The Taxpayer is a New Mexico based corporation whom the Department initiated an audit of for gross receipts tax in March, 2005. The audit was completed in November, 2006, and an assessment was issued for gross receipts tax and interest for tax period from January 31, 1999 through February 28, 2005. No penalty was assessed. The Taxpayer filed a written protest to the assessment. The Taxpayer sells park, playground and other equipment to federal and state agencies, departments and political subdivisions, as well as 501(c)(3) organizations. The majority of the sales was for equipment that is attached with footers and concrete or concrete slabs and is buried in the ground. The Department disallowed certain deductions for sales of equipment to government agencies and exempt organizations. The issue to be decided was whether the Taxpayer’s sales to these agencies and organizations constituted the sale of tangible personal property, which may be deductible, or construction material, which is fully taxable. The Taxpayer argued that the Department overstepped its authority and went beyond the Legislature’s intent in some of the regulations used to determine whether items are considered construction materials. The Taxpayer also argued that the majority of its sales to government agencies were replacement fixtures, which are not considered construction materials. The Taxpayer was able to show that some of the receipts from the period in question were from the sale of replacement fixtures, so the hearing officer found that the deductions for these receipts should be allowed however, many other sales were found to be sales of construction materials, so the Taxpayer was rightfully assessed for gross receipts tax and interest for these receipts. The Taxpayer’s protest was granted in part and denied in part.