On February 23, 2016, the Department assessed the Taxpayer for gross receipts tax, penalty and interest for the tax period from January 1, 2008 through December 31, 2012. On May 2, 2016, the Taxpayer filed a formal protest. During the period in question, the Taxpayer worked as a painter for a particular company. The Taxpayer was paid weekly and was issued 1099s as an independent contractor. The Taxpayer believed he was an employee of the company, and was led to believe this by the company, his co-workers and his tax preparer. The Taxpayer used a tax preparer who he trusted to handle his taxes appropriately. The tax preparer never explained gross receipts tax to the Taxpayer. The Department issued a notice of audit to the Taxpayer on November 21, 2015. The notice advised the Taxpayer that he was responsible for obtaining any necessary nontaxable transaction certificates (NTTCs) within 60 days of the letter. The deadline for NTTCs was January 20, 2016. The Taxpayer contacted his tax preparer for assistance and she told him that she would take care of it and send documentation to the Department. She did not do so and stopped responding to the Taxpayer. The Taxpayer contacted the company directly and requested an NTTC. The company was willing to execute an NTTC but was unable to do so because its own tax delinquencies made it ineligible for NTTCs at the time. The company came into compliance and executed an NTTC to the Taxpayer on April 29, 2016, more than three months past the deadline. The NTTC executed to the Taxpayer was also the wrong type, it was for the sale of tangible goods rather than services. There was no indication that the Taxpayer was an employee instead of an independent contractor, as he believed. Pursuant to Section 7-9-43(A) NMSA 1978, when a Taxpayer is not in possession of the required NTTCs by the deadline, the deduction requiring that NTTC shall be disallowed. The Taxpayer also argued that he should not be subject to penalty because he was led to believe that he was an employee by the company and his co-workers, and that he relied on his tax preparer’s advice. The hearing officer found that the Taxpayer was non-negligent and ordered penalty to be abated. The assessment of tax and interest were found to be correct. The Taxpayer’s protest was granted in part and denied in part.
Luis M. Fernandez