The Red Onion



On February 5, 2018, the Department assessed the Taxpayer as a successor in business for tax, penalty, and interest. The Taxpayer filed a timely protest with the Department on February 26, 2018. The Taxpayer and the previous business owner entered into a contract on July 17, 2017 for purchase of the restaurant business. The contract included the transfer of furniture and equipment. The Taxpayer operated the restaurant in the same business location but hired new employees, had a new menu, and obtained its own tax identification number. The issue to be decided in this protest is if the Taxpayer is a successor in business. The Hearing Officer used Regulation NMAC to help determine if the Taxpayer was considered a successor in business. Based on the eight factors, the Hearing Officer determined that the Taxpayer is a successor in business. The Taxpayer argued that the liability owed should be limited to the value of the equipment that was transferred with the business based on Section 7-1-63, NMSA 1978. The Taxpayer argued that the amount should not include any of the property that was repossessed by third parties that were found to not belong to the prior owner. The Hearing Officer determined that based on the way that the contract was written, the purchase was for intangible property and goodwill and therefore the full purchase price was the amount that would have been looked at in applying Section 7-1-63, NMSA 1978. However, the amount of tax, penalty, and interest that was due was less that the amount that the Taxpayer purchased the business for. For the foregoing reasons, the Taxpayer’s protest is denied.