The Taxpayers were residents of New Mexico during the 2005 and 2006 tax years. The Department conducted a limited scope audit of the Taxpayers’ gross receipts taxes for those years and issued assessments for unpaid gross receipts tax, as well as penalty and interest for both years. When the Department audited the Taxpayers, it found that they had not paid gross receipts taxes on the majority of the business income reported on their federal income tax returns. The Taxpayer received income from a company for which she was a nonemployee sales person, for which she received a 1099. The Taxpayer reported and paid gross receipts taxes on sales to customers, but not on the many bonuses and other cash allowances received. The Taxpayers also received a 1099 for another unrelated business. The matters to be decided in the hearing are whether all of the Taxpayers income is gross receipts, and if the Taxpayers are liable for penalty and interest. The Taxpayers did not deny that some of these amount received were taxable as gross receipts. The Taxpayers argued that the interest and penalty should be waived because the tax laws were too complex to understand. The hearing officer found that the Taxpayers failed to pay gross receipts tax on all of their receipts, and that the gross receipts tax and interest assessed were correct. The hearing officer also found that the penalty assessed was in excess of the applicable law in effect at the time the taxes were due, so that any penalty in excess of 10% was to be abated. The Taxpayers’ protest was granted in part and denied in part.
NOTE: The New Mexico Court of Appeals has overruled the 10% penalty issue mentioned in this decision. (Case No. 30,932)
Maria and Robert Cloutier
10/28/2009