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Hank Gallegos Trucking



The Taxpayer provides hauling services and construction services, including demolition, earth work and roadwork.  The business was organized as a sole proprietorship from 1995 through 2003, and as a corporation from December 31, 2003 to the present.  The Taxpayer has New Mexico Contractor’s Licenses valid from May 2004 through 2007, but did not provide proof of valid licenses from January 2000 through December 2003.  On July 20, 2005, the Department selected the Taxpayer’s sole proprietorship for audit of CRS reporting periods January 2002 through December 2003, and for audit of the Taxpayer’s corporation for CRS reporting periods January 1, 2004 through June 30, 2005.  The Taxpayer timely presented Type 6 and Type 7 Nontaxable transaction certificates (NTTCs) for claimed construction service deductions.  The Taxpayer also provided the auditor with customer statements that included attached tickets.  After reviewing these statements, the Department disallowed the Taxpayer’s claimed construction service deductions because the Taxpayer could not substantiate that it provided qualifying construction services other than the non-qualifying hauling and transportation.  The Department determined that the Taxpayer’s sole proprietorship had underreported by 25%, and so they expanded the audit to include reporting periods January 1, 2000 through January 1, 2002.  The Taxpayer provided the Department with a letter from a customer stating that it had paid both the Taxpayer’s sole proprietorship and corporation to perform various construction services that included loading, hauling and spreading.  The Department notified the Taxpayer that the letter would not justify deductions for construction services and that the NTTCs the Taxpayer received were inappropriate and not in good faith without additional records to justify that construction services were performed.  On October 17, 2006, the Department assessed both the Taxpayer’s sole proprietorship and corporation for gross receipts tax and interest.  The Department did not assess the Taxpayer for penalty.  The Taxpayer formally protested the Department’s assessments.  The Taxpayer argued that it was entitled to claim the deduction allowed under Section 7-9-52 NMSA 1978, and Regulation NMAC.  However, the hearing officer found at the protest hearing that the Taxpayer did not satisfy the necessary requirements of the deduction and could not demonstrate that it was entitled to the deduction.  The Taxpayer’s protest was denied.