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Michael Andrew & Meredith L. Hartnagle



On July 10, 2017, the Department issued a notice of assessment of taxes for gross receipts tax, penalty, and interest. On October 5, 2017, the Taxpayer filed a timely protest with the Department. The Taxpayers’ argued that the income in question were the result of businesses that are in Colorado and that the income should not have been allocated to New Mexico on their PIT-B. Even though the services provided by those businesses were for New Mexico clients, the Taxpayer explained that all services were performed exclusively in Colorado either by telephone or the internet. The main issue to be determined in this protest is if gross receipts derived from services performed in Colorado, for a New Mexico purchaser, are taxable in New Mexico. The Department stated that the product of the services was the emails or telephone communications which represented deliverables and those deliverables were initially used in New Mexico resulting in them being subject to gross receipts tax. The Hearing Officer determined that because the services being performed where all completed out-of-state and because the services were not a result of research and development they qualified for the exemption under Section 7-9-13.1, NMSA 1978. For the foregoing reasons, the Taxpayers’ protest is granted. The Department is ordered to abate tax, penalty, and interest under the assessment.