Professional Services Company

16-36

On February 5, 2013, the Department issued two assessments to the Taxpayer for gross receipts tax, penalty and interest for the CRS reporting periods ending December 31, 2008 and December 31, 2009.  These assessments were a result of a mismatch the Department detected between the Taxpayer’s filed CRS returns and the income reported on the federal Schedule C income tax return.  On February 22 and 26, 2013, the Taxpayer filed timely protests of the assessments.  The Taxpayer is a sole proprietorship whose owner is a civil engineer who performs surveying work and serves as a construction project superintendent.  The Taxpayer provided several arguments as to why the receipts at issue were exempt or otherwise not taxable.  One argument was that some of the receipts were from reimbursed expenditures received as a disclosed agent, and another was that other receipts were either employee wages or isolated and occasional sales.  Section 7-9-3.5(A)(3) NMSA 1978 provides that receipts received solely on behalf of another in a disclosed agency capacity are excluded from gross receipts.  The Taxpayer provided no evidence that would indicate the receipts were received in a disclosed agency capacity.  Pursuant to Section 7-9-17 NMSA 1978, wages of employees are exempt from gross receipts taxes, however, the Taxpayer did not establish that he was an employee of the other company under the factors listed there.  Finally, the Taxpayer argued that receipts received from renting surveying equipment to a company that he was performing services for was isolated and occasional, which would be exempt under Section 7-9-28 NMSA 1978.  The hearing office found that the rental occurred over a period of a year and was part of the Taxpayer’s performance of surveying services for the company.  The Taxpayer’s protest was denied.