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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 > 2006

12/18/2006

06-21

Manuel Vigil

The Taxpayer is a resident of New Mexico who invested in two mutual funds.  The Taxpayer received a Form 1099 listing the dividend and capital gain distributions made from the funds during the previous tax year.  Pursuant to the Taxpayer’s agreement with the funds, the distributions were not made in cash, but were reinvested in additional shares.  After the close of the year, the Taxpayer sold all of his shares in the two mutual funds at a substantial loss.  The Taxpayer did not include the dividend and capital gain distributions he received from the funds on his state or federal income tax returns.  The IRS and the Department subsequently assessed the Taxpayer for additional income tax on these distributions.  The Taxpayer protested, arguing that he should not have to pay tax because he lost money on the mutual funds, and because he did not receive the distributions in cash.  The Hearing Officer held that as a shareholder in the funds, which are treated as pass through entities, the Taxpayer was liable for tax on the funds’ dividend and capital gain distributions.  The fact that he later lost money on the sale his shares did not absolve him of this liability.  Nor did his decision to have distributions reinvested, rather than paid in cash, affect the taxability of the distributions.  The Taxpayer’s protest was denied.  


12/04/2006

06-20

Penny Mitchell

The Taxpayer and her husband filed joint 2001 federal and state income tax returns.  In 2003, the IRS assessed them for additional federal income tax.  Neither the Taxpayer nor her husband called the Department or consulted a tax professional to determine how this federal adjustment would impact their state liabilities.  The couple later divorced.  In 2005, the Department assessed them for additional state tax resulting from the federal adjustment to their 2001 return.  The Taxpayer protested the assessment of interest and began making monthly payments against the tax principal.  During the course of making these payments, the Department advised the Taxpayer that her ex-husband’s tax refund would be applied toward the remaining tax principal.  The Taxpayer later discovered that this was not done and that her ex-husband had received and spent his tax refund.  At the administrative hearing, the Taxpayer argued that she should not be responsible for the interest that accrued as a result of the Department’s failure to apply her ex-husband’s refund to the assessment.  She also asked the Department to consider the fact that she was a single mother and student and that paying the interest would create a financial hardship.  The Hearing Officer held that both parties to a joint return remain liable for both tax principal and interest related to that return.  In addition, the Department is not authorized to abate interest based on a taxpayer’s personal or financial situation.  The Taxpayer’s protest was denied.


11/20/2006

06-19

Karen Houser

The Taxpayer performed caregiving services as an independent contractor and reported her business income on her federal income tax return.  The Taxpayer failed to report or pay New Mexico gross receipts tax on this income.  The Department subsequently audited the Taxpayer and advised her that she must be in possession of all NTTCs required to support her deductions within 60 days.  The Taxpayer was unable to obtain an NTTC from the company she worked for, and the Department assessed her for gross receipts tax on her income from providing services as an independent contractor.  The Taxpayer protested, arguing that she was misled by the company she worked for, which refused to give her an NTTC.  The Hearing Officer held that it was the Taxpayer’s obligation to either obtain the NTTCs required to support her deductions or pay the gross receipts tax.   The Taxpayer’s protest was denied.


10/31/2006

06-18

Carole Ann Kirby

The Taxpayer is a registered nurse who performed medical services for a New Mexico clinic as an independent contractor.  The Taxpayer reported and paid gross receipts taxes on her receipts under the contract.  Subsequently, the clinic’s business manager erroneously advised the Taxpayer that she was not liable for gross receipts tax on her payments from the clinic.  Based on this advice, the Taxpayer filed a claim for refund of the taxes she had paid.  The Department asked the Taxpayer for nontaxable transaction certificates (NTTCs) to support a deduction of her receipts from selling her services for resale.  When the Taxpayer asked the clinic for an NTTC, she was told that it did not have any.  The Taxpayer’s claim for refund was denied and she filed a written protest, arguing that the clinic had already paid gross receipts tax on the money it collected from patients.  The hearing officer held that the transactions between the clinic and its patients and the clinic and the Taxpayer were both subject to gross receipts tax because the clinic did not provide the Taxpayer with NTTCs, and the situation did not fit any other deduction or exemption.  The Taxpayer’s protest was denied.


10/19/2006

06-17

Ed & Rebecca McNair

The Taxpayers became residents of New Jersey in 1967, where they remained for over 30 years.  In 1999, the Taxpayers sold their New Jersey home and moved to New Mexico.  The Taxpayers did not retain ownership in any property or business interests in New Jersey, although Mrs. McNair received a pension from the New Jersey school system.  The Taxpayers purchased a home, registered to vote, registered their vehicle and obtained driver’s licenses in New Mexico.  The Taxpayers filed a 2001 federal income tax return listing their New Mexico address, but did not file a New Mexico return.  In 2005, based on information received from the IRS, the Department assessed the Taxpayers for New Mexico income tax on their 2001 income.  The Taxpayers protested, arguing that they were not New Mexico residents, but remained domiciliaries of New Jersey.  Based upon the actions of the Taxpayers, the hearing officer found that the Taxpayers abandoned their New Jersey domicile in 1999 and became residents of New Mexico.  The Taxpayers protest was denied.  


09/14/2006

06-16

Redrock Foods, Ltd.

The Taxpayer is a California limited partnership that owns several fast-food restaurants in New Mexico.  Beginning in 1995, the partner in the Taxpayer’s Colorado office was responsible for payment of New Mexico gross receipts taxes.  In early 2003, the Colorado partner stopped paying these taxes to New Mexico.  The other partners did not discover the problem until June 2004.  At that time the Taxpayer began timely reporting and paying its gross receipts taxes again and also approached its lender for a loan to pay the back taxes.  The Taxpayer’s vice president told a Department employee that the lender would not agree to the payment of penalty, and the employee told him that she was pretty sure penalty could be abated if a short-term payment plan was arranged.  A few months later, the Taxpayer was informed that penalty could not be abated.  By June 2005, the Taxpayer had paid all amounts assessed by the Department, including the penalty.  The Taxpayer then filed a claim for refund of the penalty, which was denied.  The Taxpayer protested, arguing that the failure to pay gross receipts taxes was attributable to only one partner and the remaining partners were innocent.  The Hearing Officer held that the partnership entity was responsible for the actions of all of its partners, including the partner in Colorado, and that penalty was properly assessed.  The Taxpayer’s protest was denied.


09/14/2006

06-15

Linda Lombardo

The Taxpayer changed her residence from New Mexico to Arizona in October 2003 and filed 2003 personal income tax returns in both states as a part-year resident.  On her New Mexico return, the Taxpayer claimed a $4,335 credit for taxes paid to Arizona although the tax liability reported on her Arizona return was only $1,953.  The Department determined that the Taxpayer should have filed her New Mexico return as a full-year resident because she was present in the state for more that 185 days and adjusted her return accordingly.  The Department also reduced the credit taken for tax paid to another state to the amount of tax actually paid to Arizona.  The Taxpayer paid the tax principal but protested the assessment of interest, arguing that the Department’s instructions were wrong and that the Department took too long to provide her CPA with a copy of the income tax statutes at issue.  The Hearing Office found that the instructions were clear on the amount of the credit allowed and that it was the obligation of the Taxpayer and her CPA to determine her correct tax liability.  The Taxpayer’s protest was denied.


09/06/2006

06-14

Abdul Al-Kasir

The Taxpayer owned two businesses in Albuquerque, New Mexico, which were operated primarily as gas stations and convenience stores.  The Department audited the businesses, but the Taxpayer failed to provide any invoices, cash register tapes, ledgers, journals or other business records.  The Department obtained the Taxpayer’s federal income tax returns and bank statements by means of a subpoena.  Based on these records, the Department assessed the Taxpayer for unpaid gross receipts taxes on the sale of gasoline.  The Taxpayer protested, arguing that he leased the gas stations to third parties and was not responsible for their operation during the audit period.  The Taxpayer also questioned the methodology used to calculate his tax liability.  The Hearing Officer held that the evidence supported the conclusion that the Taxpayer was operating the two gas stations during the period at issue.  The Hearing Officer also held that given the lack of business records, § 7-1-11 authorized the Department to use alternative methods of estimating the Taxpayer’s tax liability, including the use of his federal income tax returns, bank deposit statements and industry standards.  The Taxpayer’s protest was denied.


08/11/2006

06-13

Cary Brooks

The Taxpayer is a New Mexico resident who took a job in California in mid-2000.  Upon moving, the Taxpayer informed his car insurance company of his new address, but did not change his New Mexico driver’s license or registration.  While the Taxpayer was living in California he made trips to New Mexico to purchase and register a new car and renew his driver’s license, lising a New Mexico address as his residence and mailing address.  The Taxpayer did not file a federal income tax return for the year 2000 until March 2003.  He did not file a state income tax return for California or New Mexico.  In 2005 the Department assessed the taxpayer for personal income tax, penalty and interest on the total of the income reported on the Taxpayer’s federal return.  The Taxpayer protested the assessment for the portion of the income which was earned in California.  To support this protest, the Taxpayer filed both New Mexico and California income tax returns allocating his California wages to that state.  Although the Hearing Officer determined that the Taxpayer remained a New Mexico resident during 2000, he was allowed to take a credit against his New Mexico tax liability for the tax paid to California.  The Taxpayer’s protest was granted in part and denied in part.


08/10/2006

06-12

V. Phillip and Peggy J. Soice

The Taxpayers unintentionally filed erroneous federal and state personal income tax returns for tax years 1998-2004.  The error resulted from a misreading of the W-2 forms their CPA prepared for the Taxpayers’ wholly-owned S corporation.  In 2005, the Taxpayers discovered the error and filed corrected returns, with payment of the additional tax due.  After receiving the returns, the Department assessed the Taxpayers for penalty and interest on their late payments.  The Taxpayers protested the assessments and subsequently filed a claim for refund of the tax principal paid for years that were beyon the three-year limitations period set out in NMSA 1978, § 7-1-18.  The refund was denied and the Taxpayers protested.  Held:  The limitations period in § 7-1-26 applies to assessments issued by the Department and not to the Taxpayers’ own self-assessments.  Because the taxes were due and owing to the state, there is no basis for a refund.  The Taxpayers’ erroneous reading of their W-2 forms and failure to consult with the CPA who prepared the forms was negligent, and penalty and interest were properly imposed.  The Taxpayers’ protest is denied.     ?


06/22/2006

06-11

Dell Catalog Sales, L.P

Dell Catalog Sales L.P. (“DCSLP”), a Texas limited partnership with no offices, stores, employees or sales agents in New Mexico, sells computers and related products to New Mexico consumers via mail and the internet.  Following an audit, the Department assessed DCSLP for gross receipts tax on its sales of computers to New Mexico customers and compensating tax on its distribution of catalogs within New Mexico during the audit period.  DCSLP protested the assessment, arguing:  (1) it did not have sufficient nexus with New Mexico to subject it to the state’s taxing jurisdiction; (2) its sales of computers took place outside New Mexico and were not subject to gross receipts tax; and (3) its distribution of catalogs to potential customers in New Mexico was not a taxable “use” of those catalogs.  The Hearing Officer ruled for the Department, finding:  (1) the in-state activities of BancTec, USA, an unrelated company that contracted with DCSLP to perform on-site repair services for DCSLP customers who purchased service contracts from DCSLP, was sufficient to establish DCSLP’s nexus with New Mexico under the United States Supreme Court’s rulings in Scripto and Tyler Pipe; (2) DCSLP’s sales of computers to New Mexico customers were consummated upon transfer of possession of the goods to the customer in New Mexico and were subject to New Mexico’s gross receipts tax; and (3) the distribution of catalogs within the state was a taxable use subject to New Mexico’s compensating tax.  Protest denied.  


06/19/2006

06-10

Crawford Chevrolet, Inc.

The Taxpayer is registered with the Department for payment of gross receipts, compensating, and withholding taxes.  Because the Taxpayer’s average monthly tax payment exceeded $25,000, the Taxpayer was required to use one of the special payment methods set out in § 7-1-13.1.  The CRS Filer’s Kit mailed to the Taxpayer included information concerning special payment methods, as well as a reference to a Department publication on the issue.  The Taxpayer’s office manager did not read this information, however, and was unaware of the requirement.  As a result, the Taxpayer was assessed a penalty for late payment.  The Taxpayer protested, arguing that the Department failed to notify the Taxpayer that it was subject to special payment requirements.  Held:  The Taxpayer is responsible for determining its tax obligations and cannot rely on the Department to provide the Taxpayer with personal notice of statutory requirements.  Protest denied.


05/09/2006

06-09

Howard B. Henderson

The taxpayer and his wife have rented the same house in Albuquerque since the mid-1990s.  Although the taxpayer has had jobs in several different states during the last ten years, the taxpayer’s family remained in the couple’s home in Albuquerque, and the taxpayer always returned to that home when his out-of-state jobs ended.  From September 2000 to July 2002, the taxpayer worked and maintained an apartment in Texas, but never changed his New Mexico driver’s license, car registration or voter registration.  After the Texas job ended, the taxpayer again returned to the house he and his wife shared in Albuquerque.  The taxpayer did not report his Texas income to New Mexico.  In 2005, the Department assessed the taxpayer for New Mexico personal income tax on the income he earned in Texas during 2001 and 2002.  The taxpayer protested, stating that he was a resident of Texas during that time period.  The hearing officer concluded that the taxpayer never abandoned New Mexico as his domicile and, as a New Mexico resident, was liable for personal income tax during the period in question. The taxpayer’s protest was denied.


05/08/2006

06-08

Dean Baldwin Painting Inc.

The Department conducted a field audit of the taxpayer, which is in the business of painting airplanes.  The auditor found that the taxpayer had not reported or had inappropriately deducted receipts from sixteen customers.  The Department subsequently assessed the taxpayer for additional gross receipts tax, penalty and interest.  The taxpayer protested, claiming that it was entitled to the deduction provided under § 7-9-57 for sales to out of state buyers.  The facts established, however, that all aircraft painted by the taxpayer were flown in and out of the taxpayer’s New Mexico facility by employees of the customer.  Based on this evidence, the hearing officer found that both delivery and initial use of the painted aircraft occurred in New Mexico.  The taxpayer’s protest was denied.


05/01/2006

06-06

Armando M. and Antonia G. Cordoba

In 2002, the taxpayers filed timely 2001 state and federal income tax returns.  In 2003, the IRS informed the taxpayers of an error in their return, resulting in additional tax.  Although the taxpayers’ accountant advised them that they were required to file an amended New Mexico income tax return reflecting the IRS adjustments, the taxpayers claimed that an unidentified Department employee told them that it was a federal matter and no action was needed at the state level.  For this reason, the taxpayers did not file an amended New Mexico return for 2001.  In 2005, the Department  assessed the taxpayers for the additional tax due, plus interest.  The taxpayers protested the interest, arguing that they were given erroneous information by a Department employee.  The hearing officer found that because the taxpayers’ own error resulted in the late payment of New Mexico income tax, interest was properly assessed.  In addition, the facts presented by the taxpayers did not support a finding of estoppel.  The taxpayers protest was denied.


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