On September 6, 2012, the Department assessed the Taxpayer $368,428.10 in gross receipts tax, penalty, and interest for the periods from March 31, 2004 to March 31, 2011. On December 13, 2012, the Taxpayer’s formal protest was received by the Department. The Hearing in the case was postponed through a combination of inadvertent delays and multiple motions for continuance and rescheduling by the Taxpayer and the Department. The Taxpayer’s subsidiary, RTG Medical, is a medical staffing agency that is physically located in Nebraska and provides medical professional staffing to medical facilities across the country, several of which are in New Mexico. The main issue in this protest was whether the receipts the Taxpayer received from providing medical staffing services in New Mexico were in a disclosed agency capacity and therefore exempt from gross receipts tax. Section 7-9-3.5(A)(3)(f) NMSA 1978 states that excluded from gross receipts are “amounts received solely on behalf of another in a disclosed agency capacity.” The Taxpayer argued they were acting in this capacity when they provided services to their clients. The Hearing Officer explained, however, that Regulation 22.214.171.124(C)(1) NMAC gives clarity to what disclosed agency means, stating that “an agency relationship exists if a person has the power to bind a principal in a contract with a third party.” This would mean the employee, if they were not paid by the Taxpayer, could seek payment from the client of the Taxpayer, which was not the case here. The Taxpayer provided evidence of an indemnification clause in the client’s contract, as well as results from a survey they took of their own employees, many of who had assumed that the company they were working for was an agent of the medical facility. But these considerations failed to persuade the Hearing Officer. The Taxpayer simply could not compel their client to take on their own liabilities. The Taxpayer also argued that, since the company is not physically located in New Mexico the receipts could be deductible. But the Hearing Officer determined that because the services were performed in New Mexico by their own employees these services were taxable. The Hearing Officer decided that the decision not to report the receipts fell under the definition of negligence and so penalty was appropriate. For all these reasons the Hearing Officer ordered that the receipts were subject to gross receipts tax and the protest should be denied.
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