On March 10, 2016, the Department assessed the Taxpayer for gross receipts tax, penalty and interest for the tax periods from January 31, 2009 through May 31, 2015. The Taxpayer was also assessed for withholding tax, penalty and interest. The Taxpayer filed a protest on April 11, 2016. The Taxpayer has been in business since January 1996, and was registered with the state of New Mexico and filed and paid gross receipts tax during the period at issue. The Taxpayer’s primary business is to conduct laboratory testing, including DNA testing and drug screening. All of the receipts at issue are from the New Mexico Children, Youth and Families Department (CYFD). The Taxpayer began providing services to CYFD in 1999. In 1999, an employee of CYFD told the Taxpayer that he should not charge them gross receipts tax. On September 16, 1999, CYFD executed a Type 9 NTTC to the Taxpayer. A Type 9 NTTC is for the purchase of tangible personal property, as is stated on the back of the document. The Taxpayer did not charge or collect gross receipts taxes on its receipts from CYFD. Sometime in July 2015, a different CYFD employee notified the Taxpayer that he should be charging CYFD gross receipts tax. The Taxpayer began to charge and remit gross receipts taxes for his services to CYFD at that time. During the audit period in question, an accountant prepared the Taxpayer’s gross receipts tax returns, and at no time informed the Taxpayer that a Type 9 was not valid for his transactions with CYFD. Services sold to a government agency are taxable pursuant to Regulation 220.127.116.11 NMAC. The Taxpayer was misinformed by a CYFD employee that his services were not taxable, but a Taxpayer is responsible for understanding the tax laws and paying taxes accordingly. Penalty is imposed when a Taxpayer is negligent in not filing a return or paying tax when it is due, but Regulation 18.104.22.168 NMAC provides some exceptions and indicators of nonnegligence. The Taxpayer was able to meet this by showing that it reasonably relied on its accountant to file and pay gross receipts tax returns. The hearing officer ordered the penalty on the gross receipts tax to be abated. The Taxpayer’s protest was granted in part and denied in part.
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