D-Trix Services, LLC

17-11

On May 18, 2016, the Department assessed the Taxpayer for tax, penalty and interest in weight distance tax (WDT) for the reporting period beginning October 1, 2009 through March 31, 2013. The Taxpayer filed a timely protest with the Department. The issue to be decided in the hearing is whether the Taxpayer is liable for the assessment of tax, civil penalty, underpayment penalty and interest for the periods at issue. The Taxpayer at the time of issue was in the business of providing services in the oil and gas industry, hauling waste water from well sites to designated storage facilities sometime located on the same property. During the time at issue the Taxpayer did report all miles for the international fuel tax agreement (IFTA). In 2010 and 2011, the Taxpayer decided that it was paying more in WDT based on off highway deduction.  The Taxpayer came to the conclusion that the roads it traveled in the oil fields were “off highway” miles and not subject to WDT. The Taxpayer argued that the discrepancies in miles between IFTA and WDT was due to the off highway miles being excluded from WDT. The Taxpayer did not consult with the Department or a tax professional before making the decision on off highway miles. The Taxpayer operates in New Mexico and had a rule conveyed to his drivers that if the road was marked as a state, county, forest, tribal or federal road then the miles traveled then the miles were taxable. The Taxpayer believed his duty to report and pay for WDT was only for loaded miles on governmentally designated roadways. During an audit of the period at issue it was discovered that based on the normal audit procedure and review of the documents provided by the Taxpayer that there was underreporting for WDT of more than 25%. Upon further communication with the Taxpayer, the Department was unable to obtain information that the off-highway miles reported were actually roads that were privately maintained by the oil companies. During the hearing, the Taxpayer argued that there should be a reduction of tax, penalties and interest because the business model being used by the Taxpayer in which the vehicles travel primarily on private roads while it is loaded. The Department argued that the evidence provided by the Taxpayer does not support the private road designation. The WDT Act requires taxpayer to report all miles, and if it maintains records which show that the vehicle carried no load at least 45% pf the time, it can qualify for a reduced tax rate for all the miles if the business is qualified as a “one-way” hauler. If the Taxpayer is not a “one-way” hauler the WDT Act indicates that the total number of miles travelled on New Mexico highways during the tax payment period by the motor vehicle is used to calculate the tax for the period and should be reported whether loaded or not. The hearing officer determined that the Department properly assessed the Taxpayer without reducing the assessment for off-highway miles as the Taxpayer did not overcome the presumption of correctness by not being able to provide sufficient records to support the deduction. As the Taxpayer underreported by 25% the assessment period was properly expanded and based on the statutes use of “shall” indicates that the Taxpayer is liable for penalties, and interest. For the reasons above the Taxpayer’s protest is denied.