On March 21, 2017 the Department assessed the Taxpayer for tax, penalty and interest for the CRS filing periods ending January 31, 2010 through February 29, 2016. The taxpayer filed a formal protest on June 19, 2017. The chief issue in this protest was whether receipts the Taxpayer derived from providing Family Living Services under the Developmental Disabilities Medicaid Waiver Program were excluded from gross receipts tax. The taxpayer initially argued that it had not been assessed by the Department within the limitations specified in Section 7-1-18 (A) NMSA 1978 which states an assessment must be sent within three years from the end of the calendar year in which the tax was due. The Hearing Officer however cited the exception to this rule found in Section 7-1-18 (C) NMSA 1978 which explains that if a taxpayer understates by more than twenty-five percent the amount of liability for any tax the Department may assess within 6 years from the end of the calendar year in which the tax was due. The taxpayer then argued that the amounts were received solely on behalf of another in a disclosed agency capacity, stating that it was reimbursed for approved expenditures incurred on the state’s behalf in furthering specific state programs. Regulation 220.127.116.11 (C) (1) NMAC provides an exception for reimbursement when acting in a disclosed agency capacity. However, the Hearing Officer found that the Taxpayer’s evidence clearly established that it would not satisfy its own obligations to its direct service providers until after it had received payment from the state and therefore was not being reimbursed. Because of this the Hearing Officer concluded that the Taxpayer failed to establish that it incurred those expenditures in a disclosed agency capacity. The evidence also failed to establish any authority for the Taxpayer to bind the state to an obligation created by an agent. At no place in the Taxpayer’s provider agreement with the state, the Hearing Officer found, or within any cited statute or regulation, does the state express any grant of authority consistent with the creation of a disclosed agency relationship. The totality of the evidence, the Hearing Office decided, established that payments to the Taxpayer were not amounts received solely on behalf of another in a disclosed agency capacity and therefore were not excludable from taxable gross receipts. The taxpayer also argued that the receipts should be exempt pursuant to Regulation 18.104.22.168 E – F NMAC which excludes payments to individuals providing foster care, certain caretakers, and home care. The Hearing Officer determined however that none of these designations were applicable to the Taxpayer. Because of these conclusions the Taxpayer’s receipts were decided to be taxable gross receipts. The Taxpayer is liable for accrued interest as well as penalty under the negligence definition found under Regulation 22.214.171.124 (C) NMAC.
Active Solutions Inc