Saiz Trucking and Earthmoving

15-27

On February 9, 2012, the Department assessed the Taxpayer for gross receipts tax, penalty and interest for the tax periods from January 31, 2004 through March 31, 2010.  On February 13, 2012, the Taxpayer filed a protest to the assessment.  The Taxpayer was engaged in business in New Mexico from 2004 through 2010, primarily in the business of moving and hauling dirt or gravel and performing grading at sites.  The Taxpayer’s main customer was the City of Albuquerque (City).  The Taxpayer worked mainly for the City’s parks department, and the related contracts characterized the work as equipment rental with operator and hauling.  In 2010, the Department commenced an audit of the Taxpayer. The audit was completed in 2011, and the Taxpayer was assessed in 2012.  In the protest, the Taxpayer argued that part of the assessment was barred by the statute of limitations, and also that the Taxpayer was entitled to deduct most of its gross receipts from its contracts with the City.  Receipts from sales of tangible personal property to a government entity are deductible, but this deduction does not apply to property that is sold as construction material or as part of a service.  The Taxpayer argued that it was entitled to deduct most of its gross receipts from the City because it was really engaged in selling tangible personal property in the form of landscaping materials.  Based on the contracts with the City, and the testimony of two City parks department employees who dealt with the Taxpayer, the Hearing Officer determined that the Taxpayer’s work for the City, and any tangible personal property provided, were part of a construction project.  The Taxpayer’s receipts were not deductible.  The second issue was that of the statute of limitations on assessments.  Generally, assessments must be made within three years of the end of the calendar year in which the tax was due.  The Department argued that the Taxpayer was underreporting its gross receipts tax liability by more than 25%, and under those circumstances the Department has to assess within six years from the end of the calendar year in which payment of the tax was due.  The Taxpayer argued that it was not underreporting by more than 25% because it was entitled to deduct its receipts from its work with the City, but as that was found not to be the case, the Department had six years from the end of the year in which the taxes were due to assess.  The assessment in regard to gross receipts taxes for periods from January 2004 through November 2005 were found not to be timely and were barred by the statute of limitations.  The assessed gross receipts taxes for those periods, along with the associated penalty and interest, were ordered to be abated.  The assessment in regard to gross receipts taxes for periods from December 2005 through March 2010 were found to be timely and properly made.  The Taxpayer’s protest was granted in part and denied in part.