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Judith A. Housley & Associates



Taxpayer contested the imposition of the 50% “fraud” penalty imposed under Section 7-1-69.  The evidence established that the Taxpayer was a sophisticated taxpayer who understood her obligation to report and pay gross receipts taxes, who charged her customers gross receipts tax, who cancelled her tax identification number on the basis that she had ceased to be in business, who continued in business thereafter, and who failed to report or pay gross receipts tax on her receipts as a handwriting analyst.  Held that under these facts, the 50% penalty was properly imposed under Section 7-1-69(B) or 7-1-69(C) as the statute was amended in 1997.  It was also determined that federal caselaw, which requires an affirmative act, beyond mere failure to file, to sustain a conviction for tax fraud under IRC Section 7201 was not applicable to determining whether New Mexico’s 50% fraud penalty should be imposed.  Protest denied.