The Taxpayer is in the insurance business. Beginning in December 1998 and continuing for a period of more than two years, the insurance company’s office manager stopped paying state and federal taxes and began diverting those funds to her personal use. Because the office manager had complete control over the Taxpayer’s accounting system, the fact that tax payments were not being made went undetected. In July 2000, the Taxpayer finally became aware of the situation and contacted the Department to determine the extent of the Taxpayer’s outstanding liabilities. In August 2001, the Department assessed the Taxpayer for tax principal, penalty and interest. The Taxpayer protested the interest and penalty portions of the assessment. Held: Interest is due on the Taxpayer’s late payment of taxes pursuant to Section 7-1-67 NMSA 1978. Although the Taxpayer was not responsible for the office manager’s illegal acts, the Taxpayer was negligent in placing so much authority in one employee and in failing to review its books and records on a regular basis. Accordingly, penalty was properly imposed under Section 7-1-69 NMSA 1978. Protest denied.
Pat Campbell Insurance
The Department assessed the Taxpayer gross receipts tax for periods from 2015 through 2020. The Taxpayer contended the gross receipts associated with the protest were for administrative and risk-management services provided to independent contractors that were performing work with extraction companies albeit in New Mexico. Under Section 7-9-13.1, NMSA 1978 (1989, substantially amended 2020), Taxpayer’s receipts must be from selling services performed outside New Mexico and the product of the service must be initially used in New Mexico. The Hearing Officer held that “the service” Taxpayer was selling — administrative and risk-management services —were performed out-of-state and should not be imputed to the work performed by the independent contractors in New Mexico. The protest was granted.