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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. 



PST Services Inc



Jackson Rock Springs Stages



Working Boy Productions



Dennis Miller



Four Corners Healthcare Corp



Bruce Winchell



Continental Land Resources



Distribution Management Corporation Inc

On September 25, 2018, the Department assessed the Taxpayer $36,110.92 in tax, penalty and interest as the result of an International Fuel Tax Agreement (IFTA) carrier audit for filing periods in 2015. On October 11, 2018, the Taxpayer protested the assessment. This protest involved the Taxpayer’s IFTA returns and the adequacy of records supplied upon audit and when contesting the assessment. The Taxpayer argued that it was able to replicate the fuel tax miles per gallon records using 2018 to support its 2015 reporting, which it believed to be comparable. The Taxpayer had explained that under its own internal records retention policy fuel purchase records were only kept for 90 days and so the required 2015 records had been destroyed. In order for tax to be correctly calculated the carrier needed to know precisely the miles traveled and the fuel used. IFTA requires carriers to retain supporting documents for four years. The records provided to the Department in the audit did not include many of the records that IFTA requires, including vehicle identification numbers, beginning and ending odometers, and origin and destination of trips. No original fuel receipts or fuel statements were kept. However, even though this was the case, the Department did come to the determination that the number miles reported was correct. Following the guidance of the IFTA audit manel the Department used the rate of 4 miles per gallon to calculate the tax on the estimated amount of fuel used. The Taxpayer argued that it was appropriate to use the 2018 reporting because the trucks being used had similar fuel mileage to the trucks used in 2018. The Taxpayer determined this to be 7.77 miles per gallon which would lower the amount of fuel used considerably. Though the Hearing Officer was willing to allow this as a possible method of reporting, and found the testimony of the Taxpayer’s witnesses credible, some of this testimony was directly contradicted by some of the documentary evidence and not enough support was presented to show that two tax years were similar. The burden on the Taxpayer is to overcome the presumption of correctness in the Department’s assessment. Ultimately, the lack of data made this difficult to achieve. Although the Department accepted the reported miles travelled in 2015, there remained variables unsupported by evidence. It was the Taxpayer’s responsibility to prove with substantial evidence that it properly reported the taxes owed and the Taxpayer kept no organized business records to support the fuel use taxes. Therefore, the Taxpayer failed to meet the burden to overcome the presumption of correctness in the Department’s assessment and so the Hearing Officer denied the protest and ordered the assessment paid.



Process Equipment & Service Company Inc

On February 3, 2017, and then on May 31, 2018, the Department denied the Taxpayer’s claim for a Technology Jobs and Research and Development Tax Credit for 2014 and 2016 respectively, which the Taxpayer later protested. The Department denied the claims because it determined that Taxpayer’s methodology of demonstrating qualified expenditures was inadequate under the statutory language and the evidence presented. The primary issue in this case was the meaning of qualified expenditures for the credit and whether the Taxpayer demonstrated adequate proof through its method. The Taxpayer argued since the New Mexico Technology Jobs and Research Development Credit is very similar to the federal research and development credit, the proof of the credit, routinely accepted by the IRS, should also be accepted by the state. Taxpayer contended that there is no requirement for project timekeeping system in order to claim the state credit, as that is not a requirement of federal law. The Department argued that if the legislature had intended the state credit requirements to be exactly the same as the federal credit, it would have stated so. Instead, the state required that a cost accounting method to support the credit must be the same as a methodology relied on in the Taxpayer’s other business activities. The Department contended that the methodology chosen by the Taxpayer was not relied on in any of its business activities and only used in this case to qualify for the New Mexico credit. The Taxpayer argued that the intent of the requirement in the statute was simply to prevent distortion and that it had consistently employed its method in order to demonstrate it qualified for the credit. The Taxpayer also stated that it did use the method in question for other business purposes. The Hearing Office agreed with the Department that the state credit intends different qualifications from the federal credit, however, found the Department applied the state provisions too narrowly and that, in determining qualification for a tax credit, the statute should be interpreted in a reasonable manner consistent with the legislative intent. Through testimony the Taxpayer was able to demonstrate that the system it used to track how much work was being committed to new research and development projects in its regular business activities was also used in its method to support the credit. Since the method employed supported the qualified expenditures, the Hearing Officer determined that the credit must be allowed and ordered the protest granted.



Star Paving Co

On July 27, 2018, Department assessed the Taxpayer for $23,155.27 in tax, penalty, and interest as the result of a Department audit. The Taxpayer paid the assessment but later submitted an application for refund for the amount, challenging the validity of the assessment. The Department denied the refund request on May 16, 2019, and the Taxpayer protested. The protest involved whether the Taxpayer adequately supplied records to support a one-way hauler weight distance tax rate. The Taxpayer owned and operated heavy trucks hauling materials to be used in construction projects. The Weight Distance Tax Act imposes a tax on all registered vehicles with a declared weight in excess of 26,000 pounds that travel on state highways. All the Taxpayer’s trucks met this qualification. The statute further establishes the base tax rates for all registered vehicles based on the declared gross weight and on the mileage traveled on state highways. The tax rate increases as a vehicle’s weight classification increases. There is, however, a reduced rate for a one-way haul. If the operator of the vehicle can satisfy the one-way haul rate criteria provided in regulation, the Taxpayer is allowed 33% less than the full tax rate. In this case, the Taxpayer needed to show that 45% or more of the mileage traveled was traveled empty of all load. During the timeframe at issue in the audit, the Taxpayer did not maintain records that separately recorded the mileage of its vehicles when driving from the vehicle storage yard, to the materials supplier, to the job site, and back to either the supplier or to the vehicle storage yard. Because of this, the Taxpayer’s records contained only total mileage for its trucks, which could be for miles when it was empty and miles when it was fully or partially loaded. Regulations describe exactly these requirements the records that must be kept to support the lower tax, but the Taxpayer argued that the records that were maintained showing only the total mileage traveled satisfied other record keeping regulations which it cited. However, the Hearing Officer disagreed, explaining that a plain reading of the statute clearly supported the requirements found in regulation that Taxpayers keep proper records to support that the lower one-way haul rate could be used. This having been determined the Hearing Officer denied the protest.



Gemini Las Colinas LLC

After receiving an assessment from the Department for $724,047.43 in gross receipts tax, penalty, and interest, the Taxpayer submitted a timely protest on November 1, 2017. The Taxpayer is an assisted living community that provides apartments and services for its tenants. Though the Department agreed that the receipts from the lease of real property are deductible, much of the amount that made up the receipts was from providing services and was not deductible. Determining the correct amount that would qualify for the deduction, then, was the main issue in this protest. The Department had based its calculation of the assessment using a method based on the Taxpayer’s federal reporting. The Taxpayer argued that the alternative methods of calculating the tax that it presented allowed for a greater deduction to be taken. Though there are no regulations that prescribe a method for calculating receipts when there is a combination of leasing real property and services, the Department has provided rulings that a variety of methods may be used when they are reasonable. Since the assumption was that the assessment was correct, the Taxpayer needed to provide clear countervailing evidence that the method used by the Department, which used the Taxpayer’s federal reporting, was incorrect. The Taxpayer presented two methods of calculating the receipts, both provided long after it received the assessment. The analysis presented, the Hearing Officer determined, was not supported by actual examples in its books and records. The evidence, instead, supported the Department’s conclusion that reporting on an IRS form was more accurate. The Hearing Office determined that the method being used by the Department was reasonable, particularly because at the time of the audit the Taxpayer provided no analysis of its allocation. The Taxpayer supplied competing methods for calculating the amount of a rental deduction but it did not support that the alternative methods used were more reliable. Unsubstantiated statements that an assessment is incorrect cannot overcome the presumption of correctness. In the end, the Taxpayer simply presented insufficient evidence. Because of these reasons, the Hearing Officer ordered the protest denied.



Dusty J Stone

On October 17, 2018, the Department issued the Taxpayer an assessment for $2,516.42 in gross receipts taxes, penalty, and interest. The Taxpayer protested the assessment in a letter received by the Department on January 14, 2019. The Taxpayer is a rancher who raises and trains livestock. He argued that his receipts were exempt because they were earned from selling livestock and an exemption for the sale of livestock is provided in statute. The Department argued that the Taxpayer had not supported the exemption with evidence. For the exemption to be valid, a document like a receipt or a bill created at the time of the transaction was needed as support. Though the Taxpayer stated that he would provide a bill of sale to livestock customers who asked for it, he did not keep copies and would complete a deal with a handshake. Under the law an assessment issued by the Department is presumed to be correct. It is the taxpayer’s burden to overcome the assessment by presenting some countervailing evidence to show it should be abated. The Taxpayer, however, could only support his claim to the exemption with his testimony and the record of one sale. The Taxpayer contended that his memory, along with calendars and confirmations of old customers, should be sufficient evidence. The Hearing Officer noted that the personal income tax instructions advise taxpayers to keep copies of books, records, statements, and other supporting documents for a least ten years. The Tax Administration Act also states the taxpayers shall maintain books or records that will permit the accurate computation of state taxes. Though the Hearing Officer found the Taxpayer was very creditable and cordial, his testimony alone without other physical evidence was not enough to overcome presumption of correctness. The record the Taxpayer was able to produce, a receipt for a bull sold at auction, allowed for only that portion of the assessment to be abated. And so, the Hearing Officer ordered the protest granted in part and denied in part.



Jennifer A Skeet

On December 18, 2018, the Department issued an assessment to the Taxpayer for personal income tax, penalty, and interest. On January 15, 2019, the Taxpayer protested the assessment providing documentation as support. The issue to be determined in the case was whether the Taxpayer could claim the exemption from personal income tax for members of an Indian Nation, tribe, or pueblo who earn income and live on tribal land. There was no dispute regarding the key facts which were requirements for the Taxpayer to qualify for the exemption. The Taxpayer was both a member of the Navajo Nation and earned income on Navajo land. The area of dispute was only whether the Taxpayer met the requirement to live within the boundaries of the Navajo Nation. The Taxpayer owned a house in Albuquerque but during the week worked and stayed within the Navajo Nation in Arizona. The Department contended that since the Taxpayer owned a home in Albuquerque which she returned to each week, this was her domicile and outside the boundaries of the tribal land. The Department was able to show too that the Taxpayer met many of the factors for determining domicile, including that it was where she maintained a fixed permanent residence and the place she returned to after work. The Taxpayer, however, argued that the majority of her time in the tax year in question was spent in the Navajo Nation, since she stayed there during the week. She also argued that her domicile in New Mexico was not pertinent to deciding if she qualified for the exemption. The Hearing Officer agreed, explaining that domicile or residency is never used in the statute providing for the exemption but only states that the individual must live within the boundaries of tribal land. Previous decisions cited by the Hearing Officer showed that there was no definition, standard, or test to determine what was meant to live within the boundaries of tribal land, though weight was given to a continuing physical presence. Other decisions in similar cases did not look to where the tribal member resided but where they worked. Since the Taxpayer physically spent most of the tax year living on tribal land, the Hearing Officer determined that she qualified for the exemption and ordered that the assessment abated and the protest granted.



United Parcel Service

On September 30, 2013, after an audit by the Multistate Tax Commission, the Department issued the Taxpayer an assessment for $4,083,886.63 for corporate income tax, penalty, and interest. On December 23, 2013, the Taxpayer filed a formal protest of the assessment. After multiple continuances the hearing for the protest was conducted in June of 2018. At issue in the protest was the method the Taxpayer used to apportion its income to New Mexico. The Department argued that the Taxpayer was required to follow the special trucking apportionment method found in regulation which relies on mileage to determine New Mexico sales. The Taxpayer contended that the special method of apportionment for trucking companies was not applicable to its business and did not reflect its true New Mexico business activities. The definition found in the regulation of a trucking company includes an express carrier which primarily transports tangible property by motor vehicle for compensation. The Taxpayer contended its activities only partially involved transporting the property by motor vehicle, but the Hearing Officer disagreed, determining that its other processing activities were ancillary to its need to transport packages and so it met the definition in regulation. Alternative methods of apportionment are allowed by statute, however, when the apportionment required would distort the Taxpayer’s true business activities. The Taxpayer argued that the state-to-state volume method more accurately reflected its business activities and had a history of being accepted by the Department as a reasonable method. Evidence it presented showed the use of the mileage method resulted in a disproportionately high allocation to New Mexico due to its being a large geographic state with a small population. Comparing New Mexico to states with similar allocations showed all had significantly higher sales. The Taxpayer maintained it had establish an alternative method that was reasonable given its history of using the state-to-state volume method and the Department’s previous acceptance of it in prior audits. The evidence, the Hearing Officer determined, clearly supported that the state-to-state volume method was a reasonable reflection of the Taxpayer’s actual business activity. The method resulted in an estimated revenue that was still much higher than the actual revenue in the state. This fact strongly supported that the method was a reasonable approximation allowed by law, where the mileage method resulted in a distortion of the Taxpayer’s business activity. This having been decided, the Hearing Officer ordered the assessment abated and the protest was granted.



A Class RV Storage

On December 18, 2017, and then on April 5, 2018, the department issued assessment notices for gross receipts tax, penalty, and interest to the Taxpayer, the operator of three RV storage facilities. On February 12, 2018, and on June 26, 2018, the Taxpayer submitted formal protest letters to the department disputing the assessments. The main issue to be resolved in the protest was whether the Taxpayer was entitled to deduct receipts from renting real property. The Taxpayer contended that the rental contracts were in fact land leases and not simply a license to use the space. There were indicators to support this interpretation. The rental agreement was for a specific portion of property and for an agreed to amount of time. The tenant was intended to have unrestricted use of the property and was required to provide maintenance of the space. The Department, however, disputed that the agreements were leases because of other indicators. These included limitations that the land be used only for storage, the inability to secure the space against others, and that the tenant did not have exclusive possession or access to the property. There was no physical barrier between the storage spaces for the RVs. Indeed, it was possible for the tenant to park over the boundaries of the space, making it necessary for the facility manager to have the RV removed. The Hearing Officer cited department regulations that gave examples of similar situations deciding the same question: one involved the renting of parking spaces and the other concerned providing space in an airplane hangar. Neither example allowed the deduction for receipts from the lease of real property, having determined that both granted a license to use the space instead. In another ruling cited, the openness and accessibility of the rental space enforced the conclusion that the agreement was a license and not a lease. After evaluating earlier decisions, the Hearing Officer decided that, in the end, the absence of any enclosed structure prevents the Taxpayer from providing exclusive possession, use, and access to the units and, therefore, the agreements were not leases. This having been decided, the Hearing Officer disallowed the deduction, but also ordered that penalty be abated because the Taxpayer was not negligent, having obtained the advice of a CPA, and so ordered the protest denied in part and granted in part.

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