04-0120041/8Gerard G. DesjardinsOn October 15, 1999, the taxpayer filed a New Mexico personal income tax return (Form PIT-1) for the 1998 tax year, reporting a tax liability of $1,018. No payment was included with the return. On March 19, 2002, the Department issued an assessment for the tax, plus $101.80 penalty and $445.93 interest. On April 5, 2002, the taxpayer filed a protest to the assessment of penalty and interest. The taxpayer acknowledged his liability of $1,018 and paid that amount. The taxpayer protested that the 29-month delay between the date he filed his 1998 return and the date the Department issued its assessment was unreasonable and deprived him of the opportunity to claim amnesty under the tax amnesty authorized by the New Mexico Legislature in 1999. The protest was denied on the grounds that the Department issued its assessment within the three years after the end of the calendar year in which the tax was due allowable under Section 7-1-18(A) NMSA 1978 and that the Department had no obligation to notify the taxpayer of his failure to pay his tax liability in time to claim tax amnesty. 04-0220042/16Team Specialty ProductsSometime after purchasing Team Specialty Products, Inc., the new owners discovered that their bookkeeping staff had failed to file an application for the technology jobs tax credit for the period January through December, 2001. The company’s new CPA completed an application for the basic and additional technology jobs tax credits for the 2001 calendar year and submitted it to the Department in September 2003. The Department denied the application as untimely, and the Taxpayer protested the denial. The Taxpayer argued that the one-year period for filing an application for the technology jobs tax credits provided in Section 7-9F-9(A) NMSA 1978 is optional rather than mandatory due to the use of the word “may” in the statutory passage stating that a taxpayer “may apply for approval of a credit within one year following the end of the calendar year in which the qualified expenditure was made.” The Taxpayer also maintained that the Department has discretion to grant the company an extension of time to file its application because the company had good cause for the delay. Held: The one-year limitation period set out in Section 7-9F-9(A) NMSA 1978 is mandatory, and no provision for allowing the Department to extend the application deadline is contained in the Technology Jobs Tax Credit Act or the Tax Administration Act. Protest denied. 04-0320042/26Dart Industries, Inc.Dart Industries, Inc., manufacturer and marketer of Tupperware products, entered into a franchise distribution agreement with Susan Carnell, who is located in Albuquerque. An audit performed by the Multistate Tax Commission on behalf of the Department found that Dart’s activities in New Mexico were sufficient to establish nexus with the state and also exceeded the scope of sales activities protected by Public Law 86-272 (15 U. S. C Section 381). On October 28, 1995, the Department assessed Dart for $22,019.00 in corporate income tax, franchise tax, penalty and interest for the years 1990-1992. Dart protested the assessment, arguing that Dart’s only business activities in New Mexico were solicitations of sales in interstate commerce by a foreign corporation, which are protected from taxation by Public Law 86-272. Dart argued that its New Mexico distributor was an independent contractor who sold Tupperware products on her own behalf and not on behalf of Dart. The hearing officer found that, in the operation of her franchised distributorship, Ms. Carnell was also acting on behalf of Dart. As a representative of Dart, rather than an independent contractor, Ms. Carnell’s maintenance of an Albuquerque office for her Tupperware distributorship constituted presence of the company in New Mexico and exceeded the scope of activities protected by Public Law 86-272. The hearing officer also found that, under the terms of the franchise agreement, distributors were required to perform a number of activities that went beyond the solicitation of orders for sales of Tupperware products. Dart’s licensing of intangible property, such as its trademark, for use in New Mexico also goes well beyond the solicitation of orders. Dart’s protest was denied. 04-0420043/25Terry R. & Linda A. WolffThe taxpayer reported business income on Schedule C (Profit or Loss from Business) of his 1999 federal income tax return but did not report New Mexico gross receipts tax on this income. In response to the Department’s audit notice, the taxpayer established that some of his sales were made out-of-state. The Department reduced the income subject to tax by that amount, and assessed the taxpayer for gross receipts tax, penalty, and interest on the balance of the business income reported on his Schedule C. At the administrative hearing on the taxpayer’s protest, the taxpayer produced a Form 1099-B evidencing 1999 stock sales of $11,832, and the Department’s attorney stipulated that the Department would abate the gross receipts tax attributable to that amount. The taxpayer also produced an NTTC to support a deduction of receipts from sales of tangible personal property for resale. The hearing officer found that the NTTC was not issued by the right entity and was not of the right type to support the deduction claimed by the taxpayer. The hearing officer also found that while the taxpayer had not provided any evidence to show that his receipts from the stock sales were reported on Schedule C, the Department was bound by its attorney’s stipulation that tax on this amount would be abated. The protest was granted in part and denied in part: the Department was ordered to abate gross receipts tax, penalty, and interest on the taxpayer’s 1999 capital gain; the taxpayer was found liable for the balance of tax, penalty and interest remaining after that adjustment. 04-0520044/28Barry D. SchoenemanThe taxpayer sold his 2002 Ford Explorer to a private party for cash. He then applied that cash to the purchase of a new Toyota Sequoia. After paying motor vehicle excise tax on the full purchase price of the Toyota, the taxpayer applied for a refund of the tax on the sale amount of his Ford, claiming that the money from the sale of his Ford, applied to the purchase of the Toyota, should be treated as a trade-in allowance on the purchase of the Toyota. The refund request was denied, and the taxpayer protested the denial. The protest was denied because the money from the sale of the taxpayer’s Ford did not qualify as a trade-in for purposes of calculating the value of the Toyota Sequoia under the Motor Vehicle Excise Tax Act. 04-0620045/11John B. Rodriguez
The taxpayer erroneously filed his 1999 federal and state personal income tax returns based on the filing status “head of household” rather than “single.” The IRS notified him of the error, but the taxpayer failed to amend his New Mexico return within the 90 days required by statute. The Department subsequently assessed the taxpayer for the additional tax due, plus penalty and interest. The Department later abated the penalty. The taxpayer protested the assessment of interest, arguing that he should be charged interest only for the six days between the date the assessment was issued and the date he paid the tax principal. He also argued that the Department took too long to notify him of the additional tax due. In support of its position, the Department cited Section 7-1-67(A) NMSA 1978, which provides for interest on late payments to accrue from the original due date of the tax, and Section 7-1-18(A) NMSA 1978, which gives the Department three years from the end of the calendar year in which a tax is due to issue an assessment. The hearing officer ruled in favor of the Department, and the taxpayer’s protest was denied.
04-0720046/30Mark S. Welsh
The taxpayer underreported his income on his 1999 New Mexico personal income tax return. Due to computer problems, the Department did not run a tape match with IRS records for the 1999 tax year until February 2003. In August 2003, based on the tape match information, the Department assessed the taxpayer for underpaid tax, plus penalty and interest. The taxpayer protested the interest accrued after October, 2000, arguing that the Department was at fault for not running the tape match and discovering his reporting error by that time. The hearing officer noted that it is the obligation of taxpayers, who have the most accurate and direct knowledge of their activities, to determine their tax liabilities and accurately report those liabilities to the state. The hearing officer found that the interest was properly assessed under Section 7-1-67 NMSA 1978 and the protest was denied.
04-0820047/30Victor and Bertha Chacon
In July 2002, the Internal Revenue Service notified the taxpayers that they had underreported the capital gain income on their 2000 return. The taxpayers did not file an amended 2000 New Mexico personal income tax return and waited for the Department to contact them. In April 2004, the Department assessed the taxpayers for additional income tax due as a result of the error on their 2000 federal return, plus interest of $598.93. The taxpayers paid the assessed principal but protested the interest. The taxpayers asked the Department to reduce the interest to $250.00, the amount of interest that had accrued as of the date the IRS notified the taxpayers of their underpayment of federal income tax. The hearing officer denied the protest, finding that the taxpayers had a statutory obligation to amend their New Mexico return within 90 days after the adjustment to their federal return. The taxpayers were not entitled to wait for the Department to find them before interest began to accrue on their underpayment of state tax.
04-0920048/4James R. and Deborah Y. Dotson 04-1020048/12Maggie M. Martinez
The taxpayer’s tax preparer filed first-year 1999 New Mexico personal income tax returns for herself and the taxpayer, using the same erroneous method to compute the tax due on both returns. Upon audit by the Department, the tax examiner reviewing the tax preparer’s return accepted the erroneous return and told the preparer no additional tax was due. However, the tax examiner reviewing the taxpayer’s return discovered the incorrect computations on the taxpayer’s Form PIT-B and the taxpayer was assessed for an additional $169.00 of tax principal, plus penalty and interest. The taxpayer chose to believe that the first tax examiner, who accepted the tax preparer’s return, was correct, and the taxpayer protested the assessment issued against her. In subsequent letters, the Department advised the taxpayer that penalty and interest would continue to accrue on the unpaid tax principal and explained the correct method for calculating tax on the income of first-year residents. The taxpayer then withdrew her protest to the assessed tax principal. The hearing officer denied the remaining protest of assessed interest, finding no basis for excusing the taxpayer from paying the full amount of interest due on her underpayment of 1999 income tax. The hearing officer granted the protest of the assessed penalty, citing the taxpayer’s reasonable reliance on the advice of her tax preparer as justification for abatement of the penalty under the provisions of Regulation 22.214.171.124 NMAC.
04-1120048/17Nicholas J. Drobot
The taxpayer filed a written protest to the Department’s assessment of 1999 personal income tax, claiming that he was not a New Mexico resident during 1999. The parties engaged in discovery and the hearing officer consulted with both parties to insure that they would be available on the day set for the administrative hearing. Shortly before the scheduled hearing, the taxpayer sent a letter to the hearing officer, stating that he would be unable to attend the hearing because he had moved back to the State of New York. The taxpayer’s letter included various documents he asked the hearing officer to consider in deciding the taxpayer’s protest. The taxpayer’s protest was denied based on his failure to appear. Section 7-1-17 NMSA 1978 provides that any assessment of taxes by the Department is presumed to be correct, and it is the taxpayer’s burden to provide evidence and legal argument to establish that he is entitled to an abatement. Unsworn statements and documents submitted by mail are not sufficient to meet this burden. Further, Section 7-1-16 provides that a taxpayer who elects not to appear for the administrative hearing becomes a deliquent taxpayer. By failing to appear, the taxpayer effectively abandoned his protest and forfeited his right to contest his liability for the assessment.
04-1220048/19Magdalena Construction Co.
In December 2002, the Department assessed the taxpayer for gross receipts tax, interest, and penalty resulting from failure to file some monthly CRS-1 reports and underreporting receipts for other months during the 1996 and 1997 tax years. The taxpayer protested the assessments, arguing that he would have taken steps to correct his underreporting of gross receipts tax if he had been alerted sooner. The hearing officer denied the protest, noting that it is the obligation of taxpayers, who have the most accurate and direct knowledge of their activities, to determine their tax liabilities and accurately report those liabilities to the state. Because the Department’s assessments were issued within the statutory time limits, there was no basis for abating the tax, penalty, and interest assessed.
04-1320049/1Pamela W. Kelly 04-1420049/21Charles Becknell 04-15200412/9Edwin and Lucinda A. Shellenberger