Home Security Systems and Industrial & Commercial Security Systems

12-26

The Taxpayers are two corporations, with one common president and owner. Taxpayers doe business in Albuquerque and have been registered for Combined Reporting System numbers for over 20 years. Taxpayers design, pre-wire, install, service and monitor 24-hour electronic security systems.  They sell and lease tangible personal property and sell installation and monitoring services.  The Department audited both corporations under various tax programs for a period beginning January 1, 2002 through March 31, 2005.  On May 23, 2005, the Department issued a 60-day notice letter requesting that Taxpayers possess New Mexico nontaxable transaction certificates (NTTCs) or other documentation to support claimed deductions by July 22, 2005.  The Department proposed, and the Taxpayers agreed to, a sampling method for the audit under which invoices were selected from the audit period and broken into two strata based on their amount.  The Department completed its audit in February 2006, and disallowed numerous deductions claimed by the Taxpayers.  At protest, the hearing officer determined that three of the deductions claimed by the Taxpayers were to be allowed, but the others were not.  These deductions were disallowed because the Taxpayers could not provide the necessary NTTCs, or other sufficient evidence to show that they were entitled to claim the deductions.  The Taxpayers protests were granted in part and denied in part.