Rose Ann Mathews

10-18

The Taxpayer was engaged in business as a counselor in New Mexico in 2005 and 2006.  The Taxpayer failed to file gross receipts tax with the Department for those years, which the Department determined through the Combined Reporting System.  On March 15, 2010, the Department assessed the Taxpayer for gross receipts tax, penalty and interest.  On March 18, 2010, the Taxpayer filed a formal protest.  The Taxpayer stated that she did not know she had to pay gross receipts tax.  The Taxpayer is willing to pay the taxes that she owes, and has engaged in managed audits for subsequent tax years.  The Taxpayer protests the assessment of penalty and interest.  The Taxpayer also protests the amount of gross receipts tax calculated as she was engaged in business in Valencia county, but was charged the rate for the city of Belen.  At the hearing, the Department conceded that the Taxpayer was doing business in Valencia county, so the amount of gross receipts tax was recalculated.  The penalty and interest were also recalculated, based on the new gross receipts tax total.  As to the Taxpayer’s protest to the assessment of penalty, a taxpayer’s lack of knowledge or belief that the taxpayer did not owe tax is considered to be negligence for purposes of assessment of penalty.  Statute states that interest “shall be paid” on taxes not paid, so interest must be imposed.  The assessment of penalty and interest was appropriate in this case.  However, the cap on penalty at the time that the tax was due was 10%, not 20%, and the Department is to abate the penalty in excess of 10%.  The Taxpayer also feels that the Department should have notified her prior to 2010 of this liability, the Department has seven years from the end of the year in which tax is due to make an assessment when the Taxpayer fails to file any return.  The assessment was made in a timely manner.  The Taxpayer’s protest was granted in part and denied in part.
NOTE: The New Mexico Court of Appeals has overruled the 10% penalty issue mentioned in this decision.  (Case No. 30,932)