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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 > 2007



Greg & Kimberly Hayes

The Taxpayer owned a corporation that acted as an independent sales representative for a manufacturer of home packages.  As a marketing tool, the Taxpayer constructed a home using the same materials included in the home package.  Because the Taxpayer did not have a contractor’s license, he obtained an owner/builder permit and paid gross receipts tax on his purchase of services and materials.  For over a year, the Taxpayer used the completed home as an office and a model to show potential customers what they could expect when they purchased a home package.  The Taxpayer subsequently sold the home to a couple who asked to buy the model rather than construct a similar home from a package.  The Taxpayer did not report gross receipts tax on the sale.  The Taxpayer had obtained a contractor’s license following completion of the first home and, after it was sold, proceeded to build and sell three more homes.  At the time he built his second home, the Taxpayer was not aware of the use of NTTCs and paid gross receipts tax on his purchase of construction materials and labor.  The Taxpayer did not report gross receipts tax on the sale of the second home.  Upon audit, the Taxpayer was assessed for unpaid gross receipts tax on the sale of the first two homes.  The Taxpayer protested, arguing that the sales were isolated and occasional.  In the alternative, he argued that he should be given credit for the gross receipts taxes paid to his vendors.  The hearing officer held that the sale of the first model home qualified as isolated and occasional and no gross receipts tax was due.  Once the Taxpayer obtained a contractor’s license, he was in the construction business and owed gross receipts tax on the sale of the second home.  The Taxpayer’s lack of knowledge concerning the use of NTTCs did not entitle him to a credit for taxes paid to his vendors.  Protest granted in part and denied in part.



Justo & Jessie Cordova

The IRS adjusted the Taxpayer’s 1999 personal income tax returns, resulting in an increased federal and state tax liability.  In 2003, the IRS notified the Department of the adjustment, and the Department assessed the Taxpayers for their underreported New Mexico income tax, plus penalty and interest from the date the tax was originally due.  The Taxpayers protested, arguing that it was the Department’s responsibility to notify them of the additional liability, and that penalty and interest should not begin to accrue until the date they received the assessment.  Held:  New Mexico law places the duty on taxpayers to correctly report taxes due to the state.  Pursuant to §§ 7-1-67 and 7-1-69, interest and penalty on unpaid taxes are calculated from the original due date of the tax and not from the date the taxpayers receive notice of their liability.  Protest denied.



Joan E. Oller

The Taxpayer had $1,900 of unreimbursed medical expenses in the 2006 tax year.  On her 2006 New Mexico personal income tax, the Taxpayer erroneously claimed a refundable credit that is available only to taxpayers with unreimbursed medical expenses of $28,000 or more.  The Department notified the Taxpayer that she did not qualify for the credit and her refund was denied.  The Taxpayer protested, but once the qualifications for receiving the credit were explained to her at the administrative hearing, the Taxpayer conceded that she did not qualify for the credit.  The claim for refund was properly denied.



Diamond G Home Center

The Taxpayer operates a retail business selling building materials, hardware, and homeware.  During the period at issue, the Taxpayer erroneously accepted Type 9 Nontaxable Transaction Certificates (NTTCs) from non-profit and government entities for the purchase of construction materials and accepted Type 6 NTTCs from contractors purchasing tools and supplies.  Following an audit, the Department assessed the Taxpayer for gross receipts tax on these sales and compensating tax on certain items the Taxpayer had purchased out of state.  The Taxpayer protested, arguing that it was entitled to rely on the NTTCs its customers provided, even when the deduction claimed did not apply to the transaction. The Taxpayer also maintained that it paid tax on all of its out-of-state purchases and compensating tax was not due.  Held:  Sellers are not entitled to accept NTTCs that do not apply to the items being sold.  With regard to compensating tax, the Taxpayer provided evidence that tax was paid on some of the items purchased out of state and its protest was granted as to these items.  The protest on the balance of the assessment was denied.  



Rose Bilat

The Taxpayer overpaid her 2001 personal income taxes but did not feel any urgency in filing a return because she did not owe any tax.  Due to a series of unfortunate events, the 2001 return was not filed until 2006, and the Taxpayer’s refund was denied based on the time limitations set out in  § 7-1-26 NMSA 1978.  The Taxpayer protested, asking the Department to  consider the circumstances that caused the late filing and allow the refund.  The Hearing Officer held that the Department was required to apply the law as written and did not have the authority to override the statutory limitations period.   Protest denied.



Corrosive Services Corporation

Corrosion Services, Inc. (“CSI”) was incorporated in 1976 and initially engaged in the business of corrosion control services.  Later, CSI expanded into the area of pipeline construction, which came to represent 70% of its business.  In the late 1990s, CSI suffered financial problems and ceased doing business in 2001.  Three of CSI’s employees decided to go into business for themselves and formed Corrosion Services Corporation (“Taxpayer”).  None of the employees had been a shareholder, director, officer or manager of CSI.  They acquired about $5,000 of corrosion control equipment from CSI, but did not acquire any of CSI’s construction equipment and never engaged in the construction work that made up 70 percent of CSI’s business.  In 2003, the Department assessed the Taxpayer, as a successor in business, for $165,627.70 of CSI’s delinquent taxes.  The Department originally demanded payment for the value of property the Taxpayer acquired from CSC, but then expanded its demand to the full amount of CSI’s liability on the theory that the Taxpayer was a “mere continuation” of the old business.  The Department relied on the definition of “mere continuation” contained in a regulation which was based on a federal case that is no longer good law.  The regulation was also in conflict with New Mexico case law, which holds that the mere continuation exception to successor liability has no application without proof of continuity of management and ownership between the predecessor and successor corporations.  The Hearing Officer held that the Department’s position was unreasonable, that the Taxpayer’s liability was limited to the $5,000 of property acquired from CSI; and that the Taxpayer was entitled to an award of administrative costs pursuant to NMSA 1978, § 7-1-29.1.



Brenda K. Murray, aka Brenda K. Akin

The Taxpayer and her former husband filed a joint 1999 federal income tax return.  They also prepared a joint New Mexico return, but never filed it as they were in the midst of a separation.  Upon their divorce, the husband was ordered to pay their remaining 1999 taxes.  In 2003, the Department assessed the Taxpayer and her former husband for unpaid 1999 personal income tax, plus penalty and interest.  The Taxpayer protested on the grounds that her former husband was ordered to pay this debt.  The Hearing Officer found that the State of New Mexico was not a party to the divorce action and the divorce decree had no effect on the Taxpayer’s individual liability for taxes due to the state.  Protest denied.    



JDJ Services, Inc.

The Taxpayer is a private, for-profit corporation that performed services for Amtrak as an independent contractor.  The Taxpayer’s inspection, maintenance, and cleaning of Amtrak rail cars was performed by the Taxpayer’s employees in Albuquerque during Amtrak’s scheduled stops.  The Taxpayer did not understand that New Mexico’s gross receipts tax is imposed on the seller, not the buyer, and relied on Amtrak’s statutory exemption from state and local taxes.  Following a 2006 audit, the Taxpayer was assessed for gross receipts tax on its receipts from performing services for Amtrak in New Mexico.  The Taxpayer protested, arguing that it was entitled to claim Amtrak’s exemption from state taxes; that it was engaged in interstate commerce; that it was entitled to the deduction for interstate transportation provided in § 7-9-56; and that it relied on a tax exemption certificate received from Amtrak.  The Hearing Officer rejected these arguments, holding:  (1) the Taxpayer did not qualify for Amtrak’s statutory exemption from tax; (2) the assessment of gross receipts tax did not violate the commerce clause; (3) the Taxpayer was not engaged in transporting persons or property and could not claim the deduction in 7-9-56; and (4) the Taxpayer’s reliance on the representations of Amtrak did not excuse the Taxpayer from payment of taxes due to the state.  Protest denied.



J. Nold Midyette

The Taxpayer and his wife formed a New Mexico limited liability company (LLC) to sublease restaurant space in Santa Fe, New Mexico.  The Taxpayer intended to further sublease the space to a third party, but could not obtain the landlord’s consent.  The Taxpayer then decided to have his LLC operate the restaurant.  He delegated the running of the restaurant to a manager, with the verbal understanding that once there were sufficient profits to cover the Taxpayer’s investment, ownership of the LLC would be transferred to the manager.  The Taxpayer and the manager both had signature authority over the LLC’s bank account.  While the Taxpayer was not involved in daily operations, he instructed the restaurant’s bookkeeper to notify him of any tax problems.  He also directed the bookkeeper to provide his accountant with financial information concerning the restaurant’s income and expenses; this information was then used to prepare the LLC’s tax returns.  At some point, the bookkeeper notified the Taxpayer that notices were arriving from the IRS.  A few months later, the manager closed the restaurant, leaving the LLC with substantial past-due tax liabilities.  The Taxpayer notified the Department of the closure and was assessed for unpaid withholding taxes in his individual capacity.  The Taxpayer protested, arguing that he did not have control over the restaurant’s operations and was not the employer.  Based on the Taxpayer’s status as owner and managing member of the LLC, his signature authority over the LLC’s bank account, his exercise of authority over the LLC’s bookkeeper, and his signature on tax returns and other documents related to the business, the Hearing Officer found that the Taxpayer was individually liable for the LLC’s delinquent withholding taxes.  Protest denied.



Merchants Automotive Group, Inc.

The Taxpayer is an out of state corporation specializing in commercial vehicle leases.   In 2000, the NM General Services Department (GSD) requested bids for the leasing of vehicles to the state.  The bid specifically stated that other state agencies seeking vehicles under the contract must sublease those vehicles from GSD.  GSD awarded the contract to the Taxpayer and provided the Taxpayer with a Type 9 NTTC.  The NTTC was faxed to the Taxpayer as a single-sided document with the title:  “09 Governmental Agencies and Organizations.”  Nothing on the face of the NTTC indicated that its use was limited to the sale of tangible personal property or alerted the Taxpayer that there was additional information on the back.  The Taxpayer was aware that New Mexico law provided a deduction for leasing vehicles for subsequent lease and accepted the NTTC as evidence that it did not owe gross receipts tax on its receipts under the contract with GSD.  Upon audit, the Department disallowed the NTTC and assessed the Taxpayer for gross receipts tax, penalty and interest.  At the hearing on the Taxpayer’s protest, the Department did not introduce any evidence to explain how the Taxpayer would have known that the Type 9 NTTC it accepted from GSD was limited to the purchase of tangible personal property.  Based on the facts presented, the Hearing Officer found that the Taxpayer accepted the Type 9 NTTC in good faith and was entitled to claim the deduction provided in § 7-9-50.  Protest granted.  



Salomon L. Rael

In 2004, the IRS notified the Taxpayer that an examination of his 2000 and 2001 federal income tax returns revealed a substantial underreporting of compensation.  The reports that notified the Taxpayer, referred to as “RARs” were not signed, but did include the name and employee identification number of the federal agent who made the adjustments.  The IRS informed the Department of this adjustment and the Department assessed the Taxpayer for additional New Mexico personal income tax for the tax years in question.  The Taxpayer protested, arguing that the RAR was invalid because it was not signed under penalty of perjury and that the Department had not followed required procedures in obtaining copies of the RARs.  The Taxpayer did not deny that he earned the income on which the assessment was based.    Held:  The Taxpayer’s legal  arguments have been addressed and rejected by the New Mexico Court of Appeals; the Taxpayer failed to introduce any factual evidence to meet his burden of proving that the assessments issued by the Department were incorrect.    Protest denied. 



James H. Avant

The Department assessed the Taxpayer for 1999 New Mexico personal income tax, plus penalty and interest.  The Taxpayer protested, challenging the validity of state and federal income tax laws.   The Taxpayer did not deny that he earned the income in question, nor did he question the method by which his New Mexico personal income tax liability was calculated.  Held:  The Taxpayer’s arguments are not new, but are based on standard tax protester rhetoric which has been rejected by both state and federal courts.   The Taxpayer failed to meet his burden of proving that the assessment was incorrect.   Protest denied. 



Humberto & Petra Morales,

The Taxpayers were assessed as successors in business to a supermarket previously operated in the same location.  The Department subsequently issued a Notice of Claim of Tax Lien which  referenced the earlier assessment.  The Taxpayers filed a protest to both the assessment and the lien.  The Department accepted the protest of the lien, but rejected the protest of the assessment as untimely.  At the hearing, the Department was unable to establish whether or when the assessment had been mailed to the Taxpayers.  In the absence of such evidence, the hearing officer held that the Taxpayers’ protest of the assessment must be accepted as timely and scheduled a new hearing on the merits of that protest.      



Daniel Villa

The Taxpayer made an error on his 2002 state and federal income tax returns.  He subsequently amended his federal return to correct the error, but did not amend his New Mexico return.  In 2006, the Department assessed the Taxpayer for additional tax, penalty and interest.  The Taxpayer protested the interest, arguing (1) that the Department waited too long to notify him of the error, and (2) that it is inefficient for the Department to pursue collection when the amount at issue is less than the cost of collection.  Held:  New Mexico law requires the Department to assess any tax due in excess of $10 and gives the Department three years from the end of the calendar year in which the tax was due to  issue the assessment.  Protest denied. 



LMR Computing Technologies

The Taxpayer established a sole proprietorship in July 2002.  In January 2003, the Taxpayer filed his first CRS return to report gross receipts taxes due for the 6-month period ending December 31, 2002.  After seeing the amount of paperwork involved, the Taxpayer hired a tax service to assist him with his tax filing.  The tax service advised the Taxpayer to begin making estimated income tax payments, which the Taxpayer assumed also covered his gross receipt tax liability.  The Taxpayer did not, however, file CRS returns for subsequent reporting periods, nor did he question the tax service about these returns.  In early 2004, the Taxpayer learned that his estimated payments did not cover gross receipts taxes.  A tax service employee advised the Taxpayer to wait until his personal income tax return was completed before doing anything to bring his gross receipts tax filing up-to-date.  The employee left the tax service without completing the Taxpayer’s returns, but he did not discover the problem until he called the tax service in July 2004.  After another employee was assigned to his account, the Taxpayer filed his delinquent CRS returns for reporting periods January 2003 through June 2004.  The Department subsequently assessed the Taxpayer for penalty and interest on his late payment.  The Taxpayer protested, arguing that he was justified in relying on the tax service to advise him on his tax filing obligations.  Held:  There is no basis for abating penalty or interest.  The Taxpayer was negligent in failing to insure that required CRS returns were filed in a timely manner and in failing to act promptly when he discovered his returns were delinquent.  Protest denied.

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