On August 16, 2022, the Department assessed the Taxpayer for penalty and interest for the tax period ending June 30, 2022. On October 25, 2022, the Taxpayer filed a timely protest with the Department. The Taxpayer agreed to the dates that the gross receipts tax return was filed and paid after the due date for the period. The Taxpayer argues that they were not negligent. The Taxpayer noted calling Department and asking what the consequences of filing and paying late would be and was told that a $5 late fee would be due. The Taxpayer decided to file late to ensure that the return was filed correctly and accurately. Interest is required by statute and cannot be abated. Penalty is applied for failure to pay or file on time. Penalty is calculated at a rate of 2% per month or partial month up to 20% of the tax due or a minimum of $5, whichever is greater. The Hearing Officer determined that based on regulation 3.1.11.10 NMAC that the Taxpayer did not fit the requirements for non-negligence. The Hearing Officer notes that in some cases equitable estoppel is available but there was no evidence showing that the Department’s employee engaged in conduct that was aggravated, overreaching or misleading, and equitable estoppel does not apply. The Hearing Officer determined that the protest is denied.
Stronghold Construction
The Department assessed the Taxpayer gross receipts tax for periods from 2015 through 2020. The Taxpayer contended the gross receipts associated with the protest were for administrative and risk-management services provided to independent contractors that were performing work with extraction companies albeit in New Mexico. Under Section 7-9-13.1, NMSA 1978 (1989, substantially amended 2020), Taxpayer’s receipts must be from selling services performed outside New Mexico and the product of the service must be initially used in New Mexico. The Hearing Officer held that “the service” Taxpayer was selling — administrative and risk-management services —were performed out-of-state and should not be imputed to the work performed by the independent contractors in New Mexico. The protest was granted.