That’s the Key

16-04

On October 7, 2015, the Department assessed the Taxpayer for gross receipts tax, penalty and interest for the CRS reporting periods between January 1, 2009 and December 31, 2011.  On October 9, 2015, the Taxpayer protested the assessment, asking that the Department remove the penalty and interest.  The Taxpayer is a family-run business that performs re-keying services for realtors and real estate companies.  Through its Schedule C mismatch program with the IRS, the Department detected that the Taxpayer reported business income on its Federal Schedule C that was not reported on its CRS returns in New Mexico.  During the period in question, the Taxpayer performed re-keying services for Fannie Mae and Freddie Mac and this income is the discrepancy discovered by the Department.  The Taxpayer believed that these were government agencies exempt from paying gross receipts tax, but did not consult with any tax professionals or the Department about this.  The Taxpayer did not pay gross receipts taxes on these receipts due to this erroneous belief.  The Taxpayer acknowledged in its protest letter that it was liable for the gross receipts tax principal, and made payment to extinguish that liability prior to the hearing.  The only issue to be decided at the hearing was the outstanding penalty and interest that were assessed.  Interest is required to be imposed when a Taxpayer fails to make timely payment of taxes due, and the Taxpayer was not able to satisfy the requirements to show non-negligence in regard to the penalty.  The Taxpayer’s protest was denied.