Computer Square, Inc.

12-22

The Taxpayer was engaged in business in New Mexico selling software licenses and services from 2001 through 2006.  The Taxpayer filed gross receipts tax returns with the Department for the tax periods from July 1, 2001 through September 20, 2002.  The returns were filed March 2003 and October 2003.  In March 2003, the Taxpayer paid the tax principal when the returns were filed.  In April 2003, the Taxpayer paid the applicable penalty and interest.  In June 2003, the Taxpayer filed amended returns, claiming zero gross receipts tax liability and requested a refund for amounts paid July 2001 through September 2002.  The Taxpayer was acting on advice from its accountant and believed that its receipts were exempt from New Mexico tax based on a ruling that the Department issued to a different taxpayer.  After requesting and receiving additional information from the Taxpayer in regards to the refund claim, the Department issued a refund to the Taxpayer in March 2004.  In November 2006, the Department began an audit of the Taxpayer.  The Department issued an audit report in April 2007, and determined that the Taxpayer had underreported its gross receipts by more than 25% for tax periods June 30, 2001 through September 30, 2006.  The Department also determined that the ruling relied upon by the Taxpayer did not apply and that the refund issued was in error.  The Taxpayer was assessed on May 15, 2007, for gross receipts tax and interest for the tax periods that had been audited.  The Taxpayer filed a formal protest to the assessment.  The Taxpayer withdrew its protest as to whether it should have been paying gross receipts tax, but challenged the Department’s timeliness in assessing the Taxpayer.  The hearing officer found that, for tax periods from October 1, 2001 through September 30, 2002, the assessments of gross receipts tax and interest are barred by the statute of limitations so that portion of the assessment was abated.  However, the Taxpayer was unable to show that the remainder of the assessment was incorrect and so that portion of the assessment was upheld as to both gross receipts tax and interest.  The Taxpayer’s protest was granted in part and denied in part.