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MZA Associates Corporation



Taxpayer is a federal contractor involved in developing software for the government.  In 1995, the corporation hired an office manager to handle the company’s financial records and accounting systems.  In July 1997, the filing of CRS returns by the office manager became erratic and she eventually stopped filing returns altogether.  Over the next two years, the office manager continued to be sporadic in filing the company’s CRS returns, used the corporation’s credit card for personal expenses and wrote checks to “cash” with no accounting entries to show how the money was spent.  The corporate officers failed to review the corporation’s financial or tax records on any regular basis and were not aware the office manager was not filing the corporation’s tax returns.  In March 1999, the company hired a controller to prepare reports and review the corporation’s financial records.  The controller discovered several discrepancies, including non-filed CRS reports.  In September 2000, the office manager was fired and the controller took over her duties.  In November 2000, the Department assessed the Taxpayer for gross receipts tax, penalty and interest.  The Taxpayer protested the penalty portion of the assessments. Held: The Taxpayer was responsible for the acts of its employee.  In addition, the corporate officers were negligent in failing to supervise the corporation’s employees and failing to realize that CRS returns were not being filed in a timely manner. Penalty was properly imposed pursuant to Section 7-1-69(A) NMSA 1978.  Protest denied.