitation are improper. The Department argued that the deduction is limited to health care practitioners and those health care facilities, such as the Taxpayer, cannot take the deduction. The Department also argued that the regulation is consistent with the legislative intent of the statute.  The Hearing Officer determined that the statute provided for any taxpayer who had receipts of qualifying payments to take the deduction. Therefore, the Taxpayer was entitled to take the deduction under the statute. The Taxpayer pointed out that under the current statute signed into law after the 2016 regular session, the Taxpayer would not be entitled to take the deduction. The Hearing Officer also determined that the amended statute would only apply going forward from the date it was enacted. For the foregoing reasons, the Taxpayer’s protest is granted.


12/15/2017

17-49

Spelman Investments

The Taxpayer filed an application for refund on February 15, 2017 for late penalty that was paid for Combined Reporting System (CRS) reporting periods starting May 2014 ending July 2016. The Department denied the refund request on April 11, 2017. The Taxpayer filed a timely protest with the Department on July 10, 2017. The Taxpayer manages rental property in Ruidoso, New Mexico and all record keeping and tax filings were completed by the Taxpayer. The Taxpayer used the Taxpayer Assistance Program (TAP) to pay all CRS taxes for the periods between May 2014 and July 2016 but did not file the returns for those time periods. The Taxpayer argued that it intended to file the returns properly but due to the change in the TAP system never realized that the returns were not filed with the Department. The Department had sent out non-filer notices to the Taxpayers on multiple occasions. However, the Taxpayer did not recall receiving these notices but did acknowledge that it received a lot of mail. One of the Departments representatives contacted the Taxpayer in July of 2016 to explain that none of the returns for the period in question had been filed. The representative then walked the Taxpayers through the TAP system. After, the Taxpayer filed all missing returns. The Taxpayer contacted the Department about the penalty that was due. It was suggested by the Department that the penalty be paid and an application for refund be submitted to the Department for the Taxpayer to try to get the amount paid back from the Department. The Hearing Officer determined that the Department had tried on many occasions to notify the Taxpayer of the returns that were not filed with the Department. The Taxpayer did not exercise ordinary business care and prudence that reasonable taxpayers would have exercised under the same circumstances. It was determined there was no room to allow for the abatement by statute and the penalty was properly assessed by the Department. For the reasons above, the Taxpayer’s protest is denied.


12/11/2017

17-48

On January 27, 2016, the Department sent a denial letter to the Taxpayer for a claim for refund. As the Taxpayer is deceased, the denial letter was mailed to the address of the Taxpayer’s Estate’s Personal Representative and successor in interest who had made the original claim for refund on January 20, 2016. A protest was filed with the Department on March 16, 2017 which was denied for being untimely. The personal representative filed a second protest to this denial letter on June 13, 2017. The documents submitted by the Taxpayer’s personal representative showed that the Taxpayer died on October 13, 2006. The personal representative starting inquiring about a refund for the 2006 taxable year in January of 2016. The matter at interest in these protests are was the Taxpayer entitled to a refund for the claim for refund submitted in January of 2016 for the 2006 taxable year. The Hearing Officer determined that the original return submitted in 2007 for the 2006 taxable year would have been a valid claim for refund. It appears that the Department took no action on this original claim but per section 7-1-26 NMSA 1978 and after 210 days the Department could no longer act on a claim for refund. The Hearing Officer determined that the legislature has established a statute of limitations on refund claims so that the state will not be held liable for late-asserted claims allowing the ledger book to be closed after a finite time. As the application for refund in 2016 was past the four-year statute of limitations, the claim was denied by the Department. Although, the Taxpayer established that it was entitled to the claimed refund submitted through the 2006 PIT-1 tax return in 2007, the Taxpayer did not timely re-submit a request for payment of the refund within three years of the end of the calendar year the payment would have been due per Section 7-1-26 NMSA 1978. For the foregoing reasons, the Taxpayer’s protest is denied.


12/05/2017

17-47

Agman Louisiana Inc.

On August 1, 2016, the Department assessed the Taxpayer for corporate income tax, penalty, and interest for the reporting period ending September 30, 2013. On September 22, 2016, the Taxpayer filed a timely protest with the Department. The Taxpayer is an indirect wholly-owned subsidiary of a larger group of subsidiary and affiliated entities for agricultural commodities. The Taxpayer is headquartered in New Orleans, Louisiana. The Taxpayer had two subsidiaries that were sold between 2006 and 2009 that were recognized and reported as a gain on the sale of its interest on the 2013 tax return as allocable non-business income which was reported back to its commercial domicile. Based on an audit, the Department determined that the income was business income and apportioned part of the gain on the sale of stock to New Mexico. At issue in this protest is whether the gain from the 2013 sale of its interest is business income apportionable and subject to New Mexico corporate income tax or if it is allocable nonbusiness income, not subject to New Mexico tax under the Uniform Division of Income for Tax Purposes Act and applicable to the commerce clause and due process clause requirements. New Mexico adopted three tests to determine whether the income is business or non-business income under Section 7-4-2(A) NMSA 1978. There is a transactional test, disposition test, and functional test. However, under the Uniform Division of Income Property Purposes Act all income that is not business income is nonbusiness income. The Chief Hearing Officer determined that the income from the sale of interest met the dispositional and functional tests for business income. For the reasons above, the Taxpayers gain is business income, apportionable to New Mexico and the Taxpayer’s protest is denied.


11/06/2017

17-46

Platinum Performance, LLC

The Taxpayer was assessed by the Department as a successor in business for tax, penalty, and interest on September 2, 2016. The Taxpayer filed a formal protest with the Department. On July 1, 2015, the Taxpayer was assessed for gross receipts, compensating, and withholding taxes, including penalty and interest. On August 1, 2015, the Taxpayer entered into a purchase agreement for all of the business assets and as part of the agreement assumed the liability on two secured liens. The Taxpayer immediately began operation at the same location, phone number, and employees. It also notified customers and service providers of its change of name. The Taxpayer slowly started changing the type of jobs that were accepted but completed all of the prior owners accepted jobs. The issue at hearing is whether or not the Taxpayer is a successor in business and if tax, penalty, and interest are due. The Taxpayer argued that they are located in a rural area and there is very limited availability of where their automotive shop could have moved to and they should not be penalized for that. The Hearing Officer looked at eight different factors to determine if the Taxpayer is a successor in business. The Hearing Officer determined that the Taxpayer did not overcome the presumption of correctness and that it was a successor in business. The Taxpayer argued that the assessment and interest were inappropriate. The Hearing Officer determined that due to a recent legislative change the Taxpayer was assessed under the prior law and that penalty and interest should be abated but tax is due. The Taxpayer’s protest is denied in part and granted in part.


10/24/2017

17-45

Roswell Hospital Corporation

On July 26, 2016, the Taxpayer’s agent submitted an application for refund of gross receipts tax for the period January 1, 2015 through December 31, 2015. On September 19, 2016, a refund denial letter was sent to the Taxpayer. On December 14, 2016, the Department sent a letter asking for additional information to complete the review of the refund application. On February 21, 2017, the Taxpayer filed a formal protest with the Department on the basis that the application for refund had not been granted or denied and 210 days had passed. The Taxpayer received a denial letter indicating that the Taxpayer’s protest was not timely because more than 90 days had passed from the time a refund denial letter was sent out on September 19, 2016. The Taxpayer’s agent and the Taxpayer denied ever receiving the notice from the Department and filed a timely protest of the denial of the original protest on March 23, 2017. The Department received this protest on April 10, 2017 and indicated to the Taxpayer that this timely protest would only address the denial of the original protest. The letter indicated that the denial of the refund, addressed in the original protest, would not be addressed in the current protest. The Department was able to show that the denial letter was printed and the addressed to the Taxpayer. The letter was printed by a prior employee that no longer works with the Department and was not at the hearing. The Taxpayer argued that it or its agent never received the denial letter. As the individual who would have mailed the denial letter no longer works for the Department there was no verbal verification in the hearing that the letter was in fact mailed. The Taxpayers argued that because the refund denial letter was addressed to the Taxpayer and not to the authorized agent specifically referenced on the application that the Department erred. Based on the evidence presented during the hearing, the Hearing Office was persuaded that Department did not grant or deny the Taxpayer’s application for refund within 210 days of the application being submitted and therefore the Taxpayer’s protest was granted.


10/12/2017

17-44

Pete’s Top Quality Landscape, LLC

On June 8, 2010, the Department assessed the Taxpayer for weight distance tax, penalty, and interest for the period of December 31, 2013 to June 30, 2009. The assessment included a separately stated penalty for underreporting.  The Department received the Taxpayer protest on August 19, 2010. The Taxpayer performs landscape installation services and hauls materials, including sand and gravel. In most circumstances, the Taxpayer delivers or picks up materials. The Taxpayer estimated that the trucks are empty at least 50 percent of time. The Taxpayer usually relies on fuel tickets to record the number of miles its truck travels and does not keep logs because they do not travel more than 150 miles from its center of business. In 2009 the Department performed an audit of the Taxpayer’s weight distance tax reporting. The Taxpayer stated that at the time of the audit it provided all requested documentation. The Department’s audit determined that the Taxpayer had underreported its tax by more than 25 percent for the periods being audited. During the review of the documentation submitted and the audit narrative there was not any information provided to the Department to show that the Taxpayer was entitled to a decrease in the original assessment. It was determined by the Hearing Officer, that the Taxpayer did not provide sufficient evidence and legal argument to establish presumption of correctness and therefore was not entitled to an abatement. Therefore, the Taxpayer is liable for the amount in the assessment. For the reasons above, the Taxpayer’s protest is denied.


10/11/2017

17-43

Clean Rite Janitorial Services LLC

On March 31, 2017, the Department issued an assessment for gross receipts tax, penalty, and interest for the tax periods from January 31, 2011 through June 30, 2016. On May 18, 2017 the Taxpayer filed a formal protest only on the penalty assessed. The Taxpayer is in the business of janitorial services. In 2011, the Taxpayer received a letter informing them that it was exempt from paying the New Mexico gross receipts tax for a specific client that it does business with. That letter was then submitted to its accountant. The accountant agreed with the letter and approved the Taxpayers plan to start claiming an exemption. The Taxpayer argued that it should not have to pay the penalty as it relied on an accountant before taking the exemption. However, the accountant was unable to attend due to a recent medical issue and the original letter could not be located. During the hearing, the Hearing Officer determined that there was not enough evidence to support the Taxpayers claims. The Taxpayer argued that is has always been tax compliant and was not trying to evade paying taxes. The Hearing Officer determined that the Taxpayer did not establish a good faith, mistake of law made on reasonable grounds that would allow for abatement of penalty. For the foregoing reasons, the Taxpayer’s protest is denied.


10/05/2017

17-42

Jack and Karen Dill

On April 18, 2017, the Department issued a return adjustment notice for personal income tax. On April 28, 2017, the Taxpayer filed a formal protest with the Department. For the tax year at issue, the Taxpayer performed remote work for a company based in New Mexico. The Taxpayer resided in the states of Indiana and New Jersey. The Taxpayer estimated that during the 2016 tax year he was present in the state of New Mexico for approximately 88 days or 24 percent of the year. Based on this calculation, the Taxpayer allocated his income from the New Mexico based company. The Taxpayer relied on information in the statute and the PIT-B instructions to determine how the income from wages should be allocated. The Department adjusted the return to fully allocate the wages from the New Mexico based company to New Mexico for tax purposes and sent out the adjusted refund to the Taxpayer. The Department agreed that the Taxpayer was not a resident of New Mexico during the time at issue. However, the Department asserted that 100 percent of the wages reported by the New Mexico based company were taxable because the Taxpayer was employed in New Mexico. The Hearing Officer determined that the Taxpayer overcame the presumption of correctness and established entitlement to the original refund claimed. The Taxpayer was entitled to apportion and allocation of income based on the percentage of the wages that was made while within the state pursuant to Section 7-2-11(A)(4) NMSA 1978. For the reasons above, the Taxpayer’s protest is granted.


09/28/2017

17-41

Highland Construction LLC

On December 9, 2016, the Department assessed the Taxpayer for gross receipts tax, penalty, and interest for the tax period starting January 1, 2013 through December 31, 2014. On February 8, 2017, Taxpayer filed a formal protest letter with the Department. The Taxpayers business provides construction services. The Taxpayer relies on a bookkeeper for all tax responsibilities. The bookkeeper is only consulted as-needed and is not employed by the Taxpayer. The Taxpayers standard process has been to charge gross receipts tax on all construction services. However, on one occasion the Taxpayer did not charge gross receipts tax to a non-profit organization. The protest is a result of those transactions. The Taxpayer argued that an NTTC was provided by the organization and the organization informed the Taxpayer that because they are a non-profit they do not pay tax. The Taxpayer confirmed there was no consultation with a tax professional regarding the transactions that took place with the non-profits. Based on the Taxpayers current understanding of NTTCs, it has been requested the non-profits pay gross receipts tax that would have been due, to which they refuse. The Taxpayer argues that it should be entitled to the benefit of good-faith because it accepted the NTTC’s originally in good-faith. During the hearing, it was decided that the Taxpayer accepted the clients information without further inquiry, investigation, or due diligence to check if the information provided by the client was correct. The Hearing Officer also noted that the actual NTTC provided notice that it is not to be utilized for construction services. The Hearing Officer determined that the Taxpayer did not overcome the presumption of correctness and that the receipts from performing construction projects for a non-profit organization are fully taxable. Therefore, as no deduction or certificate covered the transaction at issue, the Taxpayer did not establish good-faith acceptance of the NTTCs and is not entitled to safe harbor protection under Section 7-9-43 (A) NMSA 1978. For the reasons listed above, the Taxpayer’s protest is denied.


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