Thomas W. Strain, MD

01-03

The Taxpayer accepted a job as a State Medical Director for a private company in March 1994.  In November 1997, the Department assessed the Taxpayer based on a discrepancy between business income reported to the IRS on Schedule C and business income reported to the Department for gross receipts tax purposes.  The Taxpayer protested, asserting that he worked for the company as an employee, rather than an independent contractor and was entitled to the exemption from gross receipts found in Section 7-9-17 NMSA 1978. Held:  Although the company treated the Taxpayer as an independent contractor, he was, in fact, an employee due to the degree of control the company exercised over the Taxpayer. The Taxpayer will be entitled to claim the gross receipts tax exemption provided in Section 7-9-17 NMSA 1978 if he files amended 1994 state and federal income tax returns to report his income from the private firm as employee wages.  If the Taxpayer fails to amend his income tax returns he will be bound by his original method of reporting his income and he will be subject to the gross receipts tax. Protest Denied in Part and Granted in Part.