West Rock Inc.

13-10

The Taxpayer is a corporation engaged in the business of providing automobile repossession/recovery services to financial institutions, other lenders and dealers.  On November 30, 2006, the Department selected the Taxpayer for a field audit for the period from January 1, 2001 through October 31, 2006.  In conducting the audit, the Department found that the Taxpayer had understated its tax liability by more than 25%.  As a result of the audit, the Department assessed the Taxpayer for gross receipts tax and interest, as well as withholding tax and interest.  The Taxpayer filed a protest to the assessment, but did not protest the withholding tax or the related interest.  Prior to the hearing, the Taxpayer and the Department resolved some issues from the audit, and a portion of the gross receipts tax and related interest was abated.  The Taxpayer only continued to protest gross receipts tax assessed on its receipts from services performed for federally-chartered credit unions (FCUs).  The Taxpayer worked as an independent contractor for FCUs, and at no time was the Taxpayer an FCU or an employee of  an FCU.  The Taxpayer argued that its receipts from services performed for FCUs were immune from state taxation because the receipts of FCUs are not allowed to be taxed at the state level under the Supremacy Clause of the constitution and under 12 U.S.C. §1768.  The hearing officer found that  FCUs are federal instrumentalities entitled to state tax immunity. However, under United States v. New Mexico, 455 US 720, 102 S. Ct. 1373 (1982), supremacy clause and 12 U.S.C. §1768 state tax immunity does not extend to the Taxpayer as an independent contractor of the FCUs.  The gross receipts tax is imposed on the Taxpayer, not on the FCU, and was correctly assessed in this situation.  The Taxpayer’s protest was denied.