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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. 


All Posts > 2000

12/14/2000

00-39

Santa Fe Stone Corporation

Taxpayer protested the imposition of interest due to the late payment of taxes. The late payment was caused by the fact that the Taxpayer’s bookkeeper had embezzled the tax monies and had concealed the fact that taxes were not being paid. When the Taxpayer discovered the embezzlement, it acted quickly to file returns and it began to catch up on its tax payments. The Taxpayer was also notified of the Tax Amnesty Program authorized by the legislature, but the notification was not brought to the attention of the company president and was not applied for within the tax amnesty period declared by the Department pursuant to the authority of the Tax Amnesty Act. Taxpayer requested that it be given consideration in the assessment of interest for the fact that it did not know about the embezzlement or the availability of tax amnesty. The Taxpayer’s protest was denied. The language of Section 7-1-67 requires the assessment of interest with respect to any late payment of tax and no exceptions are provided for in the statute. The Tax Amnesty Act only allowed the Secretary to abate interest during the tax amnesty period declared by the Secretary under the authority of the Tax Amnesty Act. The Department lost its authority to abate interest upon the expiration of the tax amnesty period.


12/13/2000

00-38

Robert Pineda

The Taxpayer is a certified public accountant engaging in business in New Mexico. The Department conducted an audit of the Taxpayer's gross receipts tax reporting using the Taxpayer's bank records. Based on the Taxpayer's bank deposits, the Department assessed the Taxpayer gross receipts tax, penalty and interest for 1995 and 1996. The penalty portion of the assessment was made pursuant to Section 7-1-69(B) NMSA 1978 (1996), which imposes a 50% civil penalty for failure, with intent to defraud the state, to pay when due any amount of tax required to be paid. The Taxpayer protested the assessment stating that the bank deposits on which the assessment was based did not represent business income but represented loans, proceeds from the sale of personal assets, and gifts. Held: The Taxpayer did not meet his burden of proving that the Department’s assessment of gross receipt tax and interest was incorrect. The Department did meet its burden of proving that the Taxpayer’s failure to pay the gross receipts tax reflected in the assessment was motivated by an intent to defraud the state, and the Taxpayer is subject to the 50% penalty imposed pursuant to Section 7-1-69(B) NMSA 1978 (1996).


12/08/2000

00-37

Apple Computer, Inc.

Taxpayer sold computers and related hardware to customers in New Mexico. The Taxpayer sold the computers pursuant to contracts which either provided that the title to the merchandise passed at the Taxpayer's shipping location, its out-of-state warehouses, or there was a shipping term that provided that the merchandise was shipped F.O.B. Taxpayer's shipping location. The contracts also provided that the Taxpayer would replace goods lost or damaged in transit to the customer. The Taxpayer argued that its had no gross receipts from the sale of the computers because the title to the merchandise passed outside of New Mexico at the Taxpayer's shipping location. The second issue raised by the Taxpayer was that the Department had improperly denied it a deduction for the sale of computers to a customer from whom the Taxpayer had received a 1992 series NTTC during the course of the audit. The issue with respect to the deduction was whether the Taxpayer had presented the NTTC to the Department's auditors at the commencement of the audit. The protest was denied in part and granted in part. With respect to the location of the Taxpayer's sales, New Mexico looks to where risk of loss passes in addition to where title passes to determine the location of a sale. In this case, although the title to the merchandise passed outside of New Mexico, because the Taxpayer bore the risk of loss if the merchandise was lost or damaged in transit, the sale was not consummated until the Taxpayer met its obligation to deliver conforming goods, and that happened in New Mexico. Thus, the sales were subject to the gross receipts tax. With respect to the NTTC issue, it was determined that the Taxpayer presented the NTTC to the Department's auditors at the commencement of the audit and that the Taxpayer was entitled to the deduction it had claimed.


12/06/2000

00-36

David Montoya

The Taxpayer is engaged in performing construction services as an independent contractor.  The Department assessed the Taxpayer for gross receipts tax, penalty and interest on business income reported on his 1995 federal income tax return but not reported to the Department for gross receipts tax purposes. The Taxpayer protested the assessment, maintaining: 1) the Department should have accepted an NTTC obtained after the 60-day period provided in Section 7-9-43 NMSA 1978 because the Taxpayer substantially complied with statutory requirements; 2) the Taxpayer never received the Department’s original 60-day letter and so the NTTC was timely, and 3) imposing tax on the Taxpayer’s receipts results in double taxation. Held: The Taxpayer is not entitled to the deduction provided in Section 7-9-52 NMSA 1978 because he did not have timely possession of an NTTC as required by Sections 7-9-52 and 7-9-43 NMSA 1978; the Department provided sufficient evidence to establish mailing of the 60-day letter; the assessment of gross receipts tax against the Taxpayer does not constitute double taxation. Protest denied.


12/04/2000

00-35

Debbie Garcia-Ingram

The Taxpayer was an independent contractor from 1996 through 1998 working for a County Government. In 1999 the Department assessed the Taxpayer for gross receipts tax, penalty and interest on her receipts from performing services. The Taxpayer protested the assessment, arguing that it was unfair to assess her penalty and interest because no one told her that gross receipts tax was to be paid on her income, and that it was unfair to assess her penalty and interest when some of her co-workers did not pay gross receipts tax on their income. Held: The Taxpayer was late in paying gross receipts taxes and interest was due pursuant to Section 7-1-67 NMSA 1978; the Taxpayer was negligent by failing to determine the tax consequences of engaging in business as an independent contractor, and penalty was due pursuant to Section 7-1-69 NMSA 1978.  There was no evidence introduced to support the Taxpayer's contention that other, similarly situated taxpayers were not paying gross receipts tax.  Even if this were true, the remedy would be to assess those taxpayers, not to abate the assessment against the Taxpayer in this case.  Protest denied.


11/29/2000

00-34

Kimberly Ann Caylor

The Taxpayer was an independent contractor in 1996 working as a commissioned salesperson. In April 2000, following a limited scope audit, the Department assessed the Taxpayer gross receipts tax, penalty and interest on her commissions. The Taxpayer protested the assessment, arguing that circumstances outside her control prevented her from obtaining the invoices and NTTCs needed to document the deductions she claimed. Held: It was the Taxpayer’s responsibility to determine the tax consequences of her actions.  In this case, the Taxpayer failed to meet her burden of proving that the sales commissions in dispute were derived from nontaxable transactions. Protest denied.


11/21/2000

00-33

Roswell Lumber Co.

The Taxpayer operates retail businesses in New Mexico, selling building materials. Following a field audit, the Department assessed the Taxpayer for gross receipts tax, penalty and interest on receipts from the sale of construction materials for which the Taxpayer had accepted Type 9 NTTCs. The Taxpayer protested the assessment, arguing: 1) he was entitled to accept Type 9 NTTCs on sales of construction materials because the materials could be used for repairs as well as for new construction; 2) the Taxpayer was entitled to accept Type 9 NTTCs as conclusive proof that he was entitled to the deductions taken; and 3) requiring the Taxpayer to reject Type 9 NTTCs would create a hardship on the Taxpayer because government and nonprofit entities believe they are tax exempt and refuse to pay gross receipts tax on their purchases. Held: 1) repair work is included in the statutory definition of construction, and sales of materials to be used for this purpose do not qualify for the deductions provided in Sections 7-9-54 and 7-9-60 NMSA 1978; 2) the Taxpayer is not entitled to rely on NTTCs that do not apply to the transactions at issue; 3) the Taxpayer cannot be excused from compliance with the state’s tax laws simply because its customers do not understand the law.  Protest denied.


11/14/2000

00-32

Larry L. Cotton

In 1996, the Taxpayer worked as an independent contractor performing maintenance services. In April 2000, the Department assessed the Taxpayer gross receipts tax, penalty and interest on his 1996 business receipts. Taxpayer protested the assessment, arguing: 1) he did not have a business but only provided services; 2) he was purchasing materials as an agent for the company that hired him and should not be subject to the gross receipts tax on reimbursed expenses; and 3) imposing tax on the Taxpayer’s reimbursed expenses is in double taxation. Held: 1) the Taxpayer was engaging in business in New Mexico as defined in Section 7-9-3(E) NMSA 1978; 2) the Taxpayer bought materials on his own account and not as a disclosed agent; and 3) there is no legal prohibition against double taxation; in addition, there was no double taxation in this case. Protest denied.


11/13/2000

00-31

Moriarty Municipal Schools

Taxpayer is a New Mexico school district registered with the Department for payment of withholding taxes. In May 2000, the Department assessed the Taxpayer a late-filing penalty for failing to file its CRS-1 report by the due date.  The Taxpayer protested the assessment, arguing: 1) the statutes do not authorize imposition of penalty for late filing when the tax payment is received on time; 2) the penalty should be limited to the minimum five-dollar penalty; 3) the Taxpayer was not negligent in failing to file the return on time, and 4) penalty should not be assessed against a public entity. Held: The Department’s assessment of penalty against the Taxpayer was properly issued in accordance with the provisions of Section 7-1-69(A) NMSA 1978. The Department does not have authority to abate or reduce the penalty assessed against the Taxpayer based on the Taxpayer’s status as a public school.  Protest denied.


11/09/2000

00-30

Rea Magnet Wire Company, Inc.

The Taxpayer is engaged in the business of manufacturing. In 1998 the Taxpayer constructed a manufacturing facility in New Mexico, due in part to the tax credits available under New Mexico’s Investment Credit Act. In 1999 the Taxpayer filed an application for the investment credit.  The application was approved in part and denied in part.  The Taxpayer protested the partial denial, which was based on the Department’s determination that property depreciated as 25-year property for federal income tax purposes constituted real property and did not meet the definition of “equipment” set out in Section 7-9A-3(B) NMSA 1978. Held: Based on Department regulations in effect during the period at issue, air conditioning units and electrical equipment installed in the plant qualified as equipment eligible for the investment credit. No credit was available for the cost of constructing a raised roof or for other structural modifications required to house certain manufacturing equipment because construction costs do not qualify for the investment credit. Protest granted in part and denied in part.


11/03/2000

00-29

Brian Blount

Taxpayer, an artist, sold his artwork through consignment agreements with galleries located both inside and outside New Mexico. Taxpayer also owned a large warehouse in New Mexico, which he used as a studio and occasionally rented to film companies. In May 1998, the Department assessed the Taxpayer gross receipts tax, penalty and interest on his 1994 business income as reported on Scheduled C to his federal income tax return. The Taxpayer protested the assessment, arguing: 1) the Department erroneously included receipts from out-of-state sales when calculating the liability; 2) receipts from sales on consignment were deductible even in the absence of NTTCs; and 3) receipts from renting the warehouse were receipts from leasing real property and were deductible under Section 7-9-53 NMSA 1978. Held: 1) the Taxpayer provided sufficient evidence to establish that certain sales were made out-of-state and were not subject to gross receipts tax; 2) based on a regulatory change made by the Department, the Taxpayer was entitled to deduct his consignment sales without having possession of an NTTC; 3) the Taxpayer gave up sufficient control over his warehouse to qualify his rentals as a lease of real property deductible under Section 7-9-53 NMSA 1978. Protest granted.


10/02/2000

00-28

Quality Exteriors, Inc.

The Taxpayer is a construction business based in Texas. In March 1998, after a standard field audit, the Department assessed the Taxpayer for gross receipts tax, penalty and interest on receipts from performing construction services in New Mexico. The Taxpayer paid the audit assessment following the conclusion of the audit. In March 1999, a former employee of the Taxpayer provided additional information to the Department, which showed certain information had been withheld during the initial audit. A number of discrepancies were uncovered which indicated that there was a balance of unreported receipts in the range of $1 million. A second audit commenced resulting in an assessment, which included additional gross receipts tax, penalty and interest. The penalty portion of the assessment was assessed as a 50% civil penalty for failure to pay tax based on a willful intent to evade or defeat payment of tax [Section 7-1-69(C)]. The Taxpayer filed a protest on the assessment of the 50% percent civil penalty. Held: The Taxpayer’s failure to pay the gross receipts tax was based on a willful intent to evade or defeat the payment of tax, and the Taxpayer is subject to the 50% penalty. Protest denied.


09/19/2000

00-27

Ronald and Gloria Frost

The Taxpayer was an unlicensed building contractor who entered into contracts to provide all materials and labor to complete a specified construction project. Taxpayer disclosed the name of his customer when making materials purchases, but purchased the materials in his own name and with funds from his own account. Taxpayer also determined from whom to purchase materials and the quantities and quality of materials to be used in a project. Taxpayer argued that the amounts he received attributable to the cost of construction materials he purchased for the project were not gross receipts pursuant to Section 7-9-3(F)(2)(f) because they were reimbursements for expenses incurred in a disclosed agency capacity. Although the materials suppliers knew the name of the Taxpayer's customers, nothing in the Taxpayer's contracts with his customers authorized him to act as agent in making materials purchases. Taxpayer bought the materials in fulfillment of his own contractual obligations to his customers and not in a disclosed agency capacity.  Protest denied.


08/31/2000

00-25

Layton Talbott d/b/a Silk & Stones

The Taxpayer sells tangible personal property at both wholesale and retail. After a limited scope audit, the Department assessed the Taxpayer for gross receipts tax, penalty and interest on resale receipts he deducted without obtaining NTTCs from his buyers.  The Taxpayer protested the assessments, arguing: (1) he was not required to have NTTCs to support his deductions; (2) the Department should be estopped from assessing tax against him because he reasonably relied on the Department’s instructions and the advice he received from a Department employee; and (3) his failure to pay tax was not negligent because it was based on advice received from his Arizona accountant.  Held:  The Taxpayer is not entitled to deduct receipts from New Mexico sales for resale in the absence of required NTTC’s. Estoppel does not apply to prevent the Department from enforcing its assessments because the Taxpayer failed to read all of the Department’s instructions pertaining to the resale deduction and failed to seek clarification from a Department employee whose advice seemed to contradict the instructions. The Taxpayer is entitled to an abatement of the negligence penalty based his reliance on advice received from his Arizona accountant. The protest is partially granted and partially denied.


08/31/2000

00-26

Thomas M. and Martha L. Parrell

Taxpayers were assessed gross receipts tax based upon compensation Mrs. Parrel received from performing services as a registered nurse and reported on a Federal Schedule C.  Taxpayers argued that the compensation was received as an employee of a home health care agency which was exempt as employee compensation pursuant to section 7-9-17. Mrs. Parrell worked for two home health care agencies at the same time. In both jobs she dispensed medication to patients. The first agency treated her as an employee. The second company, Educare, hired her as an independent contractor and she understood that at the time she accepted the position. It was Mrs. Parrell's compensation from Educare that was at issue in the protest.  Educare provided her with all necessary medical supplied and equipment and a desk in their offices. Mrs. Parrell provided her own uniform and vehicle and was not reimbursed for mileage. Educare paid her by the patient visit and by the hour for her office time and time on call.  Mrs. Parrell worked out her schedule of patient visits with the other nurse who performed those same duties and informed Educare of her schedule. Although it was a relatively close question, Mrs. Parrell's knowledge that she was being hired as a contract nurse at the time she accepted the position with Educare as well as the fact that she received some tax benefits from reporting her compensation as self-employment income for federal tax purposes were persuasive in concluding that Mrs. Parrell was not an employee of Educare and was thus not entitled to the exemption found at Section 7-9-17.  Protest denied.


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