ADC Ltd. NM Inc.

11-25

The Taxpayer was a New Mexico corporation, in the business of auditing and security services, who contracted with the various National Laboratories in New Mexico.  In 1999, the Taxpayer entered into a subcontractor agreement with a division of Comforce Corporation to provide temporary security personnel and clerical support personnel.  The contract stated that the project was exempt from New Mexico gross receipts tax and that a copy of the Nontaxable Transaction Certificate (NTTC) would be mailed to the subcontractor separately.  In July 2002, the Department selected the Taxpayer for an audit of tax periods January 1, 1999 through May 31, 2002.  On August 14, 2002, the Department notified the Taxpayer that it had 60 days, until October 15, 2002, to obtain the appropriate NTTCs to support any claimed deductions.  The Taxpayer did not have any NTTCs related to this project by November 21, 2002.  During the audit, the Department also disallowed the Taxpayer’s Type 6 and Type 7 NTTCs for construction services because the services that they provided were not related to construction.  On December 4, 2002, based on the audit, the Department assessed the Taxpayer for unpaid gross receipts tax, compensating tax, withholding tax, and interest.  On December 19, 2002, the Taxpayer filed a written protest to the assessment.  The Department acknowledged the Taxpayer’s protest letter on February 7, 2003, but did not request a hearing on the Taxpayer’s protest until June 1, 2010.  The issues to be decided were whether the Taxpayer was required to have the appropriate NTTCs for its claimed deductions within 60-days of the commencement of the audit, and whether the lengthy delay between the Taxpayer’s protest and the Department’s request for a hearing denied the Taxpayer procedural due process, which would necessitate an abatement of the assessment.  The Taxpayer failed to timely produce valid NTTCs within the 60-day time limit required by Section 7-9-43 NMSA 1978.  Additionally, the Taxpayer did not suffer a due process violation because the Taxpayer suffered no prejudice from the Department’s delay.  The Taxpayer’s protest was denied.