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Orders are written statements to implement a decision after a Department administrative hearing. 

A taxpayer may file an appeal with the New Mexico Court of Appeals within 30 days after the date of the decision. Appeals are decided based on the evidence and arguments presented at the administrative hearing. 



05/26/2016

16-21

Emcore Solar New Mexico, LLC

On December 18, 2013, the New Mexico Environment Department granted the Taxpayer a Certificate of Eligibility for the Taxpayer’s qualified generating facility.  The Taxpayer is listed as the only financial entity holding an interest in its qualifying generating facility.  The Taxpayer submitted an application for approval with the Department for an advanced energy combined reporting tax credit on October 1, 2014.  On July 13, 2015, the Department partially approved the Taxpayer’s request, but for a slightly lower amount than requested.  The Taxpayer did not protest the partial denial of the credit.  Between October 9, 2015 and November 24, 2015, the Taxpayer’s consultant discussed with a Department employee the possibility of selling a portion of the ownership interest in the Taxpayer to a third party for the sole purpose of allowing the third party to utilize the credit.  The Taxpayer has not sold any interest in its business to a third party, nor has it merged with any corporation or changed its organizational structure, those possibilities are all hypothetical at this point.  On November 24, 2015, the Department denied the Taxpayer’s request to allocate the credit because the third party entity did not have ownership interest in the Taxpayer at the time it applied for the credit with the New Mexico Environment Department.  The Department stated in its denial that any allocation of the credit should have been done at the time of applying for the credit.  The entity who applies for the credit is the one who may claim the credit, and Regulation 3.13.8.12(B) NMAC prohibits the transfer of the credit to any other person, including an affiliate.  Only when two or more corporations merge or if an entity changes its organizational form and the resulting entity is a continuation of the predecessor, may the resulting entity claim the credit.  On February 1, 2016, the Taxpayer protested the denial of the transfer of the credit to a hypothetical third party.  The hearing officer found that the facts in this case were too speculative and hypothetical in nature.  The Taxpayer’s protest was denied.


05/25/2016

16-20

Robert G. Hooper 

On October 26, 2015, the Department denied the Taxpayer’s October 16, 2015 submission of a protest related to three assessments dated February 9, 2015.  On November 10, 2015, the Taxpayer submitted a protest of the Department’s denial.  On February 9, 2015, the Department issued three assessments to the Taxpayer for tax liabilities for CRS reporting periods ending on December 31, 2009, December 31, 2010, and December 31, 2011.  Section 7-1-24 NMSA 1978 provides that a protest shall be filed within 90-days of the mailing date of an assessment.  In this case, 90-days after the mailing date of the assessments was May 11, 2015.  The Taxpayer did not file a protest on or before that date.  At some point in the spring of 2015, the Taxpayer engaged the services of a CPA, who made contact with a Department auditor about the assessments.  The CPA submitted additional documentation to the auditor related to the assessments.  On September 22, 2015, the auditor sent the CPA a letter indicating that the documents had been reviewed and the Department was able to abate a portion of the assessment for the 2011 reporting year.  The Taxpayer contended in his protest letter and at hearing that the September 22, 2015 date of the Department’s letter is the controlling date for purposes of starting the 90-day protest period.  The Taxpayer does not dispute that the original February 9, 2015 assessments were timely mailed and that he did not file a protest within 90-days of the mailing of those assessments.  The hearing officer found that the statute clearly states that a protest must be filed within 90-days of the mailing of the assessment, and the Department is not able to entertain untimely filed protests.  The Department’s partial abatement of tax at a later date does not restart or reopen the 90-day protest period.  The Taxpayer’s protest was denied.


05/20/2016

16-19

Reggie Olguin

On February 3, 2016, the Department denied the Taxpayer’s January 28, 2016 submission of the protest letter originally dated January 11, 2016 as untimely.  On March 4, 2016, the Taxpayer submitted a formal protest of the Department’s denial.  On October 26, 2015, the Department assessed the Taxpayer for gross receipts tax, penalty and interest for the CRS reporting periods from January 1, 2008 through January 31, 2011.  The Department mailed the assessment on October 27, 2016.  90-days from the Department’s October 27, 2016 mailing of the notice was January 25, 2016.  Included with the notice was the FYI-402: Taxpayer Remedies, which explains the Taxpayer’s ability to protest the assessment.  The document also provides the Department’s mailing and physical addresses for the filing of protests.  On January 11, 2016, the Taxpayer prepared a protest letter, but inadvertently transposed the P.O. Box number for the department with the street address number.  The Department did not receive this incorrectly addressed letter.  The Taxpayer never received his mailing back from the postal service.  On January 26, 2015, the Taxpayer called the Department’s protest office to inquire about the status of his protest, and was told that the Department had never received his protest letter.  On January 28, 2016, the Taxpayer emailed a copy of his January 11 protest letter to an employee of the protest office.  Section 7-1-24 NMSA 1978 requires a protest to be filed within 90-days of the date of mailing of the Department’s assessment.  As a result, the Department was unable to accept a protest after the January 25, 2016 deadline.  The Taxpayer’s protest was denied.


05/20/2016

16-18

Linda Wasko

On October 6, 2015, the Department issued two assessments to the Taxpayer for gross receipts tax, penalty and interest for the CRS reporting periods from January 1, 2012 through June 30, 2012, and from July 1, 2012 through December 31, 2012.  On October 14, 2015, the Taxpayer protested the assessments.  The receipts at issue in the protest are from the Taxpayer providing in-home elder care services for a company.  In order to qualify for the deduction for the sale of a service for resale, the Taxpayer needed a Type 5 nontaxable transaction certificate (NTTC), issued by the company.  The Taxpayer did not receive an NTTC at the time her taxes were due, nor did she report, file or pay gross receipts tax during the period in question.  As part of its Schedule C Tape Match program with the IRS, the Department discovered that the Taxpayer had sole proprietorship income reported on her federal income tax return that was not reported as gross receipts on a CRS filing.  On June 26, 2015, the Department prepared a Notice of Limited Scope Audit Commencement-60 Day Notice asking the Taxpayer to explain the mismatch and provide any necessary NTTCs to support claimed deductions.  The Taxpayer claimed to have not received the notice until a week to ten days after the date on the document, and upon questioning, the Department auditor acknowledged that based on his experience, the notice could have been mailed Friday, June 26 2015, or Monday, June 29, 2015.  The notice indicated a deadline of August 25, 2015 for the Taxpayer to present the necessary NTTCs.  The Taxpayer worked with the company to get the NTTC beginning sometime in August.  On August 24 and 25, they contacted the Department because they were having trouble executing the NTTC.  On August 26, 2015, the company executed a Type 5 NTTC to the Taxpayer.  The Department disallowed the claimed deduction because the NTTC was executed after the August 25 deadline.  The hearing officer found that a genuine issue as to the date of mailing of the notice was established and the NTTC should then have been accepted as it was executed only one day after the deadline.  The Taxpayer’s protest was granted.


05/16/2016

16-17

Bogle Management Co., Inc. 

On December 19,2007, the Department assessed the Taxpayer for gross receipts tax, penalty and interest for the tax periods from January 31, 2000 through June 30, 2006.  On January 24, 2008, the Taxpayer filed a protest to the assessment.  The Taxpayer is an Arizona corporation that began operations in 1976, as was first registered in New Mexico for gross receipts tax purposes in 1977.  The Taxpayer was originally affiliated with two farming operations that are located and engaged in agricultural business in New Mexico.  At the time of its incorporation, the Taxpayer was owned by the same people who owned the farms.  The Taxpayer was created as a separate entity to provide retirement and medical benefits for the managers of the farms, which they did not want to provide to the general employees.  In 1997, the Taxpayer was acquired by new owners and operators, a man who had provided all of the accounting services for the farms and the taxpayer and was aware of how they interacted, and his wife.  Under this new ownership, the Taxpayer entered into a management agreement with each of the farms, under which the Taxpayer agreed to supply the farms with knowledgeable and skilled persons to act as the managers of the farms.  The agreement set that the farms would reimburse the Taxpayer for payments issued to the managers, to include salary, the cost of worker’s compensation, payroll taxes, benefits, and other associated costs.  The agreement also set the Taxpayer’s compensation for management fees as an amount equal to 10% of the gross salary of the managers.  The Taxpayer did its calculations and other activities related to the payroll services for the managers in Georgia, where the Taxpayer’s owners resided.  The Taxpayer paid the managers’ compensation, withholding tax, and took care of the benefit programs, issued paychecks by mail to the farms to distribute to the managers and, at the end of the tax years, would issue W-2s to the managers.  As the entity in charge of issuing the managers’ paychecks, the Taxpayer was required to pay withholding taxes and issue W-2s, which meant that the Taxpayer was the employer of the managers.  As a result, the Taxpayer had a physical presence in New Mexico through the managers.  The farms would dictate to the Taxpayer who the managers were, what each manager’s salary would be, and if any existing manager’s salary should be increased.  The farms controlled and supervised all of the work performed by the managers.  In 2007, the Taxpayer was audited by the Department, which resulted in the assessment of gross receipts taxes on the receipts related to the management fees and the payroll reimbursements.  The Taxpayer argued that even if it was doing business in New Mexico, its payments from the farms were excluded from gross receipts tax because the Taxpayer was acting as a disclosed agent on behalf of the farms.  As related to the management fees, even if the Taxpayer were acting as an agent, the fees belonged solely to the Taxpayer in exchange for the provision of services and are subject to gross receipts tax.  Regulation 3.2.1.19 NMAC interprets what constitutes a disclosed agency relationship, and the Taxpayer was not able to show that it met the requirements of actual disclosure, or the bookkeeping requirements.  The Taxpayer also argued that it was a joint employer, which is a determination made by the United States Department of Labor, however the Taxpayer never provided any evidence showing that such a determination was ever made.  The hearing officer found that the receipts of the Taxpayer were subject to gross receipts tax and interest as assessed, but did order the penalty to be abated because the Taxpayer failed to pay the taxes due to a mistake of law in believing in good faith that it was a disclosed agent of the farms, due the long-standing relationship between the farms and the Taxpayer.  The Taxpayer’s protest was granted in part and denied in part.


05/11/2016

16-16

HealthSouth Rehabilitation 

In late 2014 and early 2015, the Taxpayer applied for refunds of gross receipts tax for three tax periods.  The Department denied two of these refunds on the basis that the Taxpayer was a hospital and failed to meet the definition of “health care provider” for purposes of Section 7-9-93 NMSA 1978, which provides the deduction the Taxpayer used as their basis for the refund claims.  The Department did not act on the third application for refund.  The Taxpayer protested each of the denials, as well as the inaction, which were eventually consolidated into one protest.  The Taxpayer operates an inpatient rehabilitation hospital in New Mexico, which is staffed by physicians, physical therapists, occupational therapists, social workers, speech-language pathologists, and others.  The Taxpayer has receipts from payments for services performed by these professionals.  The Department conceded that the Taxpayer is entitled to the deduction for receipts from payments by federal Medicare administrators, and therefore entitled to some of the refund that it applied for.  The Hearing Officer found that the Taxpayer met the requirements found in Section 7-9-93 NMSA 1978, and that the Section does not prohibit a for-profit hospital from taking the deduction, though the Department had promulgated regulations to that effect which limited the availability of the deduction.  The Taxpayer’s protest was granted.


05/09/2016

16-14

John & Susan Grazier

The Taxpayers failed to timely file their New Mexico personal income tax returns for tax years 2008, 2009 and 2010.  They filed these returns on or about November 19, 2015, claiming a refund for each tax year.  The Department denied the refund requests on January 21, 2016 because the returns were filed beyond the three year statute of limitations.  The Taxpayers protested the refund denials on January 30, 2016.  Prior to and during the tax periods at issue, the Taxpayers supported themselves, their daughter and two grandchildren.  In August 2007, the Taxpayers both lost their jobs.  Shortly after, one of the Taxpayer’s became ill and the Taxpayers became overwhelmed by the loss of their jobs and this illness.  During the period at issue, the Taxpayers could not afford to hire someone to prepare their tax returns.  In 2009, the Taxpayers spoke to two Department employees who told them that tax years 2006, 2007, 2008, 2009 and 2010 were being reviewed and that the Department would owe them money, or they may owe a very small amount.  The Taxpayers did not know there was a statute of limitations for filing refund claims.  The Taxpayers argued that, because they spoke to two Department employees in 2009 who indicated that the Taxpayers would likely be owed a refund, they were misled and now the Department should be required to grant their requests for refund.  The statements made by the Department were not incorrect, and the Taxpayers were precluded from receiving the refunds by waiting six years to file the returns after they spoke to the Department employees.  The Taxpayer’s protest was denied.


05/09/2016

16-13

Sol Bookkeeping Services, Inc.

On October 23, 2015, the Department assessed the Taxpayer for gross receipts tax, penalty and interest as a successor in business.  On December 7, 2015, the Taxpayer filed a protest to the assessment.  The Taxpayer began doing business in 2009.  The Taxpayer was started and owned by three people.  The Taxpayer provides accounting  and bookkeeping services to its clients, who are primarily small business owners.  The Taxpayer sends its employees to the clients’ locations, provides general office bookkeeping, and trains its clients to do bookkeeping themselves.  The Taxpayer also assists its clients in payroll and filing of gross receipts taxes.  The Taxpayer does not maintain a physical office, and does not have inventory, supplies or equipment.  The Taxpayer uses computer software for its billing, which is located on the personal computer of one of its owners.  In 2002, seven years prior to the Taxpayer’s inception, that owner started and wholly owned another business, also engaged in accounting services, that used the same computer program as the other business.  That firm’s business consisted mainly of corporate entities, and mainly reviewed and prepared corporate income tax returns for its clients.  In 2004, the owner was injured in a car accident and suffered complications for several years that prevented her from managing the firm.  She turned the day-to-day operations over to the manager, who failed to keep the firm’s gross receipts taxes current.  In 2010, the owner was healthy enough to take on a more active role in the firm and discovered the tax issue.  In doing further investigation over the next two years, and working with the Department and the IRS, the owner discovered that the firm’s books were a mess and the manager had been involved in embezzlement.  A Department employee and an IRS employee advised the owner to shut down the firm because of these issues.  The owner shut down the firm in September 2012, approximately three years after the Taxpayer was established.  The shutdown of the firm did not interrupt the operations of the Taxpayer.  The owner maintained that the Taxpayer and the firm were completely separate entities, but after the firm ceased operations, the Taxpayer filed a corporate income tax return for one of the firm’s former clients, and the firm’s goodwill transferred to the Taxpayer when some of the firm’s clients switched over to do business with the Taxpayer.  The hearing officer determined that the Taxpayer was a successor in business to the firm, and therefore responsible for the assessed tax, but successor’s in business are not responsible for penalty or interest, so that was ordered to be abated. The Taxpayer’s protest was granted in part and denied in part.


04/26/2016

16-12

Hubbard Lovell &  Co. 

On June 29, 2015, the Department issued two assessments to the taxpayer for gross receipts tax, penalty and interest for the CRS reporting periods from June 1, 2011 through December 31, 2011 and from June 1, 2012 through December 31, 2012.  On September 22, 2015, the Taxpayer protested the Department’s assessment.  The Taxpayer provides auto restoration and detailing services in New Mexico, primarily for car dealerships who are preparing used vehicles for sale.  The car dealerships would provide the Taxpayer with nontaxable transaction certificates (NTTCs) and would not pay the Taxpayer gross receipts tax.  Three car dealerships executed NTTCs to the Taxpayer for services.  The Taxpayer received a Type 2 NTTC from on dealership, a Type 13 and a Type 1 from another, and a Type 13 from the third.  The Taxpayer believed that the NTTCs exempted it from gross receipts tax, so without inquiring with the Department or a tax professional, the Taxpayer did not collect gross receipts tax on the services performed for car dealerships that provided it with an NTTC.  The Department made some pre-hearing abatements in the Taxpayer’s favor that reduced the assessed amounts.  The two issues to be decided at the hearing were whether any deduction from gross receipts applies to the services performed by the Taxpayer for the car dealerships, and secondly, if the Taxpayer’s timely receipts of properly executed NTTCs provides a safe harbor from the assessed tax.  At hearing, the Taxpayer did not assert that any specific deduction applied to its receipts, and there is no statutory exemption or deduction that would apply to the services that the Taxpayer provided to the car dealerships.  As to the issue of the NTTCs received by the Taxpayer providing a safe harbor, a safe harbor provision cannot serve to make a taxable transaction not covered by a statutory deduction nontaxable merely by possessing NTTCs.  The Taxpayer’s protest was denied.


04/25/2016

16-11

Pete’s Top Quality Landscaping, LLC 

On August 14, 2015, the Department assessed the Taxpayer for the tax periods from January 31, 2008 through July 31, 2014.  The assessment was for gross receipts tax, withholding tax, and compensating tax, as well as penalty and interest on each of those assessed taxes.  On November 12, 2015, the Taxpayer filed a protest of the assessment.  At the hearing, the Taxpayer announced that it was no longer protesting the assessment on withholding tax and compensating tax, so the only issue remaining was the protest of the assessment for gross receipts tax.  During the period in question, the Taxpayer was selling firewood and other items to its customers, which included restaurants and other landscape companies.  The Taxpayer accepted nontaxable transaction certificates (NTTCs) from several of its customers and did not include receipts from those sales in its gross receipts.  The Department audited the Taxpayer and disallowed deductions for sales of firewood that the Taxpayer made to various restaurants because the restaurants were not reselling the firewood, but using it for cooking and/or heating.  The Taxpayer acknowledged that it owned some of the assessed gross receipts tax because it failed to obtain NTTCs from some of the other landscapers to whom it was selling.  The Taxpayer argued that it should be allowed to deduct the receipts for which it had NTTCs because they were accepted in good faith, even though it knew the restaurants were using the firewood and not selling it.  The Taxpayer asserted that it had contacted the Department prior to accepting the NTTCs from the restaurants to make sure that they were applicable, and that two Department employees assured them that they were applicable.  The Department argued that the NTTCs were invalid because the restaurants were using the firewood, not reselling it, and the Taxpayer was aware of this. Further, the Department argued that good faith did not apply and the Taxpayer was required to take more action to understand the NTTCs rather than blindly accepting them.  The Taxpayer countered that it took more action by contacting the Department on more than one occasion.  The hearing officer found that the NTTCS were accepted in good faith, so the gross receipts tax assessed on that portion was ordered to be abated, as was the penalty and interest related to that portion of the assessed amount.  The rest of the assessment remained.  The Taxpayer’s protest was granted in part and denied in part.


04/06/2016

16-10

Video Factory

On January 10, 2013, the Department assessed the Taxpayer for gross receipts tax, penalty and interest for the tax period ending on December 31, 2008.  On February 8, 2013, the Taxpayer filed a protest of the assessment.  The Taxpayer is a video production company.  The bulk of the assessment at issue relates to services and products that he Taxpayer provided for the State Bar of New Mexico, which had provided a nontaxable transaction certificate (NTTC) to the Taxpayer.  The Taxpayer recorded various live presentations, edited the recordings and provided copies of the recordings on three DVDs to the State Bar.  The State Bar maintains copies in its library, distributes copies upon request, and allows viewing of the copies.  The Taxpayer did not receive any payment from the State Bar, and was not entitled to any payment, until the DVDs had been delivered.  The Taxpayer deducted its receipts from the sales of the DVDs to the State Bar as tangible personal property pursuant to the NTTC that was issued to the Taxpayer by the State Bar.  The Department audited the Taxpayer and determined that the Taxpayer was treating the DVDs that it provided to the State Bar solely as the sale of tangible personal property.  The Department concluded that the actual value of the DVDs was not as tangible personal property and was predominantly from the service of recording, editing and transferring video files.  The Department allowed deductions of the cost of the DVDs as tangible personal property, but disallowed the bulk of the deductions as the receipts were from the services performed.  At hearing, the Department argued that the Taxpayer’s production of the DVDs is predominantly the performance of a service, and the Taxpayer is not engaged in selling DVDs except in conjunction with the service, to which the DVDs are incidental.  The Taxpayer argued that the State Bar paid for the movies, and the movies are impossible to produce without a physical medium, like the DVDs.  The Hearing Officer found that the Taxpayer’s receipts were deductible as the sale of tangible personal property, as the Taxpayer’s services have no value by themselves and the DVDs are what the State Bar paid for.   The Taxpayer’s protest was granted.


03/18/2016

16-09

Elizabeth O. Brower

On July 31, 2015, the Department assessed the Taxpayer penalty for underpayment of estimated tax for the 2014 tax year.  On October 7, 2015, the Taxpayer filed a formal protest of the assessment.  In 2014, the Taxpayer was required to make estimated payment of her personal income tax.  The Taxpayer made unequal payments in April, June and September of 2014, as well as in January of 2015.  The Taxpayer then filed her return and paid the balance of her tax due in March of 2015.  The Taxpayer receives the bulk of her retirement distributions in December of each year.  The Taxpayer does not have taxes withheld from her retirement income distributions.  The Taxpayer’s retirement income has had the tendency to decline from year to year, so the Taxpayer did not know what her income would be in 2014, or if she would receive distributions in a manner similar to her 2013 tax year.  The Taxpayer’s estimated payments for 2014 were paid timely, but were not paid in equal sums and did not add up to the pre-payment requirements of 25%, 50% and 75% of the total required annual payment for the first three installment deadlines, this is what caused the assessment of penalty.   The Taxpayer argued that, based on the fluctuations of her retirement income distributions, coupled with the fact that she used an IRS approved method for calculating the payments, penalty should not have been imposed and should be abated.  However, the Departments interpretation of the relevant statute requires that the payments be made in equal amounts, or penalty is imposed.  Reliance on a federal form does not prevent the Taxpayer from being considered negligent for purposes of penalty.  The Taxpayer’s protest was denied.


03/15/2016

16-08

Love Tree Builders 

On July 30, 2015, the Department assessed the Taxpayer for gross receipts tax, penalty and interest for the CRS reporting periods from June 1, 2012 through December 31, 2012.  On August 6, 2015, the Taxpayer protested the Department’s assessment.  During the relevant period, the Taxpayer was in the business of performing construction services in New Mexico.  The Taxpayer filed and paid New Mexico gross receipts tax during the relevant period.  The Taxpayer’s owner and his wife also filed and paid New Mexico personal income tax in 2012.  As part of the Schedule C Tape Match program with the IRS, the Department discovered a discrepancy between the business income reported on the Schedule C and the Taxpayer’s gross receipts tax return.  The Taxpayer was scheduled for a limited scope audit based on this discrepancy and received the assessment as a result.  The Taxpayer asserted that the discrepancy resulted from out-of-state services that the Taxpayer performed during a weather emergency in Minnesota.  The wife of the Taxpayer’s owner is from north-central Minnesota and her family still resides there.  On July 2-4, 2012, a severe storm struck the area and there was extensive physical damage to property.  The owner of the Taxpayer and his wife learned of the emergency from his wife’s family, who requested their assistance.  They immediately packed up their equipment and drove overnight from New Mexico to Minnesota.  In addition to helping his wife’s family, he also went house-to-house with his equipment and performed clean-up and repair work.  This work was performed on a cash-only basis.  The Taxpayer remained in Minnesota doing clean-up work through early August 2012.  The cash received during was reported on the Schedule C and is what makes up the discrepancy detected by the Department.  The Department argued that the Taxpayer should provide more documentation to show that these receipts were from work performed out of state, such as invoices or contracts, but the emergency nature of the situation made the lack of more documentation understandable.  The Taxpayer was able to credibly establish that the receipts in question were earned through the performance of services out-of-state during a weather emergency, and those receipts were not subject to the gross receipts tax.   The Taxpayer’s protest was granted.


02/18/2016

16-06

Ricardo D. Romero

On October 1, 2015, the Department assessed the Taxpayer for gross receipts tax, penalty and interest for the CRS reporting periods between January 1, 2012 and December 31, 2012.  On November 16, 2015, the Taxpayer protested the assessment.  The Taxpayer began his sole proprietorship as a real estate appraiser in 2012.  The Taxpayer had no experience with CRS returns or gross receipts tax and did not consult with any tax professional or Department employee, other than to obtain a CRS ID number.  The Taxpayer did not file CRS returns or pay gross receipts tax in 2012.  In 2013, the Taxpayer learned of the requirements to file CRS returns and pay gross receipts tax, and began doing so at that time.  That Taxpayer agrees that he owes the assessed tax principal.  The only issue to be decided is whether civil negligence penalty, imposed under Section 7-1-69 NMSA 1978 may be abated based on the Taxpayer’s lack of knowledge of the requirement to file CRS returns and pay gross receipts tax.  The imposition of penalty is mandatory in all instances where the Taxpayer’s action or inaction meets the legal definition of “negligence.”  Although the Taxpayer did not intentionally fail to pay taxes, his inaction though indifference, carelessness, erroneous belief or inattention does meet the definition of “negligence.”  The Taxpayer was not able to establish a good faith, mistake of law made on reasonable grounds, which could allow for abatement of penalty.   The Taxpayer’s protest was denied.


02/18/2016

16-05

Frank’s Electric LLC

On July 8 and 15, and on August 5, 2015, the Department issued several assessments to the Taxpayer for gross receipts tax, withholding tax, penalty and interest for CRS reporting periods ending on May 31, 2012 through the period ending on January 31, 2015.  On July 20, 2015, the Taxpayer protested the Department’s assessments, arguing that it should not be liable for the assessed penalty because it had detected and reported its errors to the Department.  The Taxpayer agrees that it owes the assessed tax principal, so the issue at protest is whether the assessments of penalty should be abated.  The Taxpayer is engaged in the electrical business in New Mexico and had previously been subject to Department audit and assessment.  As a result, the Taxpayer engaged the services of numerous bookkeepers and accountants, and filed and paid CRS taxes in accord with the protocols developed by these bookkeepers and accountants.  On or about April 2015, the Taxpayer hired a bookkeeper who detected that the system the Taxpayer developed resulted in underreporting during the relevant time and reported this to the owner.  The Taxpayer’s owner directed the bookkeeper to correct the problem, including amending previously filed returns, to remain compliant.  After receiving the amended returns, the Department issued the assessments to the Taxpayer.  As a result of the protest, the Department made a series of adjustments and credits to certain periods on the Taxpayer’s account, which resulted in abatement of penalty for a few of the reporting periods.  The Taxpayer argued that it was non-negligent under Regulation 3.1.11.11 NMAC, because the under reporting was a result of the errors in the Taxpayer’s accounting system.  The Hearing Officer found that none of the indicators of non-negligence listed in the regulation were present.  The Taxpayer’s protest was denied.


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