On August 4, 2017 the Department assessed the Taxpayer gross receipts tax, penalty and interest for the CRS reporting periods ending April 30, 2013 to December 31, 2016. On August 28, 2017, the Department received the Taxpayer’s timely protest of the assessment. The taxpayer transports bulk mail for the United States Postal Service under a Highway Contract Route, transporting mail from and to Lubbock, Texas and to various delivery points in New Mexico. This protest involved deciding the extent to which the Taxpayer was entitled to a deduction from gross receipts for these deliveries under Section 7-9-55 NMSA 1978 as transactions in interstate commerce. The taxpayer argued that all the receipts were in interstate commerce because its trucks crossed state boundaries to and from New Mexico. The Hearing Officer, however, found this argument unconvincing as many of the trips were made entirely in New Mexico. The Department argued that the amount of the deduction should be measured by employing Regulation 220.127.116.11 B NMAC which provides that a person who holds a contract for the transportation of United States mail from points within New Mexico to other points outside of New Mexico may deduct a portion of gross receipts which were derived from transactions in interstate commerce. The statute specifies the method on which a deduction is to be calculated and importantly defines “delivery point” as any point where mail is required to be delivered under the contract. After reviewing the information provided in the Highway Contract Route, the Hearing Officer determined that the calculation made by the auditor, which had concluded that the total number of delivery points in Texas was 12.5 percent, had not been calculated correctly. Allowing for the change in the number of delivery points, the Hearing Officer found that Taxpayer’s deduction from receipts should be 17 percent rather than the 12.5 percent originally calculated. Therefore, the Taxpayer’s protest is granted in part and denied in part and, allowing for the increased deduction, the Taxpayer is ordered liable for the adjusted amount of tax, penalty and interest.
Diamond T U.S. Mail Service Inc