Loranger Construction

11-07

The Taxpayer was engaged in business in New Mexico in 2005 and 2006, providing installations to other companies, who resold those services to its customers.  The Taxpayer did not report the proceeds of those services as part of its gross receipts.  Through the tape match program, the Department recognized a mismatch between Taxpayer’s gross receipts reports and its federal Schedule C.  The Department assessed the Taxpayer for gross receipts tax, penalty and interest for the 2005 and 2006 tax years.  The Taxpayer filed a formal protest to both assessments.  The Department acknowledged that the Taxpayer obtained valid non-taxable transaction certificates (NTTCs) for the 2005 tax year and for some of the transactions in the 2006 tax year within the 60-day deadline.  The 2005 assessment was abated, as was part of the 2006 assessment.  The Taxpayer argued that he attempted to obtain the other NTTCs within the deadline, but that he was not able to get them until the deadline had passed.  The Taxpayer argued that it was the buyer’s fault for not getting him the NTTCs, and that the Department charging tax on these transactions was double taxation.  However, it was the Taxpayer’s duty to get the correct NTTCs timely, or pay tax on the transactions, and it is not considered double taxation when two separate entities are taxed on their receipts.  Also, the Taxpayer’s belief that he did not owe tax is still considered negligence, so penalty is due.  The hearing officer determined that some of the penalty should be abated though, as it was calculated using a statute that had been changed after the period in question to allow higher penalty.  The Department does not have discretion on the issue of interest, as the law states that it “shall be paid”.  For those reasons, the Taxpayer’s protest was granted in part and denied in part.  NOTE: The New Mexico Court of Appeals has overruled the 10% penalty issue mentioned in this decision.  (Case No. 30,932)