On November 3, 2015, the Department assessed the Taxpayer for gross receipts tax, penalty and interest for the CRS reporting periods between January 1, 2012 and December 31, 2012. On January 29, 2016, the Taxpayer protested the assessment. The Taxpayer is comprised of a married couple who have two homes in Albuquerque that they rented out to vacationers through Vacation Rental By Owner (VRBO.com)/HomeAway during the relevant period. The advertisement for the homes included a rental fee, cleaning fee and tax rate of 7%. The advertisement also included a list of accommodations and facilities provided. The Taxpayer entered into rental agreements with the families renting the properties. These agreements specified check-in and check-out dates and times, cancelation fees, additional charges for damages or extra required cleaning, guest occupancy limits, prohibitions on smoking and pets, and other pertinent information. The rental agreements were silent on the Taxpayer’s rights to enter the premise during the rental period, inspect the premise, or to otherwise cancel or terminate the agreement or take possession of the property. The renters were provided with a set of keys during the rental period, and the Taxpayers retained an additional set of keys. The Taxpayers assisted the families that rented the property with any issues that arose during their stay, such as internet service issues or other maintenance issues. The issue to be decided is whether the Taxpayer’s short-term rental of two homes through VRBO.com are subject to gross receipts tax. The Taxpayer argued that Regulation 18.104.22.168 NMAC applies, which states that a person with three or fewer rental units is not subject to tax. The Department argued that the Taxpayer was subject to gross receipts tax under Section 7-9-53(B) NMSA 1978 because rental of a vacation home is similar to hotels, motels and guest ranches and constitutes a license to use real property rather than a lease of real property. The hearing officer found that, due to the nature of vacation rentals, and considering the advertisement and rental agreements, this arrangement is a short-term license, rather than a lease. The regulation pointed to by the Taxpayer is not part of statute and has less legal standing than the statute which was determined to fit the situation at hand. The hearing officer found that the assessments of gross receipts tax and interest, which is non-discretionary, were correct. However, because the Taxpayer reasonably relied on Regulation 22.214.171.124 NMAC, penalty was ordered to be abated. The Taxpayer’s protest was granted in part and denied in part.