Test & Evaluation Services, LLC and EWA Warrior Services, LLC


On March 8, 2018, the Department issued two Notices of Assessments to each Taxpayer. On June 4, 2018, the Taxpayer’s counsel submitted a timely protest with the Department for each notice and demand for payment. The two protests were consolidated as they both have the same underlying facts. The Taxpayer argued that the gross receipts of both Taxpayer’s are from a contract with the United States Department of Defense and that the gross receipts in question are eligible for the deductions available under Section 7-9-94 and 7-9-54 NMSA 1978. The Department argued that the Taxpayers’ evidence that was presented concerning the current status of “force transformation” initiatives in the Department of Defense was speculative and outdated. The “transformational acquisition program” definition states that the program must be authorized by the Office of the Secretary of Defense Force Transformation which is not possible since the office does not exist. The Hearing Officer determined that, based on the evidence provided and the Fiscal Impact Report released by the Legislative Finance Committee that had been provided to the legislature, the reference to the office would have been updated. The Hearing Officer further determined that based on the intent of the legislation that the gross receipts in question did qualify for the deduction under Section 7-9-94 NMSA 1978. Regarding Section 7-9-54 NMSA 1978, the Taxpayer’s counsel explained that had Section 7-9-94 NMSA 1978 been denied some of the gross receipts would also qualify for the deduction under Section 7-9-54 NMSA 1978 and would therefore still be deductible from gross receipts tax. For this reason, the Taxpayer’s protest was granted.