Show Subnavigation

Latest MeF Information:

Sept. 28, 2016
New Mexico’s MeF programs to leverage FTA’s Secure Exchange System for access to development resources for TY2016.

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. 



02/10/2017

17-08

Ronald O. Jaynes

On October 24, 2016, the Department sent a denial letter to the Taxpayer for an untimely submission of a protest letter postmarked September 14, 2016. On November 3, 2016 the Department received a timely protest of the Department’s denial to the submission of the untimely protest letter, which was acknowledged on November 9, 2016. The Taxpayer received a notice of limited scope audit commencement dated January 1, 2016, and a reminder notice for the limited scope audit dated February 10, 2016, for the filing periods January 1, 2009 through July 10, 2016. During that time period the Taxpayer provided construction services to the film industry in New Mexico. Before the notice from the Department was received, the Taxpayer made undocumented communication with the Officer of the Governor and the State Auditor in which the Taxpayer determined from the conversations that tax was not owed. The Taxpayer also made undocumented communication with the Department by email and telephone in reference to the limited scope audit per the Taxpayer’s wife and the Taxpayer’s CPA. As no correspondence was received by the Department in reference to the limited scope audit, an assessment letter was sent on April 11, 2016 for outstanding gross receipts tax, penalty, and interest for periods January 1, 2009 through December 31, 2012. During the hearing, the Taxpayer’s wife indicated that a protest was not sent to the Department in regards to the assessment letter, the amount was not paid, and documentation was not submitted to the Department to support that the assessment was in error. The Taxpayer received a statement of account dated June 28, 2016 at that time the Taxpayer contacted a CPA for assistance in the matter. The CPA indicated that correspondence was submitted to Audit and Compliance Division but not the Department’s protest office on July 21, 2016. The Taxpayer characterized the correspondence as an “official protest” during the hearing the CPA admitted that the intent of the correspondence was to work out the issue with the Department before having to go to protest. There was not any evidence that the letter was submitted to the Department’s protest office. During the hearing, it was established that no other attempts at a formal written protest were sent to the Department before July 21, 2016 which is after the protest period expired. Per Section 7-1-24(C) NMSA 1978, a protest should be filed within ninety days of the date the letter was mailed or delivery in person to the Taxpayer by the Department. In order to challenge this assessment the Taxpayer would have needed to file the protest with the Department by Sunday, July 10, 2016. As the date falls on a weekend it is extended to a business day which was Monday, July 11, 2016. The CPA noted that after July 21, 2016 date numerous pieces of correspondence were submitted to the Department. One of those pieces of correspondence postmarked September 14, 2016 was received by the protest office and at that time a denial letter was sent based on the timeliness of the protest by the protest office at the Department. The Taxpayer argued that he acted in good faith and attempted to address the communication about the limited scope audit and the assessments. The Taxpayer also admitted that the address being used by the Department on the assessment, notice, and reminder letters is correct. The hearing officer determined from the information presented that the Taxpayer did not act on his right to protest until it had expired. Due to the Taxpayer not submitting in a written formal protest until after the 90-day period for protest, the Department lacked jurisdiction to entertain the protest. The hearing officer determined that for the reasons above the Taxpayer’s protest of the denial of untimely protest letter is denied.


02/06/2017

17-07

Broken Hill Proprietary Inc.

On December 24, 2014, the Taxpayer submitted an Application for Rural Job Tax Credit which was received by the Department on December 30, 2014. The Application sought a Rural Job Tax Credit for 665 Jobs. On September 29, 2015, the Department sent a partial approval letter in which the credit for 80 jobs were disallowed based on the information provided during the application review process. A timely protest was filed on October 28, 2015. The Taxpayer asserted that it was legally entitled to the additional credit for those 80 jobs. During the hearing, the Taxpayers representative asserted that the credit should be allowed as the Taxpayer provided information showing that the jobs were “occupied” during the qualified period in the application. The Taxpayer claimed that relevant inquiry for the tax credit was whether employee “occupied” the job for 48 weeks during the qualified period. Not that the records provided to the Department demonstrated that it paid wages to the employee over the entire duration of that period. The Taxpayer argued that even if an employee was not receiving a paycheck because they were absent with an illness or injury, that employee remained on the payroll register and continued to incur benefits. During the application review process, the auditor followed the correct audit procedure used by the Department. The documents submitted with the application were reviewed to determine whether an eligible employee was in a qualifying position for the minimum period of time as required by Section 7-2E-1.1 NMSA 1978.  An essential part of that review includes looking at the payroll records provided by the Taxpayer and verifying them against the Department of Workforce Solutions database. For any pay period in which a paycheck is missing the time period is to be eliminated from the final week counts for that employee. The Taxpayer was asked for additional documentation needed to confirm whether the Taxpayer paid wages to the employees allegedly occupying the 80 jobs in question during the application review process. When additional documentation was received the Department did not find the information provided was satisfactory to verify the wages paid and the occupancy of the 80 employees in the qualified jobs. A partial approval of the Rural Jobs Tax Credit was sent to the Taxpayer. The total disallowed credit amount reflected the Department’s determination that the 80 employees had failed to occupy their qualifying jobs for 48 weeks during the 12-month qualifying periods. The Department indicated that the information that it looks for to confirm the qualified positions occupancy includes an employee’s pay periods, pay dates, pay rates, hours worked per pay period, wages earned, deductions, and withholdings. The Department deems payment of wages to be evidence of occupancy and reviews all credit applications in the same manner. It was pointed out in the hearing that nearly half of the jobs in question consisted of employees with significant periods of unpaid sick leave,  leave without pay, compensation from a third party (weekly indemnity or workers compensation benefits), and others were classified as “flex employees” or who switched from hourly to salaried employees. The hearing officer determined that definition of “wages “does not include unpaid leave or benefits paid by a third party. The Taxpayer acknowledged that the facts with respect to the 80 disallowed jobs were uncontested. The Taxpayers records for 80 jobs showed that the wages were not paid for the full duration of the 48 weeks relevant to a 12-month period. Wages as defined in Section 7-2E-1.1(N)(10) NMSA 1978 is “all compensation paid by an eligible employer to an eligible employee through the employer’s payroll system, including those wages the employee elects to defer or redirect, such as the employee’s contribution to 401(K) or cafeteria plan programs, but not including benefits or the employer’s share of payroll taxes”. The hearing officer determined that Section 7-2E-1.1 (D) NMSA 1978 states that an employer seeking the rural job tax credit “shall certify the amount of wages paid to each eligible employee during each qualifying period, the number of weeks during the qualifying period the position was occupied and whether the qualifying jobs was in a tier one or tier two area” The hearing officer indicated that because this case involves a tax credit, which has been found to be an act of legislative grace, the language of the credit statute must be narrowly constructed. Taxpayer carries the burden of proving that it is entitled to the claimed credit. The hearing officer determined that the Department’s desire to verify such information was reasonable and consistent with its grant of authority provided in the statute in which an employer must apply to the Taxation and Revenue Department on forms and in the manner the department may prescribe. The hearing officer determined that the disallowed portion of the application, it was reasonable, and well within the Department’s authority to request additional information. When the Taxpayer was unable to provide documentation that the Department found satisfactory to establish an entitlement to the remaining portion of the requested credit, it was well within its authority to disallow the credit for the remaining 80 jobs. For these reasons the Taxpayer’s protest is denied.


01/31/2017

17-06

Randall & Judith Gilbert

On December 3, 2015 the Department assessed the Taxpayer for gross receipts tax, penalty, and interest for the Combined Reporting Systems reporting periods from January 1, 2008 through December 31, 2012. A timely protest was filed with the Department. Since 2008, the Taxpayer has been in the business of selling cabinetry to building contractors or individual customers in Texas and New Mexico from a business location in Farewell, Texas. The Taxpayer’s typical transaction for the period at issue involved an order being placed with the Taxpayer, the Taxpayer placing the order with the manufacturer, and the product being shipped directly from the manufacturer to the customer, where the customer would take possession of the item. If needed, other services were also provided including measurement at the install location and computer generated renderings in regards to the sale of the cabinetry. The Taxpayer specified that no the installation of the cabinetry was performed as part of his business. There was little to no proof provided in the hearing or to the Department that full transactions took place outside of New Mexico. The assessment was the result of a Federal Schedule C mismatch with gross receipts tax reported in the State of New Mexico. On May 22, 2015 the Taxpayer was provided with a Notice of Limited Scope Audit Commencement- 60 day notice. This notice informed the Taxpayer to obtain and submit nontaxable transaction certificates (NTTCs) to the Department on or before July 21, 2015. The figures from the limited scope audit were adjusted based on sales that were made out-of-state to out-of-state customers. Limiting the tax liability to gross receipts generated from sales of goods and associated services provided to New Mexico contractors and individual customers for the period at issue. The Taxpayer was represented by a CPA that indicated for the period at issue his only services to the Taxpayer included Federal and New Mexico Income Taxes. The CPA only started providing services concerning New Mexico gross receipts tax after the Taxpayer received the assessment from the Department. The CPA argued that most of the Taxpayers transactions were subject to deductions and that the Department gave the taxpayer information to make him believe he was not taxable. During the hearing an email was provided and read into the record from February of 2016. The hearing officer determined that the goods and services provided to customers in New Mexico was taxable per Section 7-9-5 NMSA 1978.However, possible deductions in accordance with the Gross Receipts and Compensating Tax Act, such as Section 7-9-51 NMSA 1978 for the sale of construction materials to persons engaged in the construction business which could have been claimed for some of the transactions for the period at issue but due to the Taxpayer not being unable to produce the appropriate NTTC’s per Section 7-9-43 NMSA 1978, the deductions could not be allowed. The hearing officer determined that without the NTTC’s there was no mechanism available to show that the construction businesses paid the gross receipts tax on the final transaction. During the hearing the Department explained that the first recorded communication with the Taxpayer was a phone call from the Taxpayer in January of 2016 inquiring about NTTC’s which was after the Taxpayer had received the 60 day notice from the Department. The letter from February 2016 was determined by the hearing officer to simply point to Section 7-9-55 NMSA 1978 but it did not attempt to instruct or advise the Taxpayer on how to assert the deduction under statute. The hearing officer also determined that the taxpayer did not present evidence in this case to support the deduction referenced in the email. No earlier communication with the Department could be provided in support of the Taxpayers claims. The hearing officer determined that there was no evidence to suggest affirmative misconduct by any employee of the department with whom the Taxpayer may have communicated. Under New Mexico self-reporting tax system, “every person is charged with the reasonable duty to ascertain the possible tax consequences” of his or her actions. There was no evidence provided to support that the Taxpayer consulted with a tax professional or made a through inquiry regarding his tax responsibilities prior to engaging in business. There was also no affirmative evidence provided to show that the Taxpayer was misled by a Department employee and that the Taxpayers failure to pay the tax was caused by reasonable advice of a competent tax counsel or accountant whom had full disclosure of all relevant facts. Based on the information above the hearing officer determined that the Taxpayer did not overcome the presumption of correctness and failed to establish an entitlement to an abatement of penalty in this matter. The hearing officer also determined that in concerns to interest based on Section 7-1-67 NMSA 1978 that the Department does not have legal authority to abate interest and the assessment of interest is mandatory despite the Taxpayer’s lack of bad faith. The Department is to assess the Taxpayer interest from the time the tax was due, but not paid, until the tax principal liability is satisfied. The hearing officer determined that the Taxpayer did not establish the right to the claimed deduction, or entitlement to an abatement of the assessed penalty or interest, the Taxpayer’s protest is denied.


01/19/2017

17-05

Matthew Marshall RJ Handyman

On July 30, 2015 the Department assessed the Taxpayer for gross receipts tax, penalty and interest for the reporting periods June 1, 2012 through December 31, 2012. The Taxpayer filed a timely protest with the Department which was received on October 5, 2015. During the time at issue the Taxpayer was a sole owner and proprietor of a handyman construction and maintenance service business. The Taxpayer’s wife assisted the Taxpayer with maintaing the records of the business and the filing of taxes. During the relevant periods the Taxpayer and the Taxpayer’s wife filed a married filing joint return and reported more business income on the federal Schedule C than was reported on gross receipts income filed on the CRS returns. Based on the mismatch information between the Federal Schedule C and the amount reported to New Mexico the Notice of assessment was issued by the Department. During the hearing the Taxpayer argued that gross receipts tax is not due for the material purchased for the services he provided as the materials were reimbursed expenditures that were purchased on behalf of his clients and that the materials and his services were separated out on the invoices provided to the Department. The hearing officer determined that with the invoices and spreadsheets provided the Taxpayer met the bookkeeping requirements. However, Taxpayer did not present sufficient or compelling evidence that he was a disclosed agent for the clients so Section 7-9-3.5 NMSA 1978 does not apply. During the time of issue, the Taxpayer’s wife was also engaged in her own business endeavors including contracting with an out-of-state company performing services in New Mexico, selling goods online to out-of-state buyers, and performing mystery shopping services but was not registered with the Taxation and Revenue Department as a business and did not have her own CRS number. The Taxpayer argued that the Taxpayer’s wife business endeavors were not subject to gross receipts tax as the services were performed for an out-of-state company. The Department agreed to a partial abatement for some of the business endeavors reported by the Taxpayer’s wife prior to the hearing. At the time of the hearing, the hearing officer determined that gross receipts tax applies to the services performed in New Mexico by the Taxpayer and the Taxpayer’s wife per the definition of gross receipts in Section 7-9-3.5 NMSA 1978. Lastly, the Taxpayer argued that the penalty and interest should be waived for the period at issue as there are good intentions to pay what is owed to the Department. It was determined by the hearing officer that interest will not be abated as the Department has no discretion to abate interest based on Section 7-1-67 NMSA 1978. It was also determined that the Department is unable to abate penalty per Section 7-1-69 NMSA 1978 as there was no evidence showing that the Taxpayer engaged in any formal consultation or study of the issue before reporting or paying CRS taxes. The Department is ordered to recalculate outstanding tax, penalty, and interest in light of the abatement allowed by the Department and the Taxpayer is ordered to pay the outstanding liability. The Taxpayer’s protest is denied.


01/09/2017

17-04

Autoglass Technologies, LLC

On September 9, 2015 the Department assessed the Taxpayer as a successor in business. On October 6, 2015 the Taxpayer filed a timely written protest. The issue to be determined in the hearing was whether the Taxpayer is liable under the assessment as a successor in business to the former company. The Taxpayer renewed its argument that the Department’s violation of the Section 7-1B-8 NMSA 1978 that the protest be granted. During the time at issue the prior company owner was going out of business and the current company owner/the Taxpayer wanted to start her own business doing automobile glass repair. With the help of the former company owner the Taxpayer started her own business. With the assistance of the former company’s accountant the Taxpayer filed for business licenses and taxes. Taxpayer first filed a zero gross receipts tax for December 2014. The former company was still operating and receiving payments in December 2014 and the Taxpayer was conducting business and receiving payments in December 2014 despite reporting zero gross receipts for that month. It was also discovered that the former company and the Taxpayer were providing service to some of the same customers and paying some of the same employees. The Taxpayer continued to do business with customers from the prior business but did not have formal agreements to assume any of the prior business outstanding contracts. Based on Regulation 3.1.10.16 NMAC it was determined by the hearing officer that the Taxpayer is presumed to be a successor in business to the former company due to the Taxpayer first and continuing customers being the goodwill of the former company. Based on the Taxpayers renewed argument the Departments response was that the tardiness of the request and the hearing are not jurisdictional and are not grounds to grant the protest. The Hearing officer determined that the Department was in violation of the statute by failing to refer the protest for hearing within 45 days per Section 7-1B-8 NMSA 1978. However, it was also determined the Departments violation of the statutory time limits for requesting a hearing does not necessitate that the protest be granted. The hearing officer determined that even though the Taxpayer is a successor in business to the former company, it is not liable for penalty and interest but is still liable for the gross receipts tax due. The Taxpayer’s protest is granted in part and denied in part.


01/09/2017

17-03

CORE

On May 17, 2016, the Department assessed the Taxpayer for gross receipts tax, penalty, and interest for periods from March 31, 2010 through October 31, 2015. The taxpayer filed a timely protest letter July 28, 2016. During the tax periods at issue, the Taxpayer was providing educational services in New Mexico. For the periods they outsourced payroll and corporate filings to a corporate services provider which at the time of the hearing it was not found that the service provider was a competent tax counsel or an accountant capable of providing tax advice. At no time did the Taxpayer consult with any New Mexico taxing authority or tax professional to determine if the Taxpayer was in compliance with New Mexico Law. The Taxpayer stated that it was unaware of New Mexico’s “unique gross receipts tax for services” and that the Taxpayer was never given notice by the Department of GRT tax obligation during the periods at issue. However, the Taxpayer acknowledged the Registration Certificate dated in 2008 that refers to “Gross Receipts, County Gross Receipts, Municipal Gross Receipts, Compensating, and Withholding Taxes.” In 2014, a non-filers notice was acknowledged by the Taxpayer for the same CRS number in which the Registration Certificate was issued to. No evidence or documents were provided to the Department for the periods at issue supporting the Taxpayer of being tax-exempt from gross receipts tax or support their finding that the transactions during the periods were exempt or subject to a deduction. Under New Mexico’s self-reporting tax system, “every person is charged with the reasonable duty to ascertain the possible tax consequences” of his or her actions. The Taxpayer filed Corporate Income Tax returns for the time periods and concluded that it owed gross receipts tax and interest, but disputed the amount of penalty owed to the Department due to the statute of limitations and the earliest periods being assessed by the Department. With review of the statute of limitations based on the non-filer status of the account under 7-1-18 (C) NMSA 1978 the Department may asses at any time within seven years from the end of the calendar year in which the tax was due. Based on the information above the hearing officer determined that the Department properly assessed the Taxpayer and that the gross receipts tax, penalty, and interest is due. The Taxpayer’s protest is Denied.


01/04/2017

17-02

17-02 Diamond T US Mail Services Inc.

On December 28, 2015, the Department denied the Taxpayer’s claim for refund for the CRS reporting period ending July 31, 2015. On January 8, 2016, the Department received the Taxpayer’s protest of the Departments denial of claim for refund. The taxpayer is a mail courier under a Highway Contract Route, with the United States Postal Service transporting mail from and to Lubbock, Texas. The refund denial was based on the Taxpayer being a star route contractor and the lack of sufficient documentation to support the deductions being claimed. The grounds of the protest sent in by the CPA indicated that the Taxpayer was not a “star route” contractor with the United States Postal Service and that the Taxpayer had incorrectly reported receipts earned in interstate commerce. The Taxpayer argued that the refund is due under Section 7-9-55 and Section 7-9-56 NMSA 1978. The CPA response to the denial is that the term “star route” contractor is obsolete and for that reason the claim for refund should not have been denied. Based on one of the Exhibits provided in the hearing by the Taxpayer, a publication from the United States Postal Service suggests that the term “star route” has been replaced by “HCR” or “Highway Contract Route”.  The hearing officer interprets the parenthetical as signifying that the term “star route” has been supplanted by “HCR” or “Highway Contract Route”, but that the underlying definition are functionally equivalent. For this reason it was determined that the activity falls squarely within the scope of Regulation 3.2.213.10 NMAC The Department established that the relevant documentation needed in order to consider the claim for refund are addressed in Regulation 3.2.213.10 NMAC. The Department asked for documents or logs to help assist in apportioning taxes between services provided in New Mexico and those provided in interstate commerce but the documents requested were never received. The Taxpayer argued that the refund is due under Sections 7-9-55 and Section 7-9-56 NMSA 1978. The Department’s position is that the deductions can be claimed if the necessary documents establishing the right to the deduction are provided.  The evidence provided to the Department was insufficient to clearly establish the right to the deduction upon which the claim for refund relies. The Taxpayer did not establish entitlement to any refund with the evidence presented at the hearing for this reason the Taxpayer’s protest is denied.


01/04/2017

17-01

Jerry Ritchie

On February 17, 2016, the Department assessed the Taxpayer for gross receipts tax, penalty and interest for the CRS reporting periods between January 1, 2011 and December 31, 2012. On April 22, 2016, the Taxpayer filed a timely protest of that assessment. During the period at issue, the Taxpayer was a limited partner in a holding company that invests in, starts, and operates businesses in the medical field. The Taxpayer had a side agreement with the holding company in which the company agreed to forgive or offset half of the Taxpayers financial commitment in the partnership in exchange for the Taxpayers expertise and relationship in guiding the overall strategy of the company. The CPA confirmed that the LLC used Forms 1099-Misc indicating that the Taxpayer received non-employee compensation in 2011 and 2012 which was reported on the Taxpayer’s federal Schedule C. Based on the Departments Schedule C mismatch program with the IRS it was detected that business income was reported to the IRS and gross receipts tax was not reported to the state. The Hearing Officer was not persuaded by the evidence presented that the Taxpayer overcame the presumption of correctness under Section 7-1-17 (C) NMSA 1978 due to the partnerships unwillingness or inability to confirm that the forgiveness of debt was not due to services rendered in New Mexico for the periods at issue. The hearing officer was persuaded that the Taxpayer was engaging in business in that he carried on the purpose of achieving a direct or indirect benefit, which in this case was the value of consideration received in the form of debt forgiveness from selling services performed in New Mexico and that the value of the consideration received was subject to gross receipts tax. It was agreed by the Department that the penalty would be abated because it was convinced that the Taxpayer reasonably relied on the advice of the competent tax counsel or accountant as to the Taxpayer’s liability after full disclosure of all relevant facts. At the time of the hearing it was determined that the outstanding principal and the interest were due. The protest is denied in part with respect to the relief requested for gross receipts tax principal and interest. The protest shall be granted in part with respect to the abatement of penalty.


12/19/2016

16-57

Hilario Leos & Christina Luchetti-Leos and C&R Nutritional Club

On July 20, 2016, the Department assessed the Taxpayer for gross receipts tax, penalty and interest for the tax periods from January 1, 2010 through December 31, 2012 for account A and January 1, 2012 through December 31, 2012 for account B. On August 23, 2016 the Taxpayer entered into a Short Term payment Plan with the Department for the period of January 1, 2010 to December 31, 2011. The Taxpayers timely protested the assessments for the periods included in the plans in addition to reporting period in 2012. The Department acknowledged the receipt of a valid protest with respect to the 2012 assessments. In a separate piece of correspondence the Department asserted that there was no right of protest with respect to the period’s subject of the Short Term Payment Plans because the Taxpayer waived those rights by executing the plans. Starting in 2009 the Taxpayers started using a tax preparer to file their federal and state income taxes during the relevant period of time. The tax preparer provided documents in the protest claiming that the Taxpayer were not subject to pay New Mexico gross receipts tax because the goods they were selling were purchased out of state and they paid tax in the other state. The Taxpayers informed the Department that the tax preparer did not inform them of any gross receipts tax obligations in New Mexico. It was found that the taxpayers were selling goods in New Mexico and were subject to gross receipts tax. The evidence provided was insufficient to find that the tax preparer was a competent tax accountant due to lack of the individual being qualified, credentials, or competent in the area of New Mexico gross receipts tax. Despite the good faith intentions of the Taxpayers in this case, it was determined when a taxpayer fails to make timely payment of taxes to the state interest shall be paid per Section 7-1-67 NMSA 1978. The assessment of interest is mandatory and the Department is without legal authority to abate it despite the Taxpayers’ good faith intentions. Penalty may only be abated when a Taxpayer is able to show that he or she was not negligent in failing to file. Pursuant to the definition of negligence in Regulation 3.1.11.10 NMAC, the Taxpayer was negligent in failing to report and pay gross receipts tax. The Taxpayer’s protest was denied.


11/30/2016

16-56

US Field Service Inc. 

On June 16, 2010, the Department assessed the Taxpayer for gross receipts tax and interest for the CRS reporting periods from December 31, 2004 through December 31, 2006.  On August 6, 2010, the Taxpayer filed a protest to the assessment.  During the period at issue, the Taxpayer was engaged in business doing construction, maintenance and equipment rental.  The Taxpayer was hired to do work in New Mexico by a wind power company, who was a subcontractor to the project manager.  The Taxpayer provided a crane and a crane operator to the wind power company and assisted in the construction of several windmills.  The Taxpayer invoiced the wind power company for the services it provided and included gross receipts tax on its invoice.  The wind power company executed a nontaxable transaction certificate (NTTC), a Type used for construction, to the Taxpayer.  The Taxpayer accepted payment from the project manager on behalf of the wind power company and, due to relying to the NTTC, did not collect gross receipts tax.  The Taxpayer filed its gross receipts tax return, and deducted the receipts related to this situation because of the NTTC.  Several years later, the Department issued a notice of audit to the Taxpayer and issued a letter informing the Taxpayer that it had 60 days to obtain any NTTCs to support its deductions.   The Taxpayer responded to the audit and provided documentation, including the NTTC, invoice and payment information.  The Taxpayer paid the assessed tax, but does not believe it was owed.  The Taxpayer only protested the assessed interest.  The Taxpayer argued that it should not have to pay interest because it relied on the NTTC in good faith.  The Department argued that the reliance on the NTTC was not reasonable because it was not the correct type to use for leasing, and that the Taxpayer conceded the tax was owed by paying it and therefore interest is due as well.  The Department also argued that the NTTC could not be used to deduct receipts from the wind power company because the project manager made the payment.  The hearing officer found that the Taxpayer reasonably relied on the NTTC and accepted it in good faith.  The interest was ordered to be abated.  The Taxpayer’s protest was granted.


11/30/2016

16-55

ATC Healthcare Services Inc. 

On August 16, 2012, the Department assessed the Taxpayer for gross receipts tax, penalty and interest for the CRS reporting periods from January 31, 2004 through August 31, 2010.  On November 13, 2012, after having been granted an extension to protest, the Taxpayer filed a protest of the assessment.  The Taxpayer is a Georgia corporation with its principal place of business in New York.  In 1998, the Taxpayer entered into a franchise agreement with a New Mexico company.  Under the agreement, the New Mexico company operated a franchise in New Mexico that offered and sold temporary medical healthcare personnel services, programs, products and activities in accordance with the Taxpayer’s developed style, system and technique of business operations.  The Taxpayer terminated the franchise agreement on May 12, 2009.  The Taxpayer was the legal employer of the New Mexico company’s temporary employees and processed payroll and issued tax forms, but the company was responsible for recruitment, training, testing and selection of employees, hiring and firing them, determining salary and benefits, and setting rates for their customers to pay the healthcare workers.  Beginning on October 8, 2010, the Department conducted an audit of the Taxpayer for the reporting periods from January 1, 2004 through August 31, 2010.  As a result of the audit, the Department issued the assessment to the Taxpayer.  There were five issues involved in the protest.  First, is money the Taxpayer received from the company’s clients received in a disclosed agency capacity and not subject to gross receipts tax? Second, is money the Taxpayer received from the company for the granting of a franchise and license to use a trademark before June 27, 2007 subject to gross receipts tax?  Third, is money received after June 27, 2007 for the same purpose not subject to gross receipts tax under the definition of “property” in Section 7-9-3(J)?  Fourth, is money the Taxpayer received from Indian Health Services deductible under Section 7-9-93 NMSA 1978?  Fifth, if the Taxpayer is liable for the assessed tax, is it entitled to an abatement of penalty for non-negligence under Section 7-1-69 NMSA 1978?  As to the first issue, the hearing officer found that the Taxpayer failed to establish that it collected receipts as a disclosed agent.  Regarding the second and third issues, the hearing  officer found that the franchise royalties prior to June 27, 2007 were not subject to tax, but subject to gross receipts tax after that time.  The Taxpayer’s receipts from providing temporary employees to Indian Health Service facilities were found to be deductible, as was already indicated in the audit narrative.  On the last issue, the hearing officer concluded that the Taxpayer was not subject to penalty as it established that it made a mistake of law, in good faith and on reasonable grounds.  The hearing officer ordered assessed tax related to the pre-June 27, 2007 franchise fees and royalties, as well as all assessed penalty to be abated.  The Taxpayer was ordered to pay all remaining assessed tax and interest.  The Taxpayer’s protest was granted in part and denied in part.


11/29/2016

16-54

Joseph D. & Rebecca A. Chwirka 

On August 10, 2016, the Department assessed the Taxpayer an underpayment penalty for Personal Income Tax for the tax year ending December 31, 2015.  On August 23, 2016, Ms. Chwirka filed a protest of the assessment.  The Taxpayer’s were married for 36 years.  Until his illness and death, Mr. Chwirka had always prepared the Taxpayers’ income tax returns.  The Taxpayer were never required to make estimated payments in previous tax years as their annual payments were always accomplished through withholdings.  In March 2015, Mr. Chwirka was diagnosed with cancer.  He maintained employment as long as he could, which was until October 2015.  He received disability income for October, November and December 2015.  There were no withholdings from this disability income.  Mr. Chwirka passed away in January 2016.  Ms. Chwirka sought assistance in preparing the Taxpayers’ 2015 personal income tax returns.  When the New Mexico return was prepared, the total payments and credits through withholding were significantly less that the Taxpayers’ liability.  The tax due was paid on March 29, 2016, prior to the due date.  The Department assessed the underpayment penalty because the required annual payment requirement is 90 percent of the tax liability for 2015, or 100 percent of the tax liability for 2014.  The Taxpayer does not protest the income tax due for 2015, and the Department did not assess interest.  The only issue at hearing was the Taxpayer’s request that penalty be abated because of the circumstances.  The hearing officer found that the Department correctly assessed the Taxpayer’s as a result of their annual underpayment.  However, the hearing officer also found that one of the indicators of non-negligence listed in Regulation 3.1.11.10 NMAC, which allows abatement of penalty for non-negligence, was applicable in this situation.  One of the factors listed for finding a taxpayer non-negligent is for a taxpayer who is disabled because of injury or prolonged illness, and who demonstrates inability to prepare a return and make payment and is unable to procure the services of another because of this injury or illness.  Due to this, the hearing officer ordered the penalty to be abated. The Taxpayer’s protest was granted.


11/18/2016

16-53

Good Karma Art & Design

On June 15, 2016, the Department assessed the Taxpayer for gross receipts tax, penalty and interest for the tax periods from January 1, 2011 through December 31, 2013.  On June 28, 2016, the Taxpayer filed a protest.  The Taxpayer was providing services during the periods in question and was issued 1099s for that work.  The Taxpayer conceded that it owed tax, penalty and interest, but disputed the amount owed.  The Taxpayer argued that some of the assessment was beyond the statute of limitations and that some of the services were performed outside of New Mexico.  The Taxpayer provided additional documentation to show that its services were for work done entirely outside of New Mexico.  The Department conceded that part of the assessment was beyond the statute of limitations, and also accepted the documentation showing that some of the work was done outside of New Mexico.  The Department abated a portion of the assessment accordingly.   The remainder of the assessment was correct and owed by the Taxpayer.  The Taxpayer’s protest was granted in part and denied in part.


11/14/2016

16-52

Emily W. Metzloff 

On July 29, 2016, the Department assessed the Taxpayer for gross receipts tax, penalty and interest for the tax periods from January 1, 2012 through December 31, 2013.  This assessment came about after the Department detected a mismatch between income reported by the Taxpayer on her federal Schedule C and her not having filed gross receipts tax.  By correspondence dates August 16, 2016, the Taxpayer’s CPA requested on behalf of the Taxpayer that the Department waive the assessed penalty.  The Department accepted this correspondence as a formal protest.  During the period at issue, the Taxpayer worked as an independent contractor, editing text for clients for publication on the internet.  The Taxpayer did not protest the assessment of principal or interest, only the assessment of penalty.  The Taxpayer resided in New Mexico during the periods at issue, and used a CPA in New York to prepare her income taxes.  In response to the assessment, the CPA wrote in his correspondence that because they were not aware of the gross receipts tax, they could not properly advise the client and he asked that the penalty be waived.  The Taxpayer never consulted with a tax professional based in New Mexico.  Penalty may only be abated when a Taxpayer is able to show that he or she was not negligent in failing to file.  Pursuant to the definition of negligence in Regulation 3.1.11.10 NMAC, the Taxpayer was negligent in failing to report and pay gross receipts tax.  Regulation 3.1.11.11 NMAC provides other grounds for abatement of penalty in certain circumstances, but again the Taxpayer was unable to show non-negligence.  The Taxpayer’s protest was denied.


10/28/2016

16-51

James R. Hellerman

On February 3, 2015, the Department assessed the Taxpayer for personal income tax, penalty and interest for the 2011, 2012 and 2013 tax years.  On February 11, 2015, the Taxpayer filed a protest to the assessment.  The Taxpayer admitted that he and his wife were residents of New Mexico from 2000 until 2008.  The Taxpayer and his wife jointly purchased a home in Lamy, New Mexico in 2005.  The relationship between the Taxpayer and his wife became strained, and they chose not to divorce or legally separate, but to live separately and remain married.  In 2008, the Taxpayer and his wife jointly purchased a second home in Tennessee.  The Taxpayer renovated that home to his specifications and the intention was for the Taxpayer to live at the Tennessee home while his wife remained in the Lamy home.  In 2008, the Taxpayer executed a last will and testament which was signed, executed and witnessed in New Mexico, and listed his wife as his sole heir.  In 2009, the Taxpayer obtained a Tennessee driver’s license.  The Taxpayer continued to register his vehicles in New Mexico until late 2013.  Throughout 2012 and 2013, the Taxpayer was living and working full-time in Tanzania, where he leased an apartment, bought a car, and obtained a driver’s license.  The Taxpayer was rarely in the United States.  When he did visit the United States, most of his time was spent with his wife, who also visited him in Tanzania.   In 2012, the Taxpayer’s wife died.  During the tax years in question, the majority of the Taxpayer’s mail was sent to the Lamy address and collected by his wife, and later a neighbor.  After his wife’s death, the Taxpayer continued to travel to New Mexico to deal with the estate and the sale of the Lamy home.  For several months after his wife’s death, the Taxpayer continued to house vehicles in New Mexico, and renewed the registrations in New Mexico in early 2013.  The Taxpayer conceded that he was liable for New Mexico personal income tax for 2011, so the issue to be decided at hearing was whether the Taxpayer was also liable for personal income tax, penalty and interest for the 2012 and 2013 tax years.  The Taxpayer argued that he intended to establish Tennessee as his home by moving there in 2008, doing substantial home renovations, and moving his prized African art collection there.  The Department argues that the Taxpayer’s intent was not sufficient.  He was an admitted resident of New Mexico for several years and continued to spend the majority of his time here while working abroad. The Department argues that the Taxpayer continued to treat New Mexico as his residence in a number of ways.  Regulation 3.3.1.9 NMAC uses a number of criteria to determine domicile, and in this case the hearing officer found that the majority of those indicated that the Taxpayer was domiciled in New Mexico for the tax years in question.  The Taxpayer’s protest was denied.


Next
View Our Most Popular Pages & Services
Latest News:
Governor Susana Martinez

Governor Susana Martinez

Learn more about governor Martinez
Secretary Demesia Padilla

Secretary Demesia Padilla,CPA

Learn more about secretary Padilla

Online Services

Find an Online Service to Serve Your Needs

Taxation and Revenue New Mexico

1100 South St. Francis Drive
Santa Fe, NM 87504
(505) 827-0700

TRD Home          Privacy & Security          Site Policies          Accessibility/Non-Discrimination Statement          
About Us          Contact Us      Site MapLink to New Mexico Tax and Revenue Facebook Page

call us E-Mail Contact Us