The Taxpayer provides professional therapy services for schools, including five New Mexico school districts. The Department conducted an audit of the Taxpayer for the period from July 1, 2001 through June 30, 2005. The Department determined that the Taxpayer improperly deducted all of its receipts. The Department assessed the Taxpayer for gross receipts taxes, including interest but not penalty, as well as withholding tax. The Taxpayer paid the withholding tax in full, but filed a written protest regarding the gross receipts tax and applicable interest. The grounds for the protest were that a certified public accountant researched New Mexico law and requested Type 9 Nontaxable Transaction Certificates (NTTCs) Type 9 NTTCs were executed to the Taxpayer however, a Type 9 may only be used by governmental agencies and 501(c)(3) organizations for the purchase of tangible personal property, not services. The Taxpayer and their accountant argued that the certificates were accepted in good faith and that on those grounds they should be sufficient to claim the deductions. The good faith provision was designed to protect taxpayers who had no way of knowing how a customer would use goods once they were purchased. In this scenario, the problem is not how the goods were later used, but that the certificates could not apply to these transactions, and information on how the certificates could be used was accessible in more than one place. The Taxpayer’s protest was denied.
Cumberland Therapy Services