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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 > 1999



Judith A. Housley & Associates

Taxpayer contested the imposition of the 50% "fraud" penalty imposed under Section 7-1-69.  The evidence established that the Taxpayer was a sophisticated taxpayer who understood her obligation to report and pay gross receipts taxes, who charged her customers gross receipts tax, who cancelled her tax identification number on the basis that she had ceased to be in business, who continued in business thereafter, and who failed to report or pay gross receipts tax on her receipts as a handwriting analyst.  Held that under these facts, the 50% penalty was properly imposed under Section 7-1-69(B) or 7-1-69(C) as the statute was amended in 1997.  It was also determined that federal caselaw, which requires an affirmative act, beyond mere failure to file, to sustain a conviction for tax fraud under IRC Section 7201 was not applicable to determining whether New Mexico's 50% fraud penalty should be imposed.  Protest denied.



Fidel and Sadie Ann Avilucea

In 1998, the Taxpayers filed a claim for refund of personal income taxes paid during calendar years 1990 through 1993, based upon the fact that their income was earned while working as civilian employees for the Department of  Navy in Spain.  The Taxpayer's argued that they were not residents, and were therefore not subject income tax on their income earned in Spain.  The Department denied the claim for refund based upon it being filed beyond the statute of limitation found at Section 7-1-26(C)(1) NMSA 1978.  Protest denied on the basis of the statute of limitations.  Even if the claim had not been time barred, the Taxpayer would not have been entitled to a refund.  This is because they maintained a home in New Mexico and always intended to return to New Mexico after their overseas tour of duty.  That establishes that they remained domiciliaries of New Mexico during the time they were in Spain.  Because New Mexico imposes an income tax on the income of all residents, regardless of where it is earned, and because "resident" is defined at Section 7-2-2(S) as a person domiciled in New Mexico, their income earned in Spain was subject to New Mexico personal income tax.



American Communication Services of Alb., Inc. and ACSI

Taxpayers sought to have their NM telecommunications property revalued for tax year 1999 using the unit appraisal method of valuation. Taxpayers claimed the Department had an obligation to notify them of their right to elect between the cost valuation and unit appraisal methods of valuation and, had they been properly notified, they would have chosen the unit appraisal method. The responsibility for electing a valuation method is on the taxpayer, not the Department. Evidence provided by American indicated the taxpayer was aware of the election. ACSI failed to provide any evidence that it did not knowingly elect the cost valuation method when filing its 1999 rendition of value. Protest denied.



George Tucker

Taxpayer protested the Department's denial of his claim for refund that had sought to claim a deduction for the resale of services.  The Department denied the refund claim because it had previously issued the Taxpayer a 60 day letter to produce the NTTC's which would support such a deduction.  Although the Taxpayer presented the NTTC's, they were admittedly not in the Taxpayer's possession within the 60 day time limit provided by Section 7-9-43(C).  The language of 7-9-43(C) is mandatory and requires that the Department deny deductions to taxpayers who do not possess NTTC's within the 60 day limit.  Thus, the Department properly denied the Taxpayer's claim for refund.  Protest denied.



Rafael M. Romero

The Taxpayer protested the Department's estimated assessments of personal income tax, interest and the fraud penalty as well as the filing of a lien to secure the assessments.  The Taxpayer failed to attend the hearing.  The Department had obtained copies of the Taxpayer's W-2 forms for the tax years at issue and agreed to the adjustment of the assessments to reflect a smaller amount of tax, penalty and interest owing.  Having failed to attend the hearing to present evidence or argument to challenge the validity of the Department's assessments as adjusted, the presumption of correctness applies to uphold the adjusted assessments of tax and interest.  Because Section 7-1-78 places the burden of proof on the Department in fraud cases, the Department must present evidence to prove by clear and convincing evidence that the Taxpayer failed to pay tax with the willful intention to evade or defeat the payment of tax to sustain the imposition of the 50% fraud penalty.  The Department met its burden of proof in this by proving that the Taxpayer had previously filed joint returns reporting and paying taxes on his income from wages, establishing that he knew such income was subject to New Mexico income tax.  In the first of the tax years at issue, the Taxpayer filed a New Mexico personal income tax return as a married person filing separately, reporting zero federal adjusted gross income even though he had income from wages and he requested a refund of the income tax withheld by his employer from his wages.  The Department denied his claim for refund.  The Taxpayer's wife refused to participate in that return, and filed her separate return as a married individual filing separately and reported and paid income tax on her income from wages.  In the second tax year at issue, the Taxpayer simply failed to file a personal income tax return with the Department even though he had income from wages in New Mexico.  The Taxpayer's wife again refused to participate in this tax avoidance and filed a return as a married individual filing separately and she reported and paid tax on her income from wages.  The Taxpayer failed to appear to present any evidence or legal arguments to rebut the reasonable inference that he knew he was subject to income tax and willfully evaded the payment of such tax.  Finally, because the Department's tax lien secures the payment of the assessments which were upheld, and there was no evidence or argument presented to establish that the lien was improper in any respect, the Department's lien was upheld.  Protest denied except insofar as the Department agreed to modify the assessments to reflect actual taxes owing on Taxpayer's income from wages.



Nestor & Emmeline-Dorothy Padilla

Taxpayer was issued three personal income tax assessments by the Department. The Department also claimed a lien on the Taxpayer’s property. The Taxpayer filed a protest disputing the validity of the assessments and the lien making various tax protester arguments. Taxpayer failed to appear and present evidence at the hearing and therefore did not meet their burden of showing that the Department’s assessments were incorrect or that the Department’s tax lien did not comply with legal requirements. Protest denied.



Donald and Lori Breuer

Taxpayer, who had wages from employment in New Mexico, filed New Mexico PIT returns reporting zero income and requesting a refund of taxes withheld by his employer. The Department estimated the Taxpayer’s income based on prior years’ returns and issued assessments that included the 50 percent civil fraud penalty. Taxpayer protested, claiming 1) the wages are not taxable because they are not derived from a taxable source; 2) he does not come within the definition of an “employee” set out in IRC § 3401(c); 3) he was not required to file a federal income tax return because Form 1040 is not listed by the Office of Management and Budget as a form required to be filed under Treasury Regulation § 1.1-1. Taxpayer’s arguments are without merit. Taxpayer is liable for payment of New Mexico income tax, adjusted to reflect the actual wages and withholding shown on his W-2 forms. Taxpayer is not liable for the 50 percent fraud penalty because the Department failed to show that Taxpayer filed zero returns with willful intent to evade or defeat tax. Protest granted in part and denied in part.



Lenya Reese

Taxpayer was notified of a limited scope audit (C-SPAN) based on a discrepancy between the business income reported on her 1994 federal income tax return and the receipts reported to New Mexico. Taxpayer claimed that the Department’s method of calculating the tax, penalty and interest was incorrect. Taxpayer’s first argument is that the Department should have applied overpayments she had in one month to underpayments she had in another month. Taxpayer’s second argument is that the Department’s refund of tax in a subsequent year was evidence that she did not have a tax liability for any prior years. The Taxpayer is not entitled to offset overpayments in one month against underpayments in another month. The Department’s refund of tax was not a final determination of the Taxpayer’s gross receipts tax liability. Protest is denied.



Joseph and Toni Rene Salinas

Taxpayers, who had wages from employment in New Mexico, filed New Mexico PIT returns reporting zero income and requesting a refund of taxes withheld by their employers. The refund was denied and Taxpayers protested, claiming 1) they are not subject to federal income tax because they do not reside within a federal territory; 2) their wages are not taxable because wages are not derived from a taxable source; 3) they do not come within the definition of an “employee” set out in IRC § 3401(c); 4) the federal government does not have authority to impose tax on the wages of private individuals; 5) the federal income tax system is voluntary and they do not choose to volunteer; 6) they “inhabit” New Mexico but are not residents of New Mexico; 7) the Department is in default for failing to respond to Taxpayers’ demands for information. Taxpayers’ arguments are without merit. Taxpayers are liable for payment of New Mexico income tax and are not entitled to a refund of income taxes withheld by their employers. Protest denied.



Anthony Tafoya

Taxpayer was a corporate officer responsible for hiring personnel and signing withholding tax returns. The Taxpayer knew that the corporation was liable for withholding tax and that the returns had to be filed. The corporation did not file returns or remit the withholding tax to the Department. The Department assessed the corporation for withholding tax, penalty and interest. The Department subsequently sent a demand letter to the Taxpayer notifying him that he was liable for the corporations unpaid withholding taxes. The Taxpayer claimed that the Department could not demand payment from him since he had not been assessed by the Department. The Department’s collection actions against the Taxpayer were not in compliance with the statutory provisions of the TAA. Taxpayer has overcome the presumption of correctness that attaches to the Department’s demand for payment. Protest granted.



Pioneer Savings Bank & Subsidiaries

Taxpayer filed a claim for refund by filing an income tax return showing a balance due to the taxpayer. The Department took no action on the Taxpayer's refund claim.  More than a year later, the taxpayer inquired as to the status of its refund claim. The taxpayer was asked to send a letter setting out the details of its claim for refund. The taxpayer did so and also requested interest from the date of its original claim for refund. The Department ignored and did not respond to the taxpayer's correspondence. Twenty one months after submitting its original claim for refund, the taxpayer resubmitted its claim for refund and asked for interest from the date of filing its original claim. The Department granted the refund in the amount of tax principal, but did not pay any interest on that refund. Six months later, in November, 1997, the taxpayer submitted a refund claim for the interest it was not refunded previously.  The Department took no action on that refund claim. When the taxpayer inquired as to the status of its November, 1997 refund claim it was informed that the Department had not received it. The taxpayer then wrote the Department, in March, 1998, enclosing a copy of the certified mail return receipt showing that the Department had received the claim for refund and it enclosed copies of everything it submitted with its claim for refund. The Department took no action with respect to either of the taxpayer's submittals requesting a refund of interest on its original claim and the taxpayer protested the Department's failure to grant a refund of interest.The Department first argued that there was no jurisdiction to hear the taxpayer's protest because the time for protesting the Department's failure to act upon its November, 1997 refund claim had expired. It was determined that although the time for protesting the Department's inaction on its November, 1997 refund claim had expired, the taxpayer's March, 1998 correspondence was a refiling of its claim for refund and the taxpayer timely protested the Department's inaction on that claim.  The taxpayer's protest of the Department's failure to grant it a refund of interest on its original claim for refund was denied. Pursuant to Section 7-1-26, the taxpayer had 90 days to either file an administrative protest or a suit in district court to contest the Department's failure to grant its original claim for refund after the Department failed to act upon it after 120 days of its filing. Having failed to take either action to contest the Department's inaction on its original claim for refund, that claim was extinguished and any claim for interest which would be payable on that claim pursuant to Section 7-1-68 died with the claim for refund itself.



TPL, Inc.

The Taxpayer, a New Mexico corporation, entered into five research and development contracts with the federal government.  The taxpayer protested the Department's assessment of gross receipts tax on its receipts from the contracts,  The Taxpayer argued that it entitled to a deduction under Section 7-9-57 NMSA 1978 because the product of its services was neither delivered to nor initially used by the buyer in New Mexico.  The Taxpayer also protested the assessment of gross receipts tax for failure to have timely possession of NTTCs.  The protest was denied with regard to three contracts where the product of the Taxpayer's service was demilitarized munitions that remained in New Mexico and were subsequently transferred from the buyer to the Taxpayer in New Mexico. The protest was granted with regard to two contracts where the product of the service was limited to data and reports delivered and initially used outside New Mexico.  The protest was also granted on the NTTC issue because there was no evidence the Department had delivered a 60-day letter to the Taxpayer, which meant that the Taxpayer's production of NTTCs after the audit was timely under Section 7-9-43 NMSA 1978.



Kenneth G. Abbott d/b/a Abbott Designs

Taxpayer moved to NM to fulfill a service contract with a private company. After reviewing his wife’s CRS-1 Filer’s Kit the Taxpayer did not believe that his receipts from performing services in NM were subject to the gross receipts tax. In 1998 the Department discovered the non payment and assessed the Taxpayer for the tax, penalty and interest. The Taxpayer protested the penalty assessment claiming that the Filer’s Kit did not specify the tax was imposed on nonresidents performing services in NM. Taxpayer was found to be negligent. Protest denied.



Sunbelt Tastee Freeze, Inc.

The corporate officers of the Taxpayer had signed personal guarantees as security for an installment agreement between the Taxpayer and the Department in lieu of the Department filing a lien to secure its interest. The Taxpayer defaulted on the payments called for by the installment agreement and the Department defaulted the first agreement and negotiated a second installment agreement with the Taxpayer. The Department did not have the corporate officers sign new personal guarantees of the second installment agreement. When the Taxpayer defaulted on the terms of the second installment agreement, the Department proceeded to levy upon the personal bank accounts of the corporate officers for the tax debt. The corporate officers objected to the Department's levy, arguing that the personal guarantee only guaranteed payment of the first installment agreement, which was voided when the Department entered into the second installment agreement. Protest denied. In addition to guaranteeing the payment of the first installment agreement, the personal guarantees had language guaranteeing payment of the corporate liability, and much of that liability remained unpaid. The corporate officers also objected to the Department's levies against their personal account because the levy also referenced corporate liabilities which were not covered by the first installment agreement or their personal guarantees. Because the amount the Department collected from its levies against the corporate officers did not exceed the amount of liability covered by the first installment agreement, which the corporate officers had guaranteed, the Department's levies were not improper or illegal.



Bret A. Bishop

Taxpayer performed fishing guide services for a fly-fishing outfitter who resold Taxpayer's services to its customers.  Taxpayer failed to report and pay gross receipts taxes on his receipt based upon his belief that the payment of taxes by the outfitter covered all applicable taxes and the Taxpayer's failure to understand that, as an independent contractor, he was a separate business from the outfitter.  As part of the Department's desk audit, it gave the Taxpayer notice to produce all NTTCs relied on in support of deductions within sixty days. The Taxpayer failed to produce any NTTCs within sixty days, subsequently produced a type 2 NTTC rather than the proper type 5 NTTC.  Eventually the Taxpayer produced a type 5 NTTC long after the deadline to produce an NTTC.  Although the Taxpayer's receipts would have been deductible if a type 5 NTTC had been produced in a timely manner, the Department properly denied the deduction based upon the Taxpayer's failure to produce NTTCs in accordance with the requirements of Section 7-9-43.  Protest denied.

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