Show Subnavigation

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 > 2001

12/17/2001

01-33

Perez Trucking

The Taxpayer is in the business of hauling asphalt and other materials. In July 2001, the Taxpayer filed a claim for refund of gross receipts taxes paid for a three-month period in 1997.  The Department denied the claim because it was filed beyond the 3-year limitations period set out in Section 7-1-26 NMSA 1978. The Taxpayer protested, asking the Department to reconsider its decision based on the Taxpayer's lack of knowledge of New Mexico law and the financial hardship caused by the denial. Held: The Department correctly denied the claim for refund.  Neither the Department nor the hearing officer has authority to override the provisions of New Mexico law to grant a refund filed after the limitations period set out in Section 7-1-26 NMSA 1978.  Protest denied.


11/28/2001

01-32

Richard & Arlene Hall (Cornerstone)

The Taxpayer entered into an agreement to perform services as a subcontractor on a federal contract. The general contractor agreed to assume responsibility for the Taxpayer's gross receipts tax, but did not honor its agreement and never reported or paid gross receipts tax on the Taxpayer's behalf. In July 2000, the Department assessed the Taxpayer for gross receipts tax, penalty and interest. The Taxpayer protested the assessment making the following arguments: 1) all of his services were performed for the general contractor's customer and not for the general contractor; 2) he did not bill the general contractor for gross receipts tax and it is now impossible for him to recover the tax; 3) his agreement with the general contractor shifted the responsibility for payment of his gross receipts tax to the general contractor; and 4) payment of the tax will create a financial hardship. Held: 1) Although the Taxpayer performed his services only once, there were two taxable transactions:  the Taxpayer's sale of services to the general contractor and the general contractor's resale of services to its customer. The Taxpayer is liable for gross receipts tax on his receipts from performing services as a subcontractor. 2) The gross receipts tax is imposed directly on the seller, and the Taxpayer's failure to collect gross receipts tax from the buyer of his services does not relieve the Taxpayer of this liability.  3) A taxpayer may not delegate responsibility for payment of tax to a third party, and the Department is not bound by the terms of the Taxpayer's private agreement with the general contractor. 4) The hearing officer is required to enforce the tax laws as written and does not have authority to order abatement of tax, penalty or interest based on a taxpayer's individual economic circumstances.  Protest denied.


11/01/2001

01-31

Hal M. Dean

From 1991 through April 1999, Dean/Krueger & Associates, Inc. (“DKA”) was engaged in the business of providing architectural services in New Mexico. Hal Dean and Eugene Baker were the sole shareholders and officers of DKA and were the only persons who had signature authority on DKA’s bank accounts. Beginning in 1991, DKA stopped reporting and paying New Mexico CRS taxes, including withholding taxes that had been deducted from the wages of DKA’s employees. In February 2000, the Department assessed DKA for gross receipts and withholding taxes due for tax periods January 1993 through April 1999. At the same time, the Department issued separate assessments to Mr. Baker and Mr. Dean, as corporate officers, for the withholding tax portion of the assessment issued to DKA. Mr. Dean protested his individual assessment on the following grounds:  (1) he had reasonable cause for failing to pay the withholding tax due to the state and should be excused from liability pursuant to Section 7-3-5(B); (2) the assessment was not valid because it used the same assessment number assigned to DKA and did not have a unique number that the Department’s computer system could identify to Mr. Dean; (3) Section 7-1-18 limits the period for which Mr. Dean could be assessed to three years because he only became a “taxpayer” after he was assessed by the Department; and (3) the Department’s estimate of withholding tax due should be adjusted to reflect the actual withholding tax shown on business records introduced at the hearing.  Held:  (1) The "reasonable cause" exception does not apply to the facts of this case and does not excuse Mr. Dean from withholding tax liability.  (2) The assessment issued to Mr. Dean met all the requirements of Section 7-1-17 NMSA 1978 and was a valid assessment. (3) Pursuant to Sections 7-1-3(W) and 7-3-5 NMSA 1978, Mr. Dean was a taxpayer personally liable for payment of withholding tax deducted from the paychecks of DKA’s employees, and the Department correctly assessed Mr. Dean under the seven-year limitation period in Section 7-1-18.  (4) The additional withholding tax records introduced at the administrative hearing were sufficient to overcome the presumption of correctness of the Department's estimate of taxes due and provided a reasonable basis for adjusting the Department's assessment.  Protest granted in part and denied in part.


11/01/2001

01-30

Eugene K. Baker

From 1991 through April 1999, Dean/Krueger & Associates, Inc. (“DKA”) was engaged in the business of providing architectural services in New Mexico. Hal Dean and Eugene Baker were the sole shareholders and officers of DKA and were the only persons who had signature authority on DKA’s bank accounts. Beginning in 1991, DKA stopped reporting and paying New Mexico CRS taxes, including withholding taxes that had been deducted from the wages of DKA’s employees. In February 2000, the Department assessed DKA for gross receipts and withholding taxes due for tax periods January 1993 through April 1999. At the same time, the Department issued separate assessments to Mr. Baker and Mr. Dean, as corporate officers, for the withholding tax portion of the assessment issued to DKA. Mr. Baker protested his individual assessment on the following grounds:  (1) the assessment was not valid because it used the same assessment number assigned to DKA and did not have a unique number that the Department’s computer system could identify to Mr. Baker; (2) Section 7-1-18 limits the period for which Mr. Baker could be assessed to three years because he only became a “taxpayer” after he was assessed by the Department; and (3) the Department’s estimate of withholding tax due should be adjusted to reflect the actual withholding tax shown on business records introduced at the hearing.  Held:  (1) The assessment issued to Mr. Baker met all the requirements of Section 7-1-17 NMSA 1978 and was a valid assessment. (2) Pursuant to Sections 7-1-3(W) and 7-3-5 NMSA 1978, Mr. Baker was a taxpayer personally liable for payment of withholding tax deducted from the paychecks of DKA’s employees, and the Department correctly assessed Mr. Baker under the seven-year limitation period in Section 7-1-18; (3) The additional withholding tax records introduced at the administrative hearing were sufficient to overcome the presumption of correctness of the Department's estimate of taxes due and provided a reasonable basis for adjusting the Department's assessment.  Protest granted in part and denied in part.


10/30/2001

01-29

Howard L. Bancroft, III

The Department assessed the Taxpayer for personal income tax, penalty and interest for tax years 1992, 1993 and 1994.  The Taxpayer protested, raising the following issues: 1) the Department should be required to enter into a settlement agreement with the Taxpayer on the same terms he settled with the IRS; and 2) the Taxpayer should be excused from payment of penalty because his decision not to file New Mexico personal income tax returns was based on the advice of his attorney. Held: New Mexico law requires the existence of a good faith doubt before the Department is authorized to enter into a settlement agreement and does not permit settlement on the same grounds offered by the IRS; the Taxpayer's failure to file a tax return, request an extension of time to file or make estimated payment of taxes due was negligent and was not excused by the advice provided by his attorney.  Protest denied.


10/29/2001

01-27

Wayne Gaede

The Taxpayer was engaged in marketing and promoting the sale of long distance telephone services for Excel Communications. This was a multi-level marketing program in which the Taxpayer made direct sales of long distance telephone services, and recruited new sales representatives for Excel. The Taxpayer was compensated on a cash bonus and commission basis.  In April 2000, the Department assessed the Taxpayer for gross receipts tax, penalty and interest on his receipts. The Taxpayer protested, raising the following issues: 1) was the Taxpayer liable for gross receipts tax on sales commissions measured by the long-distance telephone charges paid by customers of the Taxpayer's sales representatives; 2) was the Department's method of calculating the percentage of commissions subject to gross receipts tax reasonable; and 3) did Excel's payment of gross receipts tax on its receipts from the sale of long-distance telephone services relieve the Taxpayer from liability for gross receipts tax on commissions measured by those receipts.  Held:  1) the Taxpayer's commissions represent receipts from performing marketing services in New Mexico and are subject to gross receipts tax; 2) the method of calculating the Taxpayer's in-state receipts was reasonable; and 3) the Taxpayer failed to present any evidence to support his claim that Excel paid gross receipts tax on long-distance telephone charges. Protest denied.


10/29/2001

01-28

Scott & Rebecca Dole D/B/A SW Flooring Installation

The Taxpayer was assessed gross receipts tax, penalty and interest based upon an audit in which the Department disallowed deductions for which the Taxpayer was unable to present a timely NTTC of the proper type. Taxpayer challenged the assessment on the grounds that the Department’s NTTCs are confusing and the requirements surrounding use of NTTCs are too complicated, that another similarly situated Taxpayer had been allowed the deductions under similar circumstances, that the assessment represented prohibited double taxation and that the 14 month delay between the filing of the protest and the hearing of the protest violated the requirement of § 7-1-24 that hearings on protests be set promptly. The protest was denied. The Taxpayer’s failure to understand the requirements for claiming and supporting deductions is not a defense to the assessment and the issues about the NTTC system must be taken up with the legislature.  Even though the Department erroneously allowed a similarly situated taxpayer to claim deductions in similar circumstances, the mistakes or errors of the Department with respect to another taxpayer does not provide a defense to an assessment of tax made in accordance with the law. There is no prohibition against double taxation and no double taxation occurred here because there were two separate taxpayers and two separate taxable transactions.  Finally, even if the Taxpayer’s protest was not heard promptly, which was not ruled upon, it would not provide a defense to the assessment at issue.


10/23/2001

01-26

Patrick J. Youngman

On October 20, 2000, the Department issued an assessment to the Taxpayer for personal income tax, penalty and interest for tax year 1999. At the hearing on his protest the Taxpayer raised the following arguments: (1) the Department failed to prove he is either a resident of New Mexico or a taxpayer; (2) both federal and state law prohibit the taxation of federal reserve notes; (3) the Department "dishonored" the private administrative proceeding he initiated against former Secretary John Chavez; (4) the Department "dishonored" his offer to discharge tax assessed; and (5) the Department failed to define the term "income". Held: It is the Taxpayer's burden to come forward with evidence to establish that the Department's assessment is incorrect and the Taxpayer failed to do so in this case.  With regard to the Taxpayer's legal issues, 31 USC 5154 specifically permits states to tax federal reserve notes, the state is not bound by a taxpayer's attempt to initiate a "private" administrative proceeding against public officials, nor is the state bound by the terms of a taxpayer's conditional offer to pay taxes due.  Protest denied.


10/22/2001

01-25

Raven Wolf Communications

In 1994, the Taxpayer started business as a consulting astrologer. All of the Taxpayer's clients are located outside New Mexico. From 1994 to 1998, the Taxpayer paid gross receipts tax on her receipts from providing services to out-of-state clients on advice from a Department employee. In February 1998, the Taxpayer stopped paying gross receipts tax on those services after consulting with several accountants. In June 2000, the Taxpayer submitted documentation to the Department to obtain a definitive answer on whether her receipts were taxable. The Department determined that the Taxpayer did not owe gross receipts tax on her receipts and was granted a refund for taxes paid for reporting periods December 1996 forward. In November 2000, the Taxpayer submitted a claim for refund of taxes paid for reporting periods March 1994 through November 1996 that the Department denied. The Taxpayer protested the denial by raising an estoppel argument, asserting the Department misled the Taxpayer into paying tax she did not owe. Held: The Taxpayer's claim for refund is barred by the three-year limitations period set out in Section 7-1-26 NMSA 1978, and the Department is not estopped from asserting the statute of limitations as a bar to the Taxpayer's claims. Protest denied.


09/21/2001

01-24

Don R. Hetter

The Taxpayer operated a construction company as a sole proprietorship. The Taxpayer had previously been audited and assessed gross receipts tax for underreported receipts of the construction company. The Department then used the underreported gross receipts to increase the Taxpayer's gross receipts as reported on his federal Schedule C, recalculated the Taxpayer's federal adjusted gross income and issued assessments for personal income tax. The Department's original gross receipts tax assessment was based upon the Taxpayer's bank deposits because the Taxpayer did not maintain books of account for his business. As a result of the protest, the Taxpayer was able to demonstrate that some of the bank deposits should not be considered gross receipts, and that some of the bank deposits had been reported elsewhere on his federal return as income from capital gains. Taxpayer's protest was granted in part and denied in part.


09/18/2001

01-23

East Mountain Speech Pathology

The Taxpayer has been engaged in business in New Mexico since 1990.  In early 1998, the Taxpayer was informed that for the report period of January-June 1997, the Department had no record of receiving the Taxpayer’s CRS return or payment. The Taxpayer's business records contained copies of a CRS return and check indicating timely filing for that period, but the Taxpayer had no independent recollection or Post Office receipt to establish whether or when these items were mailed to the Department. The Taxpayer was not aware that her check had not been cashed because she did not balance her tax account checkbook on a regular basis. The Taxpayer subsequently filed her CRS return and paid the taxes due for the period January-June 1997. In May 1998, the Department assessed the Taxpayer penalty and interest on the late payment of taxes for that period. The Taxpayer protested, arguing that her payment was mailed in a timely manner and that the Department took too long to notify her that the payment had not been received. The Department subsequently abated the penalty portion of the assessment. Held: The Taxpayer failed to meet her burden of proving that payment of CRS taxes was timely and the Department’s assessment was issued within the statutory period provided in 7-1-18 NMSA 1978.  Protest denied.


09/12/2001

01-22

Marcelino Sanchez

In 1996, the Taxpayer worked as an independent contractor performing auto repair services. The Taxpayer was not aware that New Mexico gross receipts tax applied to his receipts from working as an independent contractor.  Therefore, the Taxpayer did not charge gross receipts tax on his services, and did not report or pay gross receipts tax to the Department. In December 1999, following a limited scope audit, the Department assessed the Taxpayer for gross receipts tax, penalty and interest. The Taxpayer protested the assessment, arguing that his services did not qualify as a business subject to gross receipts tax and that penalty and interest should be reduced because he was not aware of his liability for gross receipts tax. Held: The Taxpayer was engaging in business in New Mexico as defined in Section 7-9-3(E) NMSA 1978, and is subject to gross receipts tax on his receipts from performing services as a independent contractor. Pursuant to Section 7-1-67 NMSA 1978, interest was properly assessed on his unreported gross receipts tax, and pursuant to Section 7-1-69 NMSA 1978, the Taxpayer was negligent in failing to report gross receipts tax.  Protest denied.


08/31/2001

01-21

James Stadler

The Taxpayer protested an assessment of gross receipts tax, penalty and interest on the grounds that he was financially unable to pay the assessment. Protest Denied.  Inability to pay an assessment of tax is not a defense to the liability.


08/30/2001

01-19

Guadalupe Medical Center & Lea Regional Hospital

In this consolidated protest, the Taxpayers were hospitals which had claimed deductions, pursuant to Section 7-9-54, for their receipts from Medicare for providing tangible personal property to Medicare covered patients. The Department denied the deductions on the basis that because Medicare beneficiaries generally have paid taxes or premiums under Medicare Part B in order to have Medicare coverage, that the Medicare reimbursements should be treated the same as if the patient’s medical expenses were covered by private insurance, for which there is no deduction. The Taxpayers argued that Medicare is a governmental program, like Medicaid, and because the Department allows a deduction for reimbursements from the Medicaid program for sales of tangible personal property to Medicaid covered patients, they should also be allowed the deduction for sales of tangible personal property to Medicare covered patients.  The Taxpayer’s protest was granted. Two other assessments were also protested. On one of the assessments, the ten year statute of limitations to enforce the assessment had run and no action or decision was rendered with respect to that assessment. On the other assessment, the Taxpayer had failed to present evidence or arguments to overcome the presumption of correctness which attached to the assessment and the Taxpayer’s protest was denied.  Finally, the Taxpayers challenged the Hearing Officer’s jurisdiction to render a decision on the basis that he failed to issue his decision within thirty days of the hearing as required by Section 7-1-24(H). The Hearing Officer determined that he retained jurisdiction to decide the matter.


08/30/2001

01-20

Craig M. Rawlings

During 1995, the Taxpayer worked as an independent contractor for a company that manufactured computer devices while his wife worked as an independent contractor for an employment agency. Although the Taxpayer was performing services on a manufactured product, his employer gave him a Type 2 nontaxable transaction certificate (NTTC), which applies to the sale of tangible personal property for resale. Neither the Taxpayer nor his wife paid gross receipts tax on their 1995 earnings. The Taxpayers subsequently divorced and the Taxpayer's wife moved to Texas. In January 1999, the Department sent a letter addressed to the Taxpayer and his former wife notifying them of a limited scope audit of their 1995 gross receipts tax reporting based on the business income reported on Schedule C to their 1995 joint federal income tax return. In May 1999, the Department assessed the Taxpayer and his former wife gross receipts tax, penalty and interest on their 1995 income. The Taxpayer protested the assessment, arguing:  1) he accepted the Type 2 NTTC in good faith and should be allowed to deduct his receipts pursuant to the provisions of Section 7-9-75 NMSA 1978; 2) the tax on his receipts results in double taxation, and 3) he should not be liable for gross receipts tax on his former wife’s earnings.  Held:  The Taxpayer is liable for gross receipts tax on his 1995 income because he did not have timely possession of an NTTC applicable to the transaction at issue; the gross receipts tax against the Taxpayer does not constitute double taxation; to the extent the Taxpayer’s interest in property that was either community or jointly held property at the time of his divorce can be identified, the Taxpayer is liable for gross receipts tax on the 1995 income of his former wife.  Protest 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