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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. 



Test & Evaluation Services, LLC and EWA Warrior Services, LLC



Edward and Linda CdeBaca



Marduk Consultants



Lisa Chavez



Elite Well Services LLC



PST Services Inc

On December 27, 2017, the Department assessed the Taxpayer for $1,620,689 in gross receipts tax, penalty and interest. On March 27, 2018, the Department received the Taxpayer’s protest of the assessment. Among issues to be decided in the case were whether receipts from providing access to software provided by the Taxpayer were licenses and therefore gross receipts, whether services were performed in New Mexico, and whether receipts should be excluded or exempt from gross receipts because they were from services performed outside of New Mexico. The Taxpayer provides billing and accounts receivable services to physicians and physician groups. The receipts in question were generated by providing services to one client located in New Mexico. An important part of these services was the use of computer software provided by the Taxpayer. The Taxpayer initially argued that the protest should be dismissed because of the failure of the Department to have a timely hearing required by law, but the Hearing Officer found there was no statutory authority to do so, citing a long established decision that the tardiness of the Department does not make an assessment invalid. On the merits of the case, the Taxpayer argued that it was not providing licenses to its client, for it had paid the company that created the software for the licenses and was only recovering the cost by passing these amounts to its client. But the Hearing Officer determined that an individual only uses software lawfully by owning the software or by receiving a license to use the software, and the sale of a license or a license to use property in New Mexico is taxable. The Taxpayer also argued that not all of the services provided were performed in New Mexico but could provide no evidence to support this claim and only argued that a small percentage of its employees were working in the state. The Department by contrast brought the testimony of witnesses, employees of the taxpayer, describing the work being done in New Mexico. Though the Hearing Officer believed it was quite possible that a portion of the services in question could have been performed outside state, and therefore eligible for the exemption, the Taxpayer could not support this with evidence and establish accurately what percentage of services where performed outside the state as regulation requires. This having been decided, the Hearing Officer ordered that the assessment was correct and the protest was denied.



Jackson Rock Springs Stages

On August 13, 2019, the Department issued an assessment to the Taxpayer for weight distance tax, late payment penalty and interest, and an additional weight distance penalty for not reporting mileage in New Mexico. On August 27, 2019, the Taxpayer protested the assessment. Though the Taxpayer conceded that it owed the tax, late penalty and interest, it contested the additional weight distance penalty. The Taxpayer owns tour buses and provides transportation for its customers in New Mexico. Though the Taxpayer was registered with the federal International Fuel Tax Agreement (IFTA) program, it was not registered with the New Mexico weight distance tax program and said that it believed this was sufficient for paying all taxes owed to New Mexico. The Taxpayer had made some payments for weight distance tax at New Mexico ports of entry but the total payments were less than the total tax owed based on its New Mexico mileage reported to IFTA. Though the Taxpayer recognized that it owed the weight distance tax, it argued that the assessment was beyond the statute of limitation and that the addition weight distance tax penalty was excessive. In many circumstances the statute states that the Department may only assess a Taxpayer three years from the end of the calendar year in which the tax is due. However, when a Taxpayer fails to file a return the Department has seven years to assess from the end of the calendar year in which the tax is due. In this case the Taxpayer had not filed any returns from 2012 through 2017, so the assessment in 2019 was within the statute of limitations. The weight distance penalty is calculated by the quarterly filing period for weight distance tax and is only applied when the Department conducts an audit. The penalty in this case was for an amount greater than the other tax, penalty and interest combined, however the statute is clear that penalty must be applied to each quarter based on the amount of tax owed. Though the Hearing Officer was sympathetic with the Taxpayer’s dismay over the penalty amount, the statute states clearly what the penalty amount is to be in this instance and that it is mandatory. The Hearing Officer determined there was no authority to overturn the statute assessing the penalty. This having been decided, the protest was denied.



Working Boy Productions

On May 4, 2018, the Department issued a denial of the Taxpayer’s application for a film production credit for the tax years 2015 and 2016. On August 1, 2018, the Taxpayer filed a formal protest of the denial of its applications. The issue to be decided in the case was whether the applications were denied properly by the Department. The Taxpayer is a film production company that had production and postproduction expenditures because of a film or commercial audiovisual project in New Mexico in 2015 and 2016. The Taxpayer argued that the hearing was unfair because of the delays that had occurred in having the hearing. Though at the time statute required the Department conduct a hearing within 90 days of the protest, the remedy allowed was only for liabilities, such as giving the Hearing Officer the authority to stop more interest being assessed, and not for credits. Regarding the merits of the protest, the film production tax credit requires that an application for the credit be made within one year of the date of the last direct production expenditure in New Mexico. The last qualified expenditure for 2015 by the Taxpayer was made on December 7, 2015, but the application was filed well over a year later on October 9, 2017. The Taxpayer argued that the application had been first filed with the Film Office in 2015 but there was no evidence of application and the Taxpayer could provide no support for this claim. The 2016 application had been denied by the Department because the Taxpayer had failed to provide canceled checks that matched the invoice amounts on the qualified expenditures. The Taxpayer explained that it paid several invoices or parts of invoices on one check. The Taxpayer provided invoices that were paid-stamped and a letter from its vendor that stated it had paid all the invoices in full at one time. The Hearing Officer found this evidence, as well as the testimony of the Taxpayer, to be consistent and creditable and so concluded that the 2016 claim for the credit should be allowed. This having been decided, the Hearing Officer ordered that the tax credit for 2016 to be allowed and the application for 2015 denied.



Dennis Miller

On April 30, 2019, the Department issued a return adjustment notice denying the refund request on the Taxpayer’s personal income tax return and instead assessed tax in the amount of $328.31. On July 29, 2019, the Taxpayer submitted a formal protest contesting the assessment. The issue to be decided in the case was whether it was appropriate for the Taxpayer to be allowed a credit for taxes paid to Arkansas on the New Mexico return, and if allowed how much the credit should be. The Taxpayer and his spouse are both residents of New Mexico and used the allocation and apportionment schedule of the income tax return so that certain types of income earned in another state would not be included on the New Mexico return. The income that the Taxpayer allocated to New Mexico did not include the rental income and capital gains that was earned in Arkansas and, consequentially, the Taxpayer was not being taxed on the New Mexico return on that income. When calculating the credit for taxes paid to another state, an individual multiplies the credit amount by the percentage allocated to the other state on the apportionment schedule. By doing this the credit allowed is only for income that was taxed in both states. Though the Taxpayer had sufficient evidence of the fact that he had paid tax to Arkansas, the credit calculated was not multiplied by the percentage of income allocated to Arkansas and so the Department adjusted this amount. The Hearing Officer determined that this adjusted amount calculated by the Department was correct. This having been decided, the Hearing Officer ordered that the assessment amount on the adjustment notice was correct and the protest denied.



Four Corners Healthcare Corp

On August 29, 2017, the Department denied the Taxpayer’s application for refund for gross receipts tax in the total amount of $1,325,343.10. On or about November 22, 2017, Taxpayer submitted a formal protest on the denial. At issue in the protest was whether gross receipts that were paid for by a federal program for medical services that was not Medicare could be deducted and whether the Taxpayer was entitled to another deduction for providing medical services provided by a healthcare practitioner. The Taxpayer is a home health agency that provided home health services for individuals who were receiving compensation and benefits under the Energy Employees Occupational Illness Compensation Program Act (EEOICPA), a program that was created for individuals who developed health problems related to radiation exposure while working for the Department of Energy. The services received by these individuals under the EEOICPA were paid for by the United States Department of Labor. The Taxpayer argued that the receipts that were paid by this program for home health services were deductible because the money was paid by a federal agency and the individuals were eligible Medicare beneficiaries, even though the services were not being paid by Medicare. However, the Hearing Officer determined this was not a complete reading of the statute which states also that the individual receive the services “pursuant to the provisions of Title 18 of the federal Social Security Act.” This means that the individual is more than simply a Medicare beneficiary but is receiving services that are paid by Medicare. The Taxpayer argued that they had received an email from the Department in response to an inquiry about taking this deduction which stated that these receipts were deductible. But this email was not the same as a legally binding ruling issued by the Department, and the Hearing Officer concluded that the response was made without an entire understanding of all of the facts. The Taxpayer also argued that the receipts would be deductible under a different law which allows for receipts to be deducted when the services are paid by an insurance program. But the receipts are deductible only when the services are performed by someone who meets the definition of a healthcare practitioner. The Taxpayer, though contracting with others that may have met this definition, was not a healthcare practitioner itself. This having been decided, the protest was denied.



Bruce Winchell

On June 14, 2019, the Department assessed the Taxpayer for $203 in gross receipts tax penalty and interest after having determined that gross receipts tax had not been paid on business income reported on the Taxpayer’s federal return. On June 28, 2019, the Taxpayer submitted a formal protest. The issues to be decided in the protest were whether income earned from a tea shop located in Ohio and teaching the Taxpayer did at the University of New Mexico and outside the state were subject to gross receipts tax. Though the location of the business had been reported incorrectly as Albuquerque on the federal income tax return, the Taxpayer was able to provide ample evidence that the tea shop was in Ohio and the receipts from the business had occurred in that state and had been subject to Ohio sales tax. Since these receipts were not from engaging in business in New Mexico, they are not subject to New Mexico gross receipts tax. The incorrect location appeared to the Hearing Officer to be only a minor mistake on return, however more significant was that the income from teaching that had been incorrectly reported by the Taxpayer on the federal return on the Schedule C as business income, because, the Taxpayer explained, at the time he had believed this portion of income had been contract work instead of wage income, though he was issued a W-2. By reporting this income as business income he was also allowed to claim business deductions on the federal return. Though this income was reported incorrectly, the Taxpayer never amended the return. The Hearing Officer determined that as long as the federal return showed this income to be business income, the income was subject to gross receipts tax, which the Taxpayer conceded. This having been decided the Hearing Officer ordered the tax on the income from the tea shop abated, as well as the income earned from teaching out-of-state, and ordered the rest of the assessment to be paid.



Continental Land Resources

On April 27, 2017, the Department assessed the Taxpayer for $1,101,453.53 in gross receipts tax, penalty and interest. On July 24, 2017, the Taxpayer filed a formal protest. The issues to be decided in the protest were whether the Taxpayer was entitled to the exemption for services performed outside New Mexico, the product of which is initially used inside New Mexico, and whether the Taxpayer was entitled to a deduction for sales of certain services to an out-of-state buyer. The Taxpayer, who is based outside New Mexico and has clients located outside the state, provides services evaluating land and negotiating leases of land that are oil and gas prospects, some of which are located inside New Mexico. The Taxpayer uses contractors with specialized knowledge of the field to perform these activities. The Taxpayer claimed that these services were covered under the exemption available for services performed outside New Mexico, the product of which is initially used inside New Mexico. The Department argued that the product of the service was the hiring of contractors and the work which those contractors did in New Mexico and so the exemption did not apply. But the Hearing Officer determined that the product of the service was the benefit received by the buyer of the service and agreed with the Taxpayer that in the this case the product of the service was the reports and analysis provided to its clients to aid their decision-making and the acquisition of leases. That the product of the service is related to property in New Mexico does not immediately mean, as the Department argued, that the product is necessarily being used inside the state. This benefit, the Hearing Officer concluded, can be received outside the state, as in this case, and so be exempt. Also in dispute was the fact that Taxpayer had not obtained a non-taxable transaction certificate to support the deduction for sales to an out-of-state buyer. But statute does allow for alternative evidence to support a deduction when a certificate is not available. The evidence presented by the Taxpayer was determined to be acceptable support for the deduction. This having been decided the Hearing Officer ordered the assessment be adjusted to reflect only the tax owed on receipts that were not exempt or deductible and the protest was granted to that extent.



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.

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