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CSW Contractors, Inc.



On January 10, 2013, the Taxpayer applied for a refund for gross receipts taxes paid for tax periods May 1, 2012 through September 30, 2012.  The Department granted a partial refund on September 11, 2013.   The reasons provided for the partial denial were that the rubber liners were used in a construction project and were construction material, and also that some of the receipts were for construction services.  The Taxpayer filed a protest to the partial denial of the refund on January 29, 2014.  The Taxpayer is a solution provider for heavy civil construction projects.  During the period in question, the Taxpayer bought pond liners from another company, and then sold them to an entity working on behalf of a County government in New Mexico.  When purchasing the pond liners, the Taxpayer issued a Type 6 Nontaxable Transaction Certificate (NTTC), and indicated that the pond liners were construction material that would become an ingredient or component part of a construction project that would be subject to gross receipts tax.  The Taxpayer then sold the pond liners to the third entity, and installed them at that company’s site.  That company executed a Type 9 NTTC to the Taxpayer for the purchase of the pond liners.  The pond liners were sold to a government agent, acting on behalf of the County, who issued industrial revenue bonds to fund the project.  The Taxpayer charged and collected gross receipts tax on the sale of the pond liners to this entity.  Later, the Taxpayer filed for refund, arguing that the receipts were deductible under Section 7-9-54 NMSA 1978.  At the hearing, the Department argued that, because a Type 6 NTTC was used in the purchase of the pond liners, and the pond liners were purchased as construction material, the Taxpayer could not then argue that the liners were not part of a construction project when attempting to take the deduction provided in Section 7-9-54, which specifically excludes construction materials.   The Hearing Officer found that the first sale of the pond liners to the Taxpayer really determined that the pond liners were construction material, rather than tangible personal property.  The Taxpayer’s protest was denied.