On July 30, 2015, the Department assessed the Taxpayer for gross receipts tax, penalty and interest for the CRS reporting periods from June 1, 2012 through December 31, 2012. On August 6, 2015, the Taxpayer protested the Department’s assessment. During the relevant period, the Taxpayer was in the business of performing construction services in New Mexico. The Taxpayer filed and paid New Mexico gross receipts tax during the relevant period. The Taxpayer’s owner and his wife also filed and paid New Mexico personal income tax in 2012. As part of the Schedule C Tape Match program with the IRS, the Department discovered a discrepancy between the business income reported on the Schedule C and the Taxpayer’s gross receipts tax return. The Taxpayer was scheduled for a limited scope audit based on this discrepancy and received the assessment as a result. The Taxpayer asserted that the discrepancy resulted from out-of-state services that the Taxpayer performed during a weather emergency in Minnesota. The wife of the Taxpayer’s owner is from north-central Minnesota and her family still resides there. On July 2-4, 2012, a severe storm struck the area and there was extensive physical damage to property. The owner of the Taxpayer and his wife learned of the emergency from his wife’s family, who requested their assistance. They immediately packed up their equipment and drove overnight from New Mexico to Minnesota. In addition to helping his wife’s family, he also went house-to-house with his equipment and performed clean-up and repair work. This work was performed on a cash-only basis. The Taxpayer remained in Minnesota doing clean-up work through early August 2012. The cash received during was reported on the Schedule C and is what makes up the discrepancy detected by the Department. The Department argued that the Taxpayer should provide more documentation to show that these receipts were from work performed out of state, such as invoices or contracts, but the emergency nature of the situation made the lack of more documentation understandable. The Taxpayer was able to credibly establish that the receipts in question were earned through the performance of services out-of-state during a weather emergency, and those receipts were not subject to the gross receipts tax. The Taxpayer’s protest was granted.
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