Cynthia B. King



The Taxpayer contracted with United States Postal Service (USPS) to deliver mail along a highway contract route.  Although the USPS told the Taxpayer she would owe gross receipts tax on her contract receipts, the Taxpayer chose to ignore this advice and never registered with the Department for payment of gross receipts tax. The Department subsequently assessed the Taxpayer for gross receipts tax, penalty and interest on her receipts from performing mail delivery services for the USPS. The Taxpayer protested the assessment, arguing that she was an employee of the USPS and was entitled to the exemption from gross receipts provided in Section 7-9-17 NMSA 1978. Held: The Taxpayer’s receipts from her contract with the USPS were receipts from performing services as an independent contractor and not as an employee of the USPS.  Although the contract contained detailed guidelines concerning the services to be performed, the following terms of the contract supported the conclusion that the Taxpayer was an independent contractor: the Taxpayer was required to provide her own vehicle and liability insurance; the Taxpayer had some flexibility in the hours she worked; the Taxpayer could subcontract the services required by the contract; the Taxpayer was expected to hire her own relief workers to cover the route when the Taxpayer became ill or was on vacation; the USPS did not withhold taxes or social security from the Taxpayer’s payments; and the Taxpayer reported the contract payments as business income on her federal income tax return.  In addition, several federal court decisions have been issued holding that mail delivery contracts similar to the contract at issue in this case do not create an employer-employee relationship.  Protest denied.