On July 16, 2018, the Department assessed the Taxpayers, NM Foods Distributors, Inc, and affiliated entities Los Curates Restaurant and Little Anita’s Mexican Food in separate assessments for gross receipts and withholding tax penalty as well as interest for the CRS filing period ending May 31, 2018. There were nine different assessment letters of varying amounts, the largest penalty of $495.15 being for gross receipts tax. The Department received the protest for all these assessments on July 18, 2018. The taxpayer did not dispute the fact they owed tax but requested an abatement of the penalty for late filing and payment. The Taxpayers explained that in June of 2018 an accounting assistant whose duty it was to file and pay the tax, was diagnosed with T-Cell Lymphoma, left work to receive treatment, and died 16-days later due to complications. While this was happening in the week the gross receipt tax was due, an accounting manager who would have been the back up to file and pay the tax was on vacation. These events were sudden and unexpected and because of this the taxpayers argued they were not negligent in filing and paying the tax late. In response the Department first explained that its GenTax software had incorrectly calculated withholding penalty which should have been entirely for gross receipts. The Department then reasoned that since the Taxpayers used a payroll service to pay the withholding tax on time the same firm should have been given instruction to pay the gross receipt tax. The Hearing Officer, however, found this argument wholly unconvincing, stating that this case was a “quintessential example” of when Regulation 126.96.36.199 (B) NMAC requires the abatement of penalty. This regulation states that non-negligence is shown when “the taxpayer, disabled because of injury or prolonged illness, demonstrates the inability to prepare a return and make payment and was unable to procure the services of another person to prepare a return because of the injury or illness.” This having been established the Hearing Officer granted the Protest and ordered that all penalty be abated.
New Mexico Food Distributors Inc & Affiliates