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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 > 2018

05/01/2018

18-15

Del Corazon Hospice LLC

On April 21, 2107, the Department assessed the Taxpayer for workers’ compensation fees, penalty, and interest for periods starting March 31, 2011 through December 31, 2015. On April 21, 2017, the Department also assessed the Taxpayer for gross receipts tax, penalty, and interest for the period starting June 30, 2011 through February 29, 2016. On July 25, 2017, the Taxpayer submitted its timely formal protest of the assessments. The Taxpayer is a licensed provider of hospice care services that is authorized by the federal authorities to provide services to Medicare and Medicaid patients. The main issue to be decided in this protest is whether or not the Taxpayer’s receipts from Medicaid, for the room and board of its patients residing in nursing home facilities, are excluded from gross receipts tax under the Gross Receipts and Compensating Tax Act. The Taxpayer argues that the receipts received from Medicaid to compensate the nursing home facilities for room and board are not taxable because the Taxpayer was acting in a disclosed agency capacity. The Hearing Officer pointed out that the invoices from the nursing homes were all issued to the Taxpayer referencing the patient’s name. Therefore, the invoices were expected to be paid by the Taxpayer and not anyone else. The invoices were then used by the Taxpayer to prepare its own invoices for room and board that were submitted electronically to Medicaid via the medical care organization. The invoices from the Taxpayer did not reference the nursing homes that the patients resided in and payment was made directly to the Taxpayer. There was no indication that the payment being received by the Taxpayer was being claimed on behalf of a nursing home. The Hearing Officer determined that the Taxpayer did not provide any evidence to establish that it had authority to act on behalf of the nursing home facilities and therefore did not establish that it was a disclosed agent. The Taxpayer argued that the nursing homes should have already paid gross receipts tax on this amount and therefore based on Section 7-1-28 (F) NMSA 1978; equitable recoupment the assessment should be abated. There are three elements that must be met to allow equitable recoupment, of which, the Taxpayer was unable to provide and the Department could not verify based on confidentiality laws. In regards to the worker’s compensation assessment, no evidence or arguments were provided in this manner and it was determined that the protest in regards to this should be denied. The Hearing Officer determined that the Department’s assessment of tax, penalty, and interest was correct. For the forgoing reasons, the Taxpayer’s protest is denied.


04/30/2018

18-14

Shaun E. Holguin

On September 29, 2017, the Department assessed the Taxpayer for personal income tax, penalty, and interest for tax year ending December 31, 2010. On October 11, 2017, the Taxpayer filed a timely protest with the Department. During the time at issue, the Taxpayer worked in Albuquerque, NM. Through the tax mismatch program with the Internal Revenue Service (IRS), the Department found that the Taxpayer had income for the year but had not filed a 2010 personal income tax return with the state. The Department then initiated a limited scope audit of the Taxpayer regarding the 2010 tax year. The Taxpayer in prior years had relied on a parent and a company for tax filings. The Taxpayer believed that the return in question had been filed but was unable to obtain a copy of the return or Form W-2. The Taxpayer argues that penalty and interest were assessed inappropriately because the Department could have contacted him earlier to resolve this matter. The Department testified that it uses the information from the IRS to compare against state returns. However, there is often a delay in the information that is shared with the Department. The Hearing Officer determined that based on Section 7-1-18(C) NMSA 1978, the assessment was within the statute of limitations. The Department has no discretion per Section 7-1-67 NMSA 1978 to abate interest and the Hearing Officer determined that penalty was due for the period in question. For the foregoing reasons, the Taxpayer’s protest is denied.


04/11/2018

18-13

Mosaic Potash Carlsbad Inc.

On October 5, 2016, the Department sent a partial denial to the Taxpayers for the high wage job tax credit application that was submitted to the Department for the periods starting January of 2010 through February of 2015. On January 5, 2017, the Taxpayer filed a protest of the partial denial with the Department. The Taxpayer argues that the Department went beyond its statutory authority in evaluating if the individual jobs the Taxpayer claimed the credit were eligible, that the methods used by the Department to verify residency overstepped the law, and that the Department denied a portion of the credit based on a previous application where the credit was denied. The Hearing Officer, points out that the New Mexico Court of Appeals has determined that tax credits are legislative grants of grace to a taxpayer that must be narrowly interpreted and construed against a taxpayer. Therefore, the Taxpayer carries the burden of proving that it is entitled to claim the tax credit. The Department witnesses testified that additional information was requested to show that the jobs in question qualified for the credit. When the additional information was not provided the partial denial was issued by the Department. The Department also testified that the processes used to review this credit application are the same processes used for all applications of this credit. The review process allows the Department to determine if the Taxpayer is eligible for the credits based on the requirements of the statute. In regards to the prior application, the Department argued that if the jobs were not originally found to be eligible for the credit the Taxpayer could not continue to claim the credit against those jobs unless information was provided to show that the jobs in question qualified for the credit. The Hearing Officer determined that the Taxpayer did not establish entitlement to the credit or establish that the Departments interpretation of the credit was incorrect for the purposes in which it denied the credit. The Taxpayer was unable to establish that the jobs in questions were eligible for the credit. For the foregoing reasons, the Taxpayer’s protest is denied.


04/06/2018

18-12

General Electric Company & Subsidiaries

On September 11, 2014, the Department assessed the Taxpayer for corporate income tax, penalty, and interest for the reporting periods from December 31, 2008 through December 31, 2010. On October 21, 2014, the Taxpayer filed a timely protest with the Department. On April 29, 2016, the Department assessed the Taxpayer for corporate income tax, penalty, and interest for the reporting periods from December 31, 2011 through December 31, 2103. On July 25, 2016, the Taxpayer filed a timely protest with the Department. On September 5, 2017, the parties jointly moved to consolidate the second protest with the original protest. The parties stated that the cases involved the same legal issue. The request was granted on September 18, 2017. During the time in question, the Taxpayer was a diversified technology and financial services company with operations and subsidiaries around the world. Of those subsidiaries 419 were foreign subsidiaries with received dividends and most were more than fifty percent owned by the Taxpayer or one of the United States subsidiaries owned by the Taxpayer. During the periods in questions, the Taxpayer elected to be a consolidated group for corporate filings. Both of the assessments in protest are the result of audits by the Department. During the audits, the Department recalculated the Taxpayer’s corporate income tax base, including dividends received from the Taxpayer’s foreign subsidiaries. The Department’s auditors asked that the Taxpayer prepare and submit the “Controlled Foreign Corporate Detroit Formula Factor Representation” worksheet for each year of the audit. The Department did allow some deductions based on the Detroit Formula factor relief. The main issue in the protest is whether the Department’s corporate income tax assessment discriminated against foreign commerce under the United States Constitution’s Commerce Clause by taxing the Taxpayer’s dividends and Subpart F income received by foreign affiliates while treating domestic dividends more favorably by excluding them from the base income of the consolidated group. The Taxpayer argues that penalty should be abated as its tax filings for the periods in question were done on good-faith and in mistake of the law. Lastly, the Taxpayer asks to be awarded the costs and fees if it is successful in the protest. The Hearing Officer determined that the Department methods used during the audit to determine base income for the consolidated group does not violate the Foreign Commerce Clause. The Taxpayer was able to establish that it made a mistake of law, in good faith and on reasonable grounds. The Hearing Officer determined that the penalty should be abated. However, the Taxpayer is liable for the tax and interest due. Interest due continues to accrue until the tax principal is paid in full. As the Taxpayer was not the prevailing party, the Taxpayer is not entitled to costs and fees. For the foregoing reasons, the Taxpayer’s protest is partially granted and partially denied.


03/26/2018

18-11

MVT Services LLC

On June 13, 2016, the Department issued a partial denial for the high wage job tax credit. On June 30, 2016, the Taxpayer executed a formal protest with the Department on the partial denial. The Department’s partial denial included 33 employees that were found to be occupying jobs that were not new or newly created jobs and were referred to as “replacement’ jobs. At the time of the hearing, the protest was specific to 23 employees over 31 qualifying periods. The Department uses the replacement analysis to prevent employers from placing an employee in a vacated high-wage job and asserting entitlement to additional qualifying periods because the statutory limit is for four-qualifying periods for each new high-wage job created. The Taxpayer asserted that it satisfied all of the essential elements necessary to qualify for the credit. The Taxpayers main argument was that the Department went beyond its statutory authority by further scrutinizing the application employing that the parties by using the replacement analysis. The Hearing Officer determined that the analysis used is not beyond the authority of the Department. A tax credit must be narrowly construed and the Department must examine when the credit is claimed and if the job is newly created. The Hearing Officer determined that the Taxpayer did not prove that it was entitled to the credit for the employees in question. For the foregoing reasons, the Taxpayer’s protest is denied. 


03/23/2018

18-10

Par Five Energy Services, LLC

On June 3, 2016, the Department issued a partial denial for the Taxpayer’s application for the high wage jobs tax credit. The Taxpayer filed a formal protest with the Department on June 20, 2016. The application was for periods starting January 10, 2011 and ending July 8, 2015. The Department’s partial denial included the denial of six employees over seven qualifying periods due to the employees being placed in existing empty positions, one employee over two qualifying periods due to an in house promotion with no outside advertisement of the position, and three employees that were determined not to be New Mexico residents. During the hearing, most of the facts presented in the case were undisputed. The Taxpayer argued that there are no written rules or regulations detailing the review process of the credit. The Department argued that its analyses were an appropriate interpretation of the statute and that published rule or regulations are not required. The Hearing Officer determined that the Department’s method for evaluating the jobs was reasonable. It was determined that the statute requires that qualified employees are hired into new jobs. Therefore, the replacements did not satisfy the statutory requirements for a new job. In the case of the in house promotion, the Taxpayer argued that the Department cannot restrict how an employer fills a job and that there is no requirement that the job must be publicly posted in statute. The Hearing Officer determined that the requirement by statute was that a new job was created, a fact that was not disputed by the Taxpayer or the Department, for that reason the new job in question in relation to the in house promotion was determined to be eligible for the credit. The last three positions in question were denied based on the employee’s residency. At the time of the hearing, two of those positions were no longer disputed. The Department argued that based on its database it shows that the employee was not a resident of New Mexico. The Taxpayer argued that there is sufficient evidence to establish that the employee was a resident of New Mexico. The Taxpayer provided tax documents from before and during the qualifying periods that show that the employee has an address in New Mexico. The Hearing Officer determined that the evidence provided by the Taxpayer was enough to show that the employee was a resident of New Mexico and therefore the Taxpayer was entitled to the credit on this employee. For the foregoing reasons, the Taxpayer’s protest was denied in part and granted in part.


03/15/2018

18-09

Paragon Construction, LLC

On Jul 26, 2017, the Department assessed the Taxpayer for gross receipts tax, penalty, and interest for the filing periods January 1, 2013 through December 31, 2013. The Taxpayer filed a timely protest with the Department. The Taxpayer is in the construction business. The matter at issue is this hearing is if the Taxpayer had to pay gross receipts tax on receipts from a specific project with a library where there was compensation for payroll expenses paid. The Taxpayer argued that the receipts should be excluded because it received the receipts as an agent on behalf of a principal in a disclosed agency capacity. The Taxpayer did not disagree that the compensation for services that it provided under the projects contract were subject to gross receipts. However, the Taxpayer believes that the separate payments that were intended to compensate the Taxpayer’s payroll expenses for the project, which were not addressed in the contract, should not be subject to tax as they were in a disclosed agency capacity. The Taxpayer argued that it was a disclosed agent of the Library because the Library was ultimately responsible for the payment of its payroll expenses and the employees were aware of the arrangement. The Hearing Officer determined that the reasoning provided by the Taxpayer was not sufficient enough for the employees to know that they would not be able to enforce payroll obligations against the Taxpayer. The paychecks were issued by the Taxpayer, and the taxpayer withheld taxes and other payroll fees of the employee’s behalf, provided worker’s compensation insurance, and it never made an affirmative disclosure to the employees of any agency relationship. For the forgoing reasons, the Taxpayer’s protest is denied. 


03/08/2018

18-08

Wall Company Inc

On February 03, 2017, the Department mailed a denial letter to the Taxpayer informing it that the application for the technology jobs and research development tax credit had been denied because the Taxpayer was not registered with the Department to engage in business in the State of New Mexico. In response, the Taxpayer provided a corrected name and combined reporting system (CRS) number that was assigned by the Department for reporting taxes. The Taxpayer’s application was ultimately denied as the application was submitted after the deadline. On May 01, 2017, the Taxpayer filed a formal protest with the Department. As there were no disputes on the statements of facts presented by the Department a summary judgement was requested. The issue to be determined during the summary judgement is if the Taxpayer’s application for the technology jobs and research and development credit for the year of 2015 was barred due to errors contained in the original application submitted two days before the statutory deadline. There was no dispute by the Taxpayer that the original application misstated the Taxpayer’s name and provided an incorrect CRS number. The Taxpayer does not disagree that the corrections were not submitted until after the statutory deadline. The question is whether the law permits for the corrections to be related back to the initial submission of the application or if the application can be submitted after the statutory deadline. The Hearing Officer determined that the Taxpayer did not point out to any specific language in the Act, nor does examination of the Act reveal any Legislative intent to allow the Department to permit the substitution of entities and to relate it back to the date of the initial application, or in the alternative, to permit the Department to accept a late-filed application. Since the Taxpayer failed to file a valid application on or before December 31, 2016 the Hearing Officer determined that the Department’s Motion should be granted. For the foregoing reasons, the Taxpayer’s protest is denied. 


02/26/2018

18-07

Sacred Garden

On June 1, 2015, the Department denied the Taxpayer’s claim for refund for the periods January 2011 through June 2014. A formal protest was received by the Department on June 3, 2015. On May 31, 2016, the Department received a second claim for refund for the periods July 2014 through January 2016. The second claim for refund was denied on September 28, 2016. The second formal protest was filed on December 14, 2016. On August 16, 2017, the Administrative Hearing Office entered a consolidation order for the two protests. The Taxpayer is a non-profit entity which produces and dispenses medical marijuana. The Taxpayer is licensed by the Department of Health as a dispensary. It is acknowledged that even though the state law permits the possession and use of medical marijuana the possession and use of marijuana is illegal under federal law. The issue to be determined during the hearing is if the Taxpayer is entitled to a deduction under Section 7-9-73.2 NMSA 1978, which allows a deduction for receipts from the sale of prescription drugs. The Taxpayer argued that the authority to utilize marijuana for medical purposes exists under state law and it should be considered a prescription drug. The Hearing Officer used the three part test in Section 7-9-73.2(B), NMSA 1978, to determine that medical marijuana is not a prescription drug as specified for entitlement to the deduction that was referenced by the Taxpayer when submitting the claims for refund. The Hearing Officer found that there was not a right to the claimed deduction under statute and that the Taxpayer did not establish its entitlement for the basis of the claims for refund. For the forgoing reasons, the Taxpayer’s protest is denied.


02/19/2018

18-06

IPC (USA), Inc

On February 17, 2016, the Department denied the Taxpayer’s claim for refund for the tax periods starting January 1, 2012 through December 31, 2014. The Taxpayer filed a formal protest with the Department on May 20, 2016. The Taxpayer owned gasoline that was stored at a pipeline terminal in Moriarty, New Mexico and in Albuquerque, New Mexico. On July 30, 2015, the Department assessed the Taxpayer for failure to pay tax. The Taxpayer paid the assessment in full. At the time of the hearing, the Taxpayer claimed that it was entitled to a larger refund than originally requested based on its recalculation. The Taxpayer argues that the refund is due because the tax was paid twice. The Department argued that the protest is limited to the denial of the original claim for refund and that documentation was not provided showing the tax was paid twice on the same gasoline or proving that the gallons racked out of Moriarty terminal were actually delivered to the Albuquerque terminal. The Department also argued that the appropriate first instance of tax is when the gasoline is racked out of a pipeline terminal and that the statutes do not allow for the Taxpayer’s business practices of shipping gasoline by truck from one terminal to another within the state. Based on the information provided at the time of the hearing, the Hearing Officer determined that the Taxpayer did not overcome the presumption of correctness and even if the documentation to support the claim would have been provided, the Taxpayer would not be entitled to a refund based on statute. The Taxpayer’s protest is denied.


02/15/2018

18-05

CIBL INC. & Subsidiaries

On March 7, 2017, the Department notified the Taxpayer that its claim for refund was untimely because it was received after the statute of limitations and therefore was denied. The deadline to claim a refund for the period ending December 31, 2012 based on the statute of limitations was December 31, 2016. On April 28, 2017, the Taxpayer submitted a timely formal protest with the Department. The Taxpayer argues that based on prior communication that was sent to the Department the claim for refund should be considered timely. The Department argues that a complete request for refund required by Section 7-1-26, NMSA 1978 Regulation 3.1.98 NMAC was not filed with the Department until after December 31, 2016 and therefore had to be denied. The Taxpayer argued that the regulation was asking for an amended return when it was not required by statute. The Hearing Officer determined that the regulation is reasonable and relevant as the amended return helps the Department to determine that the refund claim being requested is accurate. Due to the Taxpayer failing to request a refund as outlined in statute, regulation, and in the forms issued by the Department before the expiration of the statute of limitations, the refund is barred. The Taxpayer’s protest is denied.


01/24/2018

18-04

Chamisa Hills Family Dental

On August 17, 2017, the Department assessed the Taxpayer for gross receipts tax, withholding tax, penalty, and interest. On August 23, 2017, the Taxpayer submitted a formal timely protest with the Department. In May of 2016, the Taxpayer purchased the business from the prior owner. Based on the prior owner’s high recommendation, the office manager stayed working at the business after the change of ownership. In or around May of 2017, the Taxpayer noticed that certain duties assigned to the office manager where not being completed. Among those duties were the Taxpayer’s CRS-1 returns. Upon the resignation of the office manager the Taxpayers filed all late CRS-1 returns. The Taxpayer is asking for an abatement of penalty and interest based on the circumstances surrounding the prior employee. The Department argued that multiple notices were sent to notify the Taxpayer that they were not filing returns and that there was an underpayment of tax due. Based on that underpayment, penalty and interest were calculated and assessed. The Hearing Officer determined that based on the information and Sections 7-1-67 NMSA 1978 and Section 7-1-69 NMSA 1978 the assessment of penalty and interest were properly assessed by the Department. The Taxpayer failed to establish non-negligence so penalty cannot be abated and interest cannot be abated per statute. For the forgoing reasons, the Taxpayer’s protest is denied.


01/10/2018

18-03

ACME Mechanical

On August 16, 2017, the Department assessed the Taxpayer for gross receipts tax, penalty, and interest for the tax period starting January 1, 2012 and ending December 31, 2014. On August 30, 2017, the Taxpayer filed a timely protest with the Department. During the time at issue, the Taxpayer was providing services in New Mexico as a plumbing contractor. The Taxpayer subcontracted with two companies to provide plumbing services on construction projects in New Mexico. The assessment was the result of an audit conducted in 2017. Unfortunately, both of those NTTCs were executed after the deadline given by the Department to the Taxpayer to obtain NTTCs. Due to the NTTCs not being submitted by the deadline of August 2, 2017, the Department rejected them and disallowed the associated deduction. The issue to be decided in this protest is whether the Taxpayer is liable for the gross receipts tax, penalty and interest assessed. The issue hinges on the timeliness of the Taxpayer’s acceptance and submission of the NTTCs. Per Section 7-9-43(A) NMSA 1978, the taxpayer should be in possession of the NTTC when the transaction of the receipts takes place but allows for the Department to give a 60 day window if a taxpayer is placed under audit to give those NTTCs to the Department. This statute specifies that if the taxpayer has not obtained the NTTC within the sixty day time frame the deduction is to be disallowed. It was not disputed that the Taxpayer’s receipts used to calculate the assessment would be deductible if the NTTCs could be allowed. However, the Department cannot allow the deductions based on when the NTTCs were executed and submitted to the Department. The Hearing Officer determined that by the Taxpayer not presenting the NTTCs in a timely manner, as required by statute, the Taxpayer waived its right to the claimed deduction. For the foregoing reasons, the Taxpayer’s protest is denied.


01/09/2018

18-02

Marc A. Gelinas

On March 17, 2017, the Department assessed the Taxpayer for gross receipts tax, penalty and interest for the reporting periods starting January 1, 2010 and ending December 31, 2010. The Taxpayer filed a formal protest with the Department on June 5, 2017. During the time at issue, the Taxpayer was a salesperson selling implantable medical devices, such as prosthetics for knees, hips and shoulders. The Taxpayer’s income was based on commissions from his sales and was reported on IRS form 1099-MISC from the medical devices distributors. When completing a sale the Taxpayer would prepare order forms, the payment of goods was made by the buyer to the manufacturer. Then the manufacturer would pay a portion of the sale price to the distributor, which would then pay the Taxpayer his commission from the sale. The Taxpayer never filed gross receipts reports or made any gross receipts tax payments in relation to this compensation. The assessment was the result of a Schedule C mismatch audit. The Taxpayer argued that the items that were being sold were eligible for the deduction in Section 7-9-73 NMSA 1978 for the sale of prosthetic devices and therefore the commissions would also be deductible under Section 7-6-66 NMSA 1978, which is the deduction of commissions from gross receipts tax. This statute indicates if the receipts are derived from a commission on the sale of tangible personal property that original sale was subject to a deduction the commission would also be deductible. This is further clarified in Regulation 3.2.1.18 HH (6) NMAC. The Hearing Officer indicated that this deduction does not require the use of an NTTC and that the deduction only requires that the originating receipts of the commission were deductible. The Hearing Officer determined that since the original sale that the commission is based on would be subject to a deduction so would the commission that was earned from that sale. The Hearing Officer determined that based on the information above the Department is ordered to abate the assessed gross receipts tax, penalty and interest and the Taxpayer’s protest is granted.


01/09/2018

18-01

Joel W. & Jacqueline R. Draham

On June 6, 2017, the Department issued a return adjustment notice for the Taxpayers’ 2016 personal income tax (PIT) return. On August 23, 2017, the Taxpayers submitted a formal protest with the Department. The adjustment was based on the W-2’s submitted with the return and the Taxpayers’ domicile. At the time of the hearing, the Department indicated that no further documentation was provided to establish that the Taxpayer had any entitlement to the refund amount in dispute. The issue to be decided in the hearing is whether the Taxpayers were entitled to a refund equivalent to the portion of taxes withheld and paid to the State of New Mexico on the W-2. One of the Taxpayers moved out of state for part of the year while the other Taxpayer remained in New Mexico with the Taxpayers’ dependent. The income from the Taxpayer residing in New Mexico with the Dependent is not in question. The Department argued that there was not sufficient evidence to show that the Taxpayer that had moved out of state had changed domicile to another state as early as asserted. The Taxpayers’ claim for refund is premised on an overpayment of tax based on one of the Taxpayers being domiciled in another state. The Department argued that the Taxpayer did not show enough evidence to support the time indicated that was spend out of the state. The Hearing Officer states that everyone is deemed to be domiciled somewhere and once that domicile is established it does not change until the person moves ‘with the bona fide intention” of making a new location that persons permanent home. Domicile is what helps to establish a taxpayer’s residency. Per Regulation 3.3.1.9(C)(4) NMAC, there are thirteen factors to help determine a taxpayer’s domicile. The Hearing Officer determined that eight of those factors weighed in favor of the Department, five were neutral, and zero weighed in favor of the Taxpayer. Based upon the information provided, the Hearing Officer determined that the Taxpayer failed to establish an entitlement to the refund that was subject of the protest. The Taxpayers’ protest was denied.


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