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Lewis & Sharon Steinberg



The Taxpayers filed a joint federal income tax return in 1996, reporting income each of them had earned during the year on separate Schedule C’s. The husband was registered with the Department to report and pay New Mexico gross receipts tax on his income. The wife was not registered with the Department and did not report or pay gross receipts tax on her income. In July 2000, following a limited scope audit, the Department assessed the Taxpayers for gross receipts tax, penalty and interest. During the course of the subsequent protest, evidence was presented that resulted in abatement of a portion of the assessment.  The Taxpayers protested the remaining issues, arguing: (1) that services performed by the wife for resale should be deductible even though she did not have an NTTC to verify the deduction and (2) that she should not be liable for the full amount of interest assessed because of delays involved in notification of the Taxpayer and the Department’s subsequent delay in evaluating additional information provided by the Taxpayers. Held: Because the Taxpayers were unable to demonstrate possession of an NTTC, they were not entitled to deduct receipts from selling services. Pursuant to Section 7-1-67(A) NMSA 1978, taxpayers are required to pay interest for any period of time during which they retained tax funds lawfully due to the state. Protest denied.