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 > 2015

12/31/2015

15-43

Precision Eye Center, PC

On July 26, 2006, the Department assessed the Taxpayer for gross receipts tax and interest for the tax periods from January 31, 2002 through June 30, 2005.  No penalty was assessed.  On August 25, 2006, the Taxpayer filed a protest to the assessment.  On June 9, 2015, the Administrative Hearings Office learned of the protest.  On June 10, 2015, a notice of hearing was issued.  Both parties stipulated to the relevant facts at the hearing, and explained that they had been communicating regularly since the request for hearing was made.  The Taxpayer was entitled to deduct part of its gross receipts, and some items included in the assessment were determined not to be gross receipts.  The final proposed numbers for the assessment were available on the date of the hearing.  The Taxpayer objected to the hearing since it was conducted in 2015 and the protest was filed in 2006.  The Taxpayer argued that some consideration for the significant delay should be given and the interest should be reduced.  In 2006, there was not a strict statutory deadline of time frame within which a hearing must be held.  There is also no statutory provision or regulatory authority for the Hearing Officer to dismiss a previously filed protest as a result of any delay.  Interest was properly assessed and there is no statutory provision that allows for a reduction of interest when a hearing is significantly delayed.  The parties stipulated that certain amounts of the original assessment should be reduced, so that portion of the assessment was ordered to be abated.

The Taxpayer’s protest was granted in part and denied in part.


12/30/2015

15-42

Archaeological Support Svcs

On August 3, 2015, the Department issue two assessments of $5 each to the Taxpayer.  The assessments were penalty for not timely filing CRS-1 returns for the CRS reporting periods ending on September 30, 2014, and December 31, 2014.  The Taxpayer protested the assessments.  During the period in question, the Taxpayer was not engaged in active business and has no gross receipts tax liability.  Rather than close his business, the Taxpayer maintained his CRS number and prepared CRS-1 returns showing zero liability on a quarterly basis.  The Taxpayer’s wife also operates a business subject to CRS reporting requirements, so the Taxpayer submits his returns in an envelope along with his wife’s and notes on the front of the envelope that two CRS-1 returns are included.  The Department did not process the Taxpayer’s returns for the two reporting periods at issue, along with another period.  The Department timely received the Taxpayer’s wife’s returns, contained in the same envelope as the Taxpayer’s returns, for two of those reporting periods.  The Taxpayer acknowledged that he did not timely file the CRS-1 return for the reporting period ending on December 31, 2014.  The Hearing Officer found the Taxpayer’s testimony to be credible that he timely mailed his CRS-1 return for the reporting period ending on September 30, 2014 in the same envelope with his wife’s return, which was received and processed.  The Hearing Officer ordered the penalty for that reporting period to be abated.  The Taxpayer’s protest was granted in part and denied in part.

 


12/29/2015

15-41

Larry J. Gonzales

On April 27, 2015, the Department issued four assessments to the Taxpayer for gross receipts tax, penalty and interest for CRS reporting periods from January 1, 2008 through December 31, 2011.  On June 8, 2015, the Taxpayer protested the assessments.  The Taxpayer is employed as a math and physical education teacher with Albuquerque Public Schools (APS). Over his thirty years at APS, the Taxpayer has also been employed as a basketball coach and athletic director for the school where he works.  During the relevant period, APS had an arrangement with the Albuquerque Youth Basketball League (AYBL) whereby the organization could use APS facilities for practices and sports events not otherwise part of APS’ formal athletics programming.  APS would only allow AYBL to use their facilities if an APS employee was present.  As part of his job as the athletic director, and at the direction of the school’s principal, the Taxpayer was responsible for supervising school and sports activities in the school gym.  The Taxpayer opened the facility, monitored the practice/activity, and closed the facility at the conclusion of the event when AYBL used the gym at his school.  This activity occurred approximately five months a year, one to four times a week.  AYBL paid the Taxpayer for his time on a weekly basis, and provided the Taxpayer with a 1099-MISC at the end of the year.  In the summer, the Taxpayer also served as a teacher-chaperone on one overseas student trip per year with an APS Board approved educational program.  At the end of the trip, the Taxpayer is paid by that program, and is also provided with a 1099-MISC at the end of the year.  The Taxpayer receives a W-2 from APS for his annual teacher wages.  The Taxpayer’s accountant prepared the Taxpayer’s returns for each of the relevant years.  The Taxpayer did not file or pay gross receipts tax in any of the relevant years because he did not believe he was engaged in business, and he thought all his income was earned within the scope of his employment with APS.  The Taxpayer did report and pay income tax on all of the 1099-MISC income listed on his federal Schedule C each year, and the Department issued the assessments as a result of detecting the mismatch between the federal Schedule C income reported and the lack of CRS reporting.  The Department abated the assessed penalty prior to the hearing on this issue.  The Hearing Officer found that, under Regulation 3.2.105.7 NMAC, the Taxpayer established that he was acting as an employee of APS in his monitoring of the gym facilities.  In regard to the receipts from the once a year overseas trip, the Taxpayer was not engaged in business and his receipts are exempt under Section 7-9-28 NMSA 1978, as isolated and occasional. The Taxpayer’s protest was granted.


12/17/2015

15-40

Jacob & Jeanne Kuriyan

On January 13, 2015, the Department denied the Taxpayers’ claim for refund of 2009 New Mexico personal income tax.  The letter stated that for the Department to consider such a claim, Section 7-1-26 NMSA 1978 requires that it be filed within three years of the end of the calendar year in which the payment was due.  On April 9, 2015, the Taxpayers’ filed a protest of the Department’s denial.  During the relevant period, the Taxpayers  employed an accountant to prepare their income tax returns.  On or about October 13, 2010, the Taxpayers submitted their 2009 New Mexico PIT-1 return on which they claimed a refund.  The Department received the return on October 14, 2010, but took no action to approve or deny the claim by February 11, 2011, which was 120 days after they received the return.  The Taxpayers did not file a protest or initiate civil action by May 12, 2011, 210 days after the filing of their claim for refund on their 2009 return.  Around April 2013, the Taxpayer realized that they had not received the refund of their 2009 personal income taxes.  The Taxpayers contacted their accountant to determine what happened.  Also in early 2013, the Department determined that they had never received the Taxpayers 2008 personal income tax return, and they communicated this to the Taxpayers accountant.  On April 17, 2013, the Taxpayers resubmitted their 2008 personal income tax return.   In December 2013, the Taxpayers received a letter from the Department containing three applications for refund to request refunds for three separate years, including the 2009 personal income taxes at issue.  The Taxpayers completed all three applications and mailed them to the Department in one envelope sometime on or before December 24, 2013.  The Taxpayers received two refund checks, but they did not receive the refund for the 2009 personal income tax.  The Department took no action to approve or deny the Taxpayers application for refund within 120 days, on or before April 23, 2014.  The Taxpayers did not file a protest or initiate civil action within 210 days of their application, on or before July 22, 2014.  The Taxpayers expressed frustration at the Department’s inaction on their claim for refund of their 2009 personal income tax on two occasions, and also raised some argument as to why their claim should be granted.  However, the requirements of Section 7-1-26 (B) NMSA 1978 render the Taxpayers’ claim stale and the Department does not have the authority to grant a stale claim for refund.  The Taxpayers’ protest was denied.


12/16/2015

15-39

Christina L. Evaro

On April 6, 2015, the Department denied the Taxpayer’s claim for refund of 2010 personal income taxes, citing that the statute of limitations had expired for the claim.  On June 25, 2015, the Taxpayer protested the Department’s denial.  The Taxpayer recalls mailing her 2010 PIT-1 return on or before April 15, 2011, she claimed a refund.  The Taxpayer’s 2010 wage withholding received by the Department in 2010 were sufficient to pay er entire 2010 liability.  The Department has no record of receiving that return.  Even if the Department had received the return and failed to act on the claim for refund, statute allows the Taxpayer only 210-days to file a protest or civil suit.  In March 2015, the Taxpayer logged into the Department’s Taxpayer Access Point (TAP) system to file her 2014 PIT-1 return.  While reviewing her account, she noticed that the Department had not received her 2010 return.  On March 17, 2015, using a paper copy of her 2010 return, the Taxpayer completed her 2010 return online through TAP, showing a refund due to the Taxpayer.  The Department denied the claim for refund because it was more than three years from the end of the calendar year in which the taxes were due.  On April 16, 2015, the Taxpayer made a payment towards her 2010 personal income taxes, an amount that the Taxpayer did not owe.  The Department refunded the payment because the return did not establish any tax liability.  Pursuant to Section 7-1-26 (D)(1) NMSA 1978, no refund can be granted unless as a result of a claim made within three years of the end of the calendar year in which the tax is due.  In this situation, the Taxpayer had until December 31, 2014 to make a claim for refund for 2010 personal income taxes.  Any claim made after that date is barred by the statute of limitations.  The Taxpayer argued that Section 7-1-26 (D)(4) NMSA 1978 indicates that if the payment of tax was not made within three years of the end of the calendar year in which it was due, a claim for refund can be made within a year of the date on which the tax was paid.  However, in this case the Taxpayer’s withholding provided to the Department in 2010 paid all of the Taxpayer’s 2010 liability, the erroneous payment she made in 2015 was never due or owing and does not result in an additional year to claim a refund. The Taxpayer’s protest was denied.


12/16/2015

15-38  

Irasema Cervantes Pettibone

On July 7, 2015, the Taxpayer submitted a protest to the Department seeking approval for a claim for refund of 2008 personal income tax, a claim on which the Department never took any action to grant or deny.  The Taxpayer submitted her 2008 personal income tax return, which included a claim for refund, to the Department on December 24, 2012.  The Department took no action to grant or deny the claim by April 22, 2013, within 120-days of December 24, 2012.  The Taxpayer did not file a civil action or protest against the Department’s inaction by July 21, 2013, or 90-days after the Department’s failure to act and 210-days after the Taxpayer’s filing of her 2008 personal income tax return.  At some point in 2014, the Taxpayer refiled her 2008 personal income tax return.  By this point, the statute of limitations for a claim for refund of 2008 personal income tax had lapsed.  When the Department still took no action on the claim for refund, the Taxpayer then filed her protest.  The Taxpayer submitted a statement from her doctor that she had a medical condition for 12 months that prevented her from managing her financial affairs, but the statement did not specify when the condition was diagnosed.  The Taxpayer offered no explanation as to why her 2008 personal income tax return was filed on December 24, 2012.  The Taxpayer argued that since she initially filed her return within the three-year period allowed, and the Department did not inform her of her obligations to challenge its inaction, the refund should be granted.   Under Section 7-1-26(D) NMSA 1978, no refund can be granted unless the claim is made within three years of the end of the calendar year in which the tax was due, which would be December 31, 2012 in this situation.  The Taxpayer did initially file within this time but, when the Department takes no action, Section 7-1-26(B) gives the Taxpayer 90-days to file a protest or civil action when the Department takes no action within 120-days.  By taking no action, the Taxpayer abandoned her December 24, 2012 claim for refund.  The Taxpayer’s 2014 resubmission of her 2008 personal income tax return was made after the expiration of the statute of limitations, and the Department has no authority to grant a claim for refund.  The Taxpayer’s protest was denied.


12/08/2015

15-37

Family Workshop LLC / Jeffrey Burrows

On March 17, 2015, the Department assessed the Taxpayer for workman’s compensation tax, penalty and interest for the tax periods from September 30, 2010 through December 31, 2013.  On March 18, 2015, the Department assessed the Taxpayer for gross receipts tax, withholding tax, penalty and interest for the tax periods from July 31, 2010 through January 31, 2014.  On May 12, 2015, the Taxpayer filed a formal protest.  The Taxpayer does business in New Mexico as a provider of behavioral and mental health counseling services, and has several licensed therapists working as employees or independent contractors.  The Taxpayer has two locations, one in Albuquerque and one in Rio Rancho.  The Taxpayer has contracts with several insurance companies and their subsidiaries for providing counseling services to their customers.  One of the insurance companies had a subsidiary that was responsible for payments for the provision of health services under the state’s Medicaid Program.  The Taxpayer knew that several changes to deductions regarding payments for health care services occurred from 2005 through 2007.  The Taxpayer consulted with an accountant about the changes and was advised that payments made by a health management organization (HMO) or a managed care organization (MCO) could be deducted from gross receipts.  In 2011, some of the Taxpayer’s independently contracted therapists were audited.  They brought the issue to the Taxpayer, who contacted the Department about the therapists’ gross receipts, as well as his own. The Taxpayer indicated that some of the employees did not give him an answer about his gross receipts, but that one told him payments from an HMO were probably deductible.  The Taxpayer understood the subsidiary making Medicaid payments to be an HMO or MCO and deducted the Medicaid payments from his gross receipts.  The Taxpayer reported all of his gross receipts at the Albuquerque tax rate, even though some were for services rendered at the Rio Rancho location, which had a higher tax rate.  An audit of the Taxpayer was completed in early 2015.  The auditor discovered that the Taxpayer had two locations but reported all of his gross receipts at the lower rate of one location.  The auditor worked with the Taxpayer to determine which gross receipts were attributable to which location, and also which were derived from Medicaid payments.  The Department assessed the Taxpayer from gross receipts tax attributable to the Medicaid payments and adjusted the tax rate according to the correct location.  The Taxpayer did not present any argument or evidence at the hearing related to the assessments of workman’s compensation tax or withholding tax or their respective penalties and interest, so the only part of the assessment at issue is the gross receipts tax and the related penalty and interest.  The Taxpayer argued that the statute did not prohibit the deduction of Medicaid payments, that the Department should be estopped from collecting the tax based on his conversations with Department employees, and that the Department improperly assessed him for taxes going back more than three years.  The Department argued that Medicaid payments are not deductible under the statute, and that the assessment can go back as far as six years because the Taxpayer underreported his gross receipts by more than 25%.  The hearing officer found that the Medicaid payments are not deductible based on the language of Section 7-9-93 NMSA 1978, and the assessment could go back six years because the Taxpayer filed reports showing his gross receipts tax as zero, thereby underreporting by 100%.  The hearing officer did order the penalty portion to be abated because the Taxpayer relied on the advice of an accountant and spoke to Department employees about the issue, so he was not negligent.  The Taxpayer was properly assessed for the gross receipts tax and interest, and the assessments for the workman’s compensation tax and withholding tax are presumed correct.  The Taxpayer’s protest was granted in part and denied in part.


12/07/2015

15-36

Santa Fe Baking Co.

On March 11, 2015, the Department issued the Taxpayer six assessments for withholding tax, penalty and interest.  On March 18, 2015, the Department issued an additional six assessments for gross receipts tax, penalty and interest.  On June 17, 2015, the Taxpayer filed a protest of the assessments.  The Taxpayer is a restaurant in Santa Fe, owned and operated by the same owner since 1998.  The Taxpayer agreed that it owes the assessed tax principal and interest, so the only issue to the addressed at the hearing was the assessed penalty.  During the period in question, the Taxpayer employed an office manager who was responsible for maintaining the financial records for the Taxpayer and for reporting and paying New Mexico combined reporting system (CRS) taxes.  The Taxpayer also engaged the services of a CPA, but this was only to prepare federal tax filings based on the books maintained by the office manager.  The office manager was not a CPA or otherwise trained in tax accounting methods.  The owner of the Taxpayer focused primarily on the kitchen and trusted the office manager and the CPA to take care of all the financial aspects of the business.  The owner realized there were problems when he learned of unpaid bills to vendors in the fall of 2014.  In October 2014, the Taxpayer hired another CPA to audit its financial records.  This CPA discovered that the Taxpayer had gone 33 months without reporting and paying gross receipts taxes, and he also found numerous errors and omissions related to accounting done by the office manager.  This CPA recommended to the owner in May 2015 that the office manager be relieved of her duties.  The office manager was relieved of her duties in September 2015.  The Taxpayer argues that it was non-negligent, and that paying the  assessed penalty would create economic hardship.  The Taxpayer’s arguments to establish non-negligence for purposes of penalty rely on three factors listed in Regulation 3.1.11.11 NMAC.  The first is that the Taxpayer was affirmatively misled by a Department employee.  The Taxpayer argued that it was misled by the Department’s failure to detect the absence of filing and payments however, this does not equate to being misled by a Department employee.  Second, the Taxpayer argued that the office manager did such a poor job in maintaining the books, they were effectively physically damaged, which is another potential factor.  This argument is not relevant in this situation, as this applies when records are damaged by something like a flood or fire at the place of business.  Last, one factor that can help to establish non-negligence is reasonable reliance on advice of competent tax counsel or an accountant.  While the Taxpayer did employ a CPA to assist with federal tax filings, only the office manager, who was not a CPA or tax accountant, was responsible with maintaining the financial records and filing and paying the CRS taxes.  None of the arguments presented by the Taxpayer, including that of financial hardship, establish any reasonable grounds for abatement of penalty.  The Taxpayer’s protest was denied.


11/17/2015

15-34

Denise Thomas

On July 14, 2015, the Department assessed the Taxpayer for gross receipts tax, penalty and interest for the tax periods from April 1, 2011 through December 31, 2011.  On July 28, 2015, the Taxpayer filed a protest to the assessment.  During the period in question, the Taxpayer did property inspections on an as-needed basis for a mortgage services company.  The Taxpayer did not realize that she should be paying gross receipts taxes on the services she was providing.  On March 13, 2015, the Department issued an audit notice to the Taxpayer and gave her a 60-day deadline, ending May 12, 2015, to obtain any necessary nontaxable transaction certificates (NTTCs).  The Taxpayer contacted the company and asked for an NTTC.  The company told the Taxpayer that they were being audited as well and could not issue any NTTCs at that time, but would do so when they could.  The Taxpayer was not in possession of the NTTC by the deadline.  In August 2015, the Taxpayer received a Type 2 NTTC from the company.  The Taxpayer did not argue that she was engaged in the business of performing services and that these receipts would normally be subject to the gross receipts tax, but she did argue that she should be allowed to deduct her receipts.  Pursuant to Section 7-9-43 NMSA 1978, any deduction claimed by a seller who is not in possession of the required NTTCs within sixty days from the time notice is given shall be disallowed.  The Taxpayer was not in possession of the NTTC timely, and was not allowed by statute to deduct the related receipts. Interest is required to be paid on all taxes not paid on or before the date on which the tax is due, and a lack of knowledge about the requirement to pay taxes is considered negligent and subject to penalty, so interest and penalty were properly assessed.  The Taxpayer’s protest was denied.


10/09/2015

15-33

Brent’s HVAC & Plumbing

In 1998, the owner of the Taxpayer began doing business as a corporation.  That corporation was an air conditioning business that installed air conditioning units and ductwork for builders in new construction projects, as well as doing some air conditioning maintenance work.  This business purchased three large pieces of equipment, which were all used for fabricating and installing ductwork.  As new construction began to slow with the downturn of the economy, the business began to suffer and was eventually closed in late 2010, but the actual last day of business was March 31, 2011.  At that time, the equipment that had been purchased by the business was worth approximately $4000.00.  At the time of the business closure, it had an outstanding gross receipts tax liability.  The business’ owner filed bankruptcy, and attempted to sell the equipment, but was unable to.  The owner’s home and shop, where the business operated out of, were foreclosed on by the bank.  After shutting down the air conditioning business, the owner began to look for other work.  Eventually the owner, who was trained as a plumber, began a new business.  The owner is the sole proprietor of the Taxpayer.  The Taxpayer provides plumbing services for individual homeowners, and also does occasional air conditioning maintenance.  The Taxpayer retained the equipment from the previous business, but does not use it for this new business.  The Taxpayer has one customer in common with the air conditioning business, who is a personal friend of the owner.  The Taxpayer also has one employee who was previously an employee of the air conditioning business.  On March 23, 2012, the Department assessed the Taxpayer as a successor in business for gross receipts tax, penalty and interest for the tax periods from February 28, 2010 through March 31, 2011.  On April 20, 2012, the Taxpayer filed a formal protest to the assessment.  The issue to be decided is whether the Taxpayer is liable as a successor in business for the assessed amounts.  Pursuant to Section 7-1-61 NMSA 1978, a successor in business is required to pay the tax for which the acquired business was liable.  Several factors are used in determining a successor in business, and if a single one is present, the presumption is that there is a successor in business.  The Taxpayer met more than one of the requirements set forth, and was determined to be a successor in business.  The Department also argued that the Taxpayer was a mere continuation of the air conditioning business because the owner is the same, they share a common customer, a common employee, and both engage in some air conditioning maintenance work.  Additionally, the Taxpayer clearly intended to be engaged in some air conditioning work because “HVAC” is included in its name.  The Taxpayer argued that the key factor should be the substance of its work, which is primarily plumbing.  The Hearing Officer agreed that the Taxpayer is not a mere continuation of the air conditioning business.  Due to the Hearing Officer finding that the Taxpayer was a successor in business, but not a mere continuation of the previous business, it was ordered that the Taxpayer could discharge the assessment by paying the Department the full value of the equipment that was transferred, which is approximately $4000.00.  The Taxpayer’s protest was granted in part and denied in part.


09/29/2015

15-32

Andrew Winton

On January 28, 2010, the Department assessed the Taxpayer for withholding tax, penalty and interest for the tax periods from November 2008 through March 2009.  On February 2, 2010, the Taxpayer filed a protest of the assessment.  On February 26, 2007, the Taxpayer filed to register a limited liability company (LLC) in the state of Texas.  The LLC was organized to engage in the restaurant business.  The Taxpayer filed as the registered agent and manager of the LLC.  The Taxpayer filed the LLC on behalf of his son-in-law, who actually owned and operated the restaurant under the LLC, but was unable to register the LLC in Texas because he was not a US citizen.  The son-in-law opened and operated his restaurant in New Mexico with a business partner.  The LLC registered in New Mexico as a foreign LLC on June 26, 2007.  The registration listed the Taxpayer as the registered agent, and the Taxpayer, his son-in-law, and the son-in-law’s business partner as officers.  The LLC registered with the Department for gross receipts taxes on July 27, 2007.  The application for the business tax identification number identified the Taxpayer as one of the managers of the LLC, as well as listing the son-in-law, business partner, and two other businesses in various roles.  The son-in-law’s business partner signed the application.  From November 2008 through March 2009, the LLC filed its withholding tax, but failed to pay the amounts due.  The LLC’s registration in Texas was amended on April 1, 2009.  The Taxpayer was removed from the registration and the son-in-law was listed as the agent and manager.  The Taxpayer testified that he was aware that his son-in-law was running the restaurant, but was unaware of any business or tax registrations in New Mexico and had not consented to the use of his information on any such registrations.  The Taxpayer did not work for the restaurant or LLC, was not paid by them, did not deal with their finances, was not authorized on their accounts, did not have any control over their employees or wages, and did not participate in any aspects of their business.  Employers who are required to deduct and withhold income tax from their employees’ wages, and those withholders are liable for amounts required to be deducted and withheld.  Generally, members and managers of an LLC are protected from the debts of any LLC, but withholding tax under New Mexico law is one of the exceptions.  However, based on the testimony of the Taxpayer, the Hearing Officer found that the Taxpayer is not the party liable for the withholding tax, penalty or interest owed by the LLC. The Taxpayer’s protest was granted.


09/29/2015

15-31

Elizabeth Brower

On March 10, 2015, the Department denied the Taxpayer’s request for refund of an amount that was offset from her 2013 New Mexico personal income tax refund.  The offset was done to satisfy a penalty for underpayment of estimated tax on her 2011 and 2012 personal income tax.  On March 23, 2015, the Taxpayer filed a protest of the denial.  At some point, the Department refunded the amount taken for the 2012 tax year because a formal assessment had not been done.  On May 22, 2015, the Department formally assessed the Taxpayer for the penalty for underpayment of estimated tax for the 2012 tax year.  On June 4, 2015, the Taxpayer filed a protest of the assessment.  In 2011 and 2012, the Taxpayer was required to make estimated payments for personal income tax.  The Taxpayer made some estimated payments, but not enough to satisfy the requirement under Section 7-2-12.2 NMSA 1978, which requires the payments to equal 90% of the current taxable year, or 100% of the prior tax year, whichever is less.  The estimated payments are to be equal payments made by the 15th days of April, June and September of the taxable year, and by the 15th day of January of the following year.  When a Taxpayer makes underpayments of the estimated tax, a penalty applies to the amounts of underpayment for the period of underpayment.  The Taxpayer argued that the statute was unfair and unreasonable.  The law is clear and the Taxpayer was required to make the estimated payments.  Penalty applies when any installment of estimated tax is underpaid.  The Taxpayer failed to pay the full amounts of estimated tax due when it was due, so penalty was properly assessed.  The Taxpayer’s protest was denied.


09/10/2015

15-30   

Flat Landers Taxidermy  

On April 23, 2015, the Department assessed the Taxpayer for gross receipts tax, penalty and interest for the CRS reporting periods from January 1, 2008 through December 31, 2008.  On May 19, 2015, the Taxpayer protested the assessment.  The Taxpayer is a registered hunting guide, who is required to work under the supervision of a registered outfitter.  In 2008, the Taxpayer provided hunting guide services as an independent contractor for Business X, who paid him on a per day basis, did not withhold from his check, and provided him with a 1099 at the end of the year.  Through its tape match program with the IRS, the Department detected that the Taxpayer had reported Schedule C business income on his 2008, 2010 and 2011 personal income tax returns, but did not have a corresponding CRS filing in those years.  On January 31, 2015, the Department sent the Taxpayers a Notice of Limited Scope Audit Commencement.  The notice informed the Taxpayer that he had 60-days to possess the appropriate executed nontaxable transaction certificate (NTTC) to support any claimed deductions.  A CPA called the Department on behalf of the Taxpayers around February 4, 2015, and informed the Taxpayers that an NTTC was needed.  On March 11, 2015, the Department sent the Taxpayers a reminder.  On March 16, 2015, the Taxpayers submitted a series of documents to a Department employee via email, believing that this might be a sufficient substitute for an NTTC.  The employee indicated that he would review the documents and respond as soon as possible if anything additional was needed.  The Department employee did not contact the Taxpayers again.  The Taxpayers did not present an executed NTTC by the deadline.  The Taxpayer did present sufficient documentation to support that no gross receipts tax was due for the 2010 and 2011 years, so no assessments were issued for those years.  Two weeks after the 60-day deadline, Business X executed a Type 2 NTTC to the Taxpayer.  This NTTC covers the sale of tangible personal property for resale, rather than the sale of services for resale, which is covered by a Type 5 NTTC.  On April 23, 2015, the Department issued its assessment for the 2008 gross receipts tax.  There are three main issues in the protest.  First, can the Department  allow a deduction when an NTTC is executed after the deadline, even when a Department employee did not timely inform the Taxpayer that the documents provided were insufficient?  Second, does equitable recoupment provide grounds to abate the assessment? The third issue is whether penalty and interest were appropriately assessed.  Regarding the first issue, the deadline for NTTCs to be presented is set by statute, and the Department does not have discretion to allow a deduction when the NTTC is not timely executed.  As to the second issue, the Department was unable to determine if Business X paid gross receipts tax on the hunting trips where the Taxpayer served as a guide and the Taxpayer was unable to establish the elements of equitable recoupment.  As to the final issue, interest is mandatory under Section 7-1-67 NMSA 1978.  The Hearing Officer found that the Taxpayer was not negligent, as is required for penalty to be imposed, because the lack of response by the Department employee.  The penalty was ordered to be abated.   The Taxpayers’ protest was granted in part and denied in part.


08/11/2015

15-29

Star Hospice, Inc.

On December 22, 2014, the Department assessed the Taxpayer for tax, penalty and interest for the CRS reporting periods from January 31, 2008 through December 31, 2013.  On January 29, 2015, the Taxpayer protested the assessment.  The Taxpayer was a non-filer of CRS returns during the periods at issue.  During the relevant period, the Taxpayer provided hospice nursing care services in nursing homes in New Mexico, under contract with the nursing home facilities.   The Taxpayer is a license hospice nursing service provider that is only authorized to provide clinical services in a residential setting related to the hospice diagnosis.  The Taxpayer is not a licensed nursing home provider and does not provide room and board services or curative services.  At issue in this case are the Taxpayer’s receipts received from Medicaid for the patients’ room and board at the nursing home facilities.  This is the only amount in dispute in the protest.  The nature of the transactions was that the nursing home facility would bill the Taxpayer for the room and board that the facility provided to the Taxpayer’s hospice patients.  The Taxpayer billed Medicaid for the nursing home room and board at the permissible Medicaid room and board rate, and Medicaid would pay the Taxpayer 95% of the permissible room and board rate.  Upon receipt of payment, the Taxpayer would place the money in a specific reimbursement account and then reimburse the nursing facility at 100% of the Medicaid room and board rate.  The Taxpayer would not retain any portion of the money.  The Taxpayer’s contracts with the nursing homes specified that the Taxpayer was an independent contractor.  The question in the protest is two-fold.  First, does the Taxpayer receive payment from Medicaid for room and board for reimbursement to the nursing home in a disclosed agency capacity? Second, if the Taxpayer was not acting as a disclosed agent, does the fact that the Medicaid regulations require the Taxpayer to bill for room and board services provided by nursing homes establish an agency relationship?  Regulation 3.2.1.19 NMAC provides that an agency relationship only exists if a person has the power to bind a principal in contract with a third party.  The contracts between the Taxpayer and the nursing homes make it clear that this was not the case.  The Taxpayer argued that the Medicaid regulations forced it to be the nursing home’s agent for purposes of billing, but the Taxpayer entered into contracts that disavowed any agency relationship with the nursing homes.  The Taxpayers’ protest was denied.


08/04/2015

15-28

Floyd & Anna Rivera

On April 8, 2015, the Department assessed the Taxpayers for personal income tax, penalty and interest for the personal income tax period ending on December 31, 2010.  On April 10, 2015, the Taxpayer filed a protest of the assessment.  The Taxpayers timely filed 2010 personal income tax returns with both the IRS and New Mexico.  The Department detected a discrepancy between the Taxpayers’ federal and state returns as part of the tape match program.  On October 19, 2014, the Department sent a notice of limited scope audit commencement for the 2010 personal income tax year because of this discrepancy.  The main issue is a misreporting on line 8 of the New Mexico PIT-1 form, on which a taxpayer is to report the amount of state and local income tax or general sales tax deduction claimed on their federal itemized deduction.  Due to a misunderstanding by the Taxpayers, the amount entered on their PIT-1 was much lower than the amount shown on their Schedule A.  There were two other minor discrepancies related to an arithmetic error and a transposition of numbers.  There errors resulted in the Taxpayers underreporting their state personal income tax liability by 46%.  The Taxpayers did not understand the discrepancy at issue, and argued that there was only one minor error.  Also, the Taxpayers argued that the statute of limitations had lapsed by the time the assessment was issued.  Section 7-1-18 provides a normal three-year statute of limitations for assessment, but the statute of limitations is extended to six years when a tax liability was underreported by more than 25%.  The Department made the assessment within four years from the end of the calendar year in which the tax was due, which is timely under the extended statute of limitations.  The Hearing Officer found that the Taxpayers were properly assessed, and were subject to interest under Section 7-1-67 NMSA 1978, as well as the penalty for negligence under Section 7-1-69 NMSA 1978.  The Taxpayers’ 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