Redrock Foods, Ltd.



The Taxpayer is a California limited partnership that owns several fast-food restaurants in New Mexico.  Beginning in 1995, the partner in the Taxpayer’s Colorado office was responsible for payment of New Mexico gross receipts taxes.  In early 2003, the Colorado partner stopped paying these taxes to New Mexico.  The other partners did not discover the problem until June 2004.  At that time the Taxpayer began timely reporting and paying its gross receipts taxes again and also approached its lender for a loan to pay the back taxes.  The Taxpayer’s vice president told a Department employee that the lender would not agree to the payment of penalty, and the employee told him that she was pretty sure penalty could be abated if a short-term payment plan was arranged.  A few months later, the Taxpayer was informed that penalty could not be abated.  By June 2005, the Taxpayer had paid all amounts assessed by the Department, including the penalty.  The Taxpayer then filed a claim for refund of the penalty, which was denied.  The Taxpayer protested, arguing that the failure to pay gross receipts taxes was attributable to only one partner and the remaining partners were innocent.  The Hearing Officer held that the partnership entity was responsible for the actions of all of its partners, including the partner in Colorado, and that penalty was properly assessed.  The Taxpayer’s protest was denied.