Save A Shield, NM

02-01

In 1996, the Taxpayer started business in New Mexico, repairing and reconditioning automobile windshields for car rental agencies. During 1996 and 1997, the Taxpayer reported and deducted its business receipts on its gross receipts tax returns, even though the Taxpayer had not received non-taxable transaction certificates (NTTC’s) from its customers. In 1998, the Taxpayer stopped reporting its receipts altogether. Following a field audit in 2000, the Taxpayer obtained Type 2 and Type 4 NTTCs, both of which apply to receipts from selling tangible personal property. The Department refused to accept the NTTCs and assessed the Taxpayer for gross receipts tax, interest and penalty for the period 1996 to 1999. The Taxpayer protested the assessments, arguing:  1) it was engaged in selling tangible personal property, not services, and was entitled to accept Type 2 and Type 4 NTTC’s from its customers; 2) it was entitled to the deductions claimed because it accepted the NTTC’s in good faith; and 3)  it was not liable for the negligence penalty because it relied on the advice of its accountant. Held: The Taxpayer was engaged in selling services, not tangible personal property, and Type 2 and Type 4 NTTC’s do not apply to the sale of services.  Additionally, the Taxpayer did not accept the NTTC’s in good faith.  Finally, the Taxpayer’s decision to delegate total responsibility for payment of taxes to an agent does not relieve the Taxpayer of the negligence penalty.  Protest denied.