Hubbard Lovell & Co.

16-12

On June 29, 2015, the Department issued two assessments to the taxpayer for gross receipts tax, penalty and interest for the CRS reporting periods from June 1, 2011 through December 31, 2011 and from June 1, 2012 through December 31, 2012.  On September 22, 2015, the Taxpayer protested the Department’s assessment.  The Taxpayer provides auto restoration and detailing services in New Mexico, primarily for car dealerships who are preparing used vehicles for sale.  The car dealerships would provide the Taxpayer with nontaxable transaction certificates (NTTCs) and would not pay the Taxpayer gross receipts tax.  Three car dealerships executed NTTCs to the Taxpayer for services.  The Taxpayer received a Type 2 NTTC from on dealership, a Type 13 and a Type 1 from another, and a Type 13 from the third.  The Taxpayer believed that the NTTCs exempted it from gross receipts tax, so without inquiring with the Department or a tax professional, the Taxpayer did not collect gross receipts tax on the services performed for car dealerships that provided it with an NTTC.  The Department made some pre-hearing abatements in the Taxpayer’s favor that reduced the assessed amounts.  The two issues to be decided at the hearing were whether any deduction from gross receipts applies to the services performed by the Taxpayer for the car dealerships, and secondly, if the Taxpayer’s timely receipts of properly executed NTTCs provides a safe harbor from the assessed tax.  At hearing, the Taxpayer did not assert that any specific deduction applied to its receipts, and there is no statutory exemption or deduction that would apply to the services that the Taxpayer provided to the car dealerships.  As to the issue of the NTTCs received by the Taxpayer providing a safe harbor, a safe harbor provision cannot serve to make a taxable transaction not covered by a statutory deduction nontaxable merely by possessing NTTCs.  The Taxpayer’s protest was denied.