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  3. Adobe Rose Bed & Breakfast

Adobe Rose Bed & Breakfast



During the period in question, the Taxpayer was the sole proprietor and owner of a bed and breakfast outside of the city limits of Artesia, New Mexico.  The Taxpayer’s primary customers were federal law enforcement agents on assignment as instructors at the Federal Law Enforcement Training Center.  These agents would usually stay for longer than thirty days.  The Taxpayer was uncertain about the taxability of receipts from guests staying longer than thirty days, so he contacted the Department.  A Department employee advised the Taxpayer that guests staying more than thirty days would be considered a lessee paying rent, and not subject to gross receipts tax.  This advice was not given in writing.  The Taxpayer relied on this advice and did not impose gross receipts taxes to guests staying more than thirty days at the bed and breakfast.  He did impose gross receipts tax on guests staying less than thirty days.  In 2008, four years after beginning his business, the Taxpayer was selected for audit.  As part of the audit, the Department determined that the Taxpayer had no Tenant-Landlord relationship with any of the guests and so all money received from guests who stayed at the bed and breakfast were taxable gross receipts.  The Taxpayer informed the auditor of the information that he was given by a Department employee.  This employee, now an audit supervisor, confirmed that he had given the Taxpayer this information.  He recommended that the imposition of penalty be waived in assessing the Taxpayer.  The Department assessed the Taxpayer for unpaid gross receipts tax and interest, but not penalty.  The Taxpayer filed a written protest to the assessment because of the advice given by the Department employee.  The hearing officer concluded that gross receipts tax was due in this situation, and reliance on oral advice does not have an affect on this statutorily-required tax principal.  Statute dictates that interest shall be imposed, so the assessment for unpaid gross receipts and interest is correct in this case.  The Taxpayer’s protest was denied.