Christopher Martin



The Taxpayer worked as a handyman and doing odd jobs in New Mexico in 2005 and 2006.  He failed to file gross receipts tax for those years.  The Taxpayer was using a tax preparer from California who did not realize that gross receipts tax was applied to services in New Mexico.  The Department discovered this discrepancy based upon comparison with the Taxpayer’s federal Schedule C, and subsequently assessed him for unpaid tax, penalty and interest for those periods.  The Taxpayer filed a protest to the assessments.  At the hearing, the Taxpayer did not dispute that he was providing services and that receipts from those services were taxable.  He was not aware of that in 2005 and 2006, but upon learning that his receipts were taxable he took steps to get into compliance.  The Department does not have discretion in applying interest to unpaid tax liabilities.  The law states that interest shall be applied.  When engaging in business, it is the Taxpayer’s responsibility to determine the taxability of his activities, so penalty cannot be waived due to being unfamiliar with the law.  However, the hearing officer did determine that, because the cap on penalty was 10%, not 20%, at the time the taxes were due, the Department is to abate the penalty in excess of 10%.  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)