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Sipapu Recreation Dev. II, LLC



The Taxpayer is a limited liability that owns and operates a resort in New Mexico.  From 2000 until March 2008, the Taxpayer has always filed a paid its monthly gross receipts taxes on time.  For a 4-year period, beginning in 2004, the Taxpayer employed a paid bookkeeper.  Until 2008, this bookkeeper had a history of timely filing and payment and gained the trust of the Taxpayer.  In early 2009, because of discrepancies regarding credit card statements, the Taxpayer terminated the bookkeeper’s employment and hired a new accountant. The Taxpayer also hired forensic accountants who found a number of issues in the work the bookkeeper had done, including falsifying and destroying certain records.  During the time that the forensic accountants were reconciling the Taxpayer’s accounts, the Department contacted the Taxpayer regarding outstanding gross receipts tax for seven periods in 2008.  The Taxpayer verified that no filings or payments were made and filed all the missing reports.  Shortly after, the Department issued seven assessments for unpaid gross receipts tax, penalty and interest.  The Taxpayer filed protests to each of the assessments.  After some discussion with the Department, the Taxpayer withdrew the protest regarding tax principal and interest but continued to protest the assessment of penalty.  Penalty is imposed when a taxpayer fails to pay taxes due as a result of negligence or disregard of rules and regulations.  In this case, consistent with prior Departmental Decision and Order In the Matter of the Protest of Sandia Oil Company, No. 01-01, based upon testimony of the Taxpayer regarding this former bookkeeper and her actions, and also the actions of the Taxpayer in supervising that employee, the Hearing Officer found that the Taxpayer exercised reasonable business care and prudence and was not negligent.  For that reason, the Taxpayer’s protest was granted.