On January 10, 2013, the Department assessed the Taxpayer for gross receipts tax, penalty and interest for the tax period ending on December 31, 2008. On February 8, 2013, the Taxpayer filed a protest of the assessment. The Taxpayer is a video production company. The bulk of the assessment at issue relates to services and products that he Taxpayer provided for the State Bar of New Mexico, which had provided a nontaxable transaction certificate (NTTC) to the Taxpayer. The Taxpayer recorded various live presentations, edited the recordings and provided copies of the recordings on three DVDs to the State Bar. The State Bar maintains copies in its library, distributes copies upon request, and allows viewing of the copies. The Taxpayer did not receive any payment from the State Bar, and was not entitled to any payment, until the DVDs had been delivered. The Taxpayer deducted its receipts from the sales of the DVDs to the State Bar as tangible personal property pursuant to the NTTC that was issued to the Taxpayer by the State Bar. The Department audited the Taxpayer and determined that the Taxpayer was treating the DVDs that it provided to the State Bar solely as the sale of tangible personal property. The Department concluded that the actual value of the DVDs was not as tangible personal property and was predominantly from the service of recording, editing and transferring video files. The Department allowed deductions of the cost of the DVDs as tangible personal property, but disallowed the bulk of the deductions as the receipts were from the services performed. At hearing, the Department argued that the Taxpayer’s production of the DVDs is predominantly the performance of a service, and the Taxpayer is not engaged in selling DVDs except in conjunction with the service, to which the DVDs are incidental. The Taxpayer argued that the State Bar paid for the movies, and the movies are impossible to produce without a physical medium, like the DVDs. The Hearing Officer found that the Taxpayer’s receipts were deductible as the sale of tangible personal property, as the Taxpayer’s services have no value by themselves and the DVDs are what the State Bar paid for. The Taxpayer’s protest was granted.