Emily W. Metzloff



On July 29, 2016, the Department assessed the Taxpayer for gross receipts tax, penalty and interest for the tax periods from January 1, 2012 through December 31, 2013.  This assessment came about after the Department detected a mismatch between income reported by the Taxpayer on her federal Schedule C and her not having filed gross receipts tax.  By correspondence dates August 16, 2016, the Taxpayer’s CPA requested on behalf of the Taxpayer that the Department waive the assessed penalty.  The Department accepted this correspondence as a formal protest.  During the period at issue, the Taxpayer worked as an independent contractor, editing text for clients for publication on the internet.  The Taxpayer did not protest the assessment of principal or interest, only the assessment of penalty.  The Taxpayer resided in New Mexico during the periods at issue, and used a CPA in New York to prepare her income taxes.  In response to the assessment, the CPA wrote in his correspondence that because they were not aware of the gross receipts tax, they could not properly advise the client and he asked that the penalty be waived.  The Taxpayer never consulted with a tax professional based in New Mexico.  Penalty may only be abated when a Taxpayer is able to show that he or she was not negligent in failing to file.  Pursuant to the definition of negligence in Regulation NMAC, the Taxpayer was negligent in failing to report and pay gross receipts tax.  Regulation NMAC provides other grounds for abatement of penalty in certain circumstances, but again the Taxpayer was unable to show non-negligence.  The Taxpayer’s protest was denied.