On February 27, 2016, the Department denied the Taxpayer’s claim for refund for periods 2011 through 2012. The Taxpayer filed a timely a timely protest on April 21, 2016. The issue to be decided is if the Taxpayer is entitled to deduct sales of coal from its gross receipts when those sales were made in lots in excess of 18 tons to a power plant that used the coal to produce electricity. The Taxpayer argument is that it was entitled to deduct its sales of coal to the power plant from its gross receipts per Section 7-9-65 NMSA 1978. The Taxpayer argues that a plain reading of the statute and regulation can lead to the conclusion that coal is a chemical based on the regulations definition and can be allowed in the deduction. The Department argues that the Taxpayers argument is against the purpose of regulations. Regulations are used to help further define and narrow the applicability of deductions not to overstep the statute. The first step in statutory interpretation is to look at the plain language of the statute and refrain from further interpretation if the plain language is clear. The Hearing Officer also noted that when statutes and regulations are inconsistent, the statute prevails. The Hearing Office stated that the interpretation of statutes should be done by keeping in mind legislative intent and in a way that does not lead to absurd, unreasonable, and unjust results. The Hearing Officer determined after looking at legislative history and the information presented that the statute is related to the processing of ores or oil. It was also concluded that the burning of coal to produce electricity is not an activity related to the processing of ores or oil. The statute must be read in its entirety and a single phrase of a statute cannot determine the statutes intent. The Hearing Officer determined that coal is for producing heat which is used in the processes of making electricity and is not a chemical under the statute or regulation because it is not used for producing a chemical reaction. The Taxpayer failed to establish that it was entitled to the deduction. For the reasons mentioned above, the Taxpayer’s protest is denied.
Peabody Coalsales Company