If I pay my New Mexico gross receipts tax just a few days late, does the state charge interest for the whole month or only for the days I was late?

Plain-English summary

Under the law in effect in 2000, New Mexico charged a full month's interest for any fraction of a month a tax payment was late — so paying 11 days late meant owing a whole month's interest, not a prorated 11 days. Protest DENIED. (The Legislature later switched to daily interest, effective January 1, 2001.)

Rioja, Inc. owed gross receipts tax for January 2000, due February 25. It paid on March 8 — 11 days late. The Department assessed penalty and interest; Rioja paid the penalty but protested the interest, arguing the Department should have charged interest only for the 11 days the payment was actually late, not for a full month.

How the statute computed interest

The version of Section 7-1-67 in effect had two relevant parts. Subsection A says interest is due "from the first day following" the due date "until it is paid" — this sets the period interest runs. Subsection B sets the method: interest accrues at 15 percent a year, "computed at the rate of one and one-fourth percent per month or any fraction thereof." The hearing officer read these together: nothing requires daily computation; Subsection A fixes the period and Subsection B fixes the monthly method. Because interest is figured monthly, any fraction of a month counts as a whole month — so 11 days late produced one month's interest.

Two things reinforced the monthly reading

• Agency deference. The Department had consistently read the statute this way since 1965, and a long-standing, reasonable agency interpretation of a statute it administers is given significant weight (Gonzales v. Allstate; New Mexico Pharmaceutical Ass'n; In re Application of Sleeper).
• The 2000 amendment. Effective January 1, 2001, the Legislature rewrote Section 7-1-67(B) to delete "per month or any fraction thereof" and require interest computed "on a daily basis." A statutory amendment is presumed to change the prior law (In re Estate of Greig), which confirmed that the earlier version had indeed been monthly.

The hearing officer also noted (in a footnote) that the Legislature did not change the parallel "per month or any fraction of a month" language in the Section 7-1-69 late-payment penalty, and Rioja did not challenge the full-month penalty on its 11-day-late payment.

Result: protest DENIED — a full month's interest on the 11-day-late payment was correct under the 2000 law.

What this means for you

For 2000 and earlier: even a day or two late meant a full month's interest

Under the pre-2001 statute, interest was computed monthly, and any fraction of a month counted as a whole month. If you are dealing with an older period, do not expect interest to be prorated to the exact number of days late.

For payments due on or after January 1, 2001: interest is daily

The Legislature changed the rule. For late payments on or after that date, interest is computed on a daily basis, so it tracks the actual number of days late. Which rule applies depends on the period of the underlying tax.

The late-payment penalty is still charged by the full month

The 2000 amendment changed interest but not the Section 7-1-69 penalty, which still runs at 2 percent "per month or any fraction of a month." A payment even a few days late can draw a full month's penalty. Rioja did not contest that here.

A long-standing agency interpretation is hard to beat

Courts defer to an agency's reasonable, consistent, long-held reading of a statute it administers. Arguing that the Department has been miscalculating for decades is an uphill fight without clear statutory text on your side.

Common questions

Q: I paid my New Mexico tax a few days late. Is interest prorated to those days?
A: It depends on the period. For tax due before January 1, 2001, interest was computed monthly, so any fraction of a month counted as a full month. For tax due on or after that date, interest is computed daily.

Q: Why did 11 days late cost a whole month of interest here?
A: Because the 2000 version of Section 7-1-67 computed interest "per month or any fraction thereof." The 11-day delay fell within one month, and any fraction of a month was treated as a full month.

Q: Did the law change?
A: Yes. Effective January 1, 2001, the Legislature amended Section 7-1-67 to compute interest on a daily basis. The court treated that change as confirmation that the earlier law had been monthly.

Q: What about the penalty — is that daily now too?
A: No. The late-payment penalty under Section 7-1-69 still runs at 2 percent per month or any fraction of a month, so a short delay can still draw a full month's penalty.

Citations and references

Statutes and regulations:

• NMSA 1978, § 7-1-67 (1996) — interest on late-paid tax; Subsection A sets the period interest runs, Subsection B set the rate at 15% a year, "one and one-fourth percent per month or any fraction thereof" (monthly computation)
• NMSA 1978, § 7-1-69 — late-payment penalty of 2% "per month or any fraction of a month" (unchanged by the 2000 amendment)
• NMSA 1978, § 7-1-24 — protest procedure
• Regulation 3 NMAC 1.10.18.2 — interest begins to accrue the day after the due date and continues until the tax is paid
• 2000 N.M. Laws, ch. 28, § 11 — amended Section 7-1-67(B), effective January 1, 2001, to require interest computed "on a daily basis"

Cases cited:

• Gonzales v. Allstate Ins. Co., 1996-NMSC-041, 122 N.M. 137, 921 P.2d 944 (1996); New Mexico Pharmaceutical Ass'n v. State, 106 N.M. 73, 738 P.2d 1318 (1987) — an agency's reasonable interpretation of a statute it administers is persuasive and given deference
• In re Application of Sleeper, 107 N.M. 494, 760 P.2d 787 (Ct. App. 1988) — a long-standing administrative construction is given even greater weight
• In re Estate of Greig, 107 N.M. 227, 755 P.2d 71 (Ct. App. 1988) — when the Legislature amends a law, it does so to change the law as it previously existed

Source

• Listing: New Mexico Decisions & Orders
• Decision post: Rioja, Inc.
• Decision PDF: D&O 00-22

Original ruling text

BEFORE THE HEARING OFFICER
OF THE TAXATION AND REVENUE DEPARTMENT
OF THE STATE OF NEW MEXICO

IN THE MATTER OF THE PROTEST OF
RIOJA, INC. No. 00-22
I.D. NO. 02-246821-00-8
ASSESSMENT NO. 2507781

DECISION AND ORDER

A formal hearing on the above-referenced protest was held July 18, 2000, before Margaret B.

Alcock, Hearing Officer. Rioja, Inc. (“Taxpayer”) was represented by Orville C. McCallister, who is

both president of the company and an attorney. The Taxation and Revenue Department

("Department") was represented by Monica M. Ontiveros, Special Assistant Attorney General. Based

on the evidence and arguments presented, IT IS DECIDED AND ORDERED AS FOLLOWS:

FINDINGS OF FACT

1. The Taxpayer is a corporation engaged in business in New Mexico.

2. The Taxpayer is registered with the Department for payment of gross receipts tax.

3. The Taxpayer’s gross receipts tax for reporting period January 2000 was due on or

before February 25, 2000.

4. The Taxpayer paid the gross receipts tax due February 25, 2000 on March 8, 2000,

eleven days late.

5. On March 28, 2000, the Department issued Assessment No. 2507781 to the Taxpayer

for penalty and interest on the Taxpayer’s late payment of gross receipts tax.

6. The Taxpayer paid the penalty.

7. The Taxpayer protested the assessment of interest, asserting that the Department

incorrectly assessed interest for an entire month when it should have assessed interest for only the
11-day period the payment was late. The Taxpayer’s protest letter was received by the Department

on April 4, 2000.

8. The Department has consistently interpreted Section 7-1-67 NMSA 1978 to impose a

month's interest for any fraction of a month that a payment is late.

DISCUSSION

The sole issue to be decided is whether the Department correctly calculated interest on the

Taxpayer’s late payment of tax. Section 7-1-67 NMSA 1978 (1996) governs the imposition of

interest during the period at issue and states, in pertinent part:

A. If any tax imposed is not paid on or before the day on which it becomes
due, interest shall be paid to the state on such amount from the first day
following the day on which the tax becomes due, without regard to any
extension of time or installment agreement, until it is paid....

B. Interest due to the state under Subsection A or D of this section shall be at
the rate of fifteen percent a year, computed at the rate of one and one-fourth
percent per month or any fraction thereof....

The quoted language has remained virtually unchanged since the Tax Administration Act was first

enacted in 1965. See, 1965 N.M. Laws, ch. 248, § 68. The Department has consistently inter-preted

this language to impose a month's interest for any fraction of a month that a payment is late. The

Taxpayer argues that the Department’s interpretation renders Subsection A of Section 7-1-67

meaningless. The Taxpayer asserts that because Subsection A imposes interest only “until it is

paid”, interest must be calculated on a daily basis. The Taxpayer also relies on Department

Regulation 3 NMAC 1.10.18.2, which states that interest “shall begin to accrue” on the day

following the due date and shall continue to accrue “until the tax indebtedness is paid.”

There is nothing in Subsection A or the Department’s regulation that mandates the

calculation of interest on a daily basis. Subsection A simply determines the period for which interest

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is due. Subsection B determines the method of calculating the interest. The statute provides that

interest is to be calculated on a monthly, not a daily basis. This conclusion is consistent with the

language of the statute and is also consistent with the Department’s long-standing interpretation of

Section 7-1-67. Although not binding, an agency's reasonable interpretation of a statute the agency

is charged with administering is persuasive and will be given deference by the courts. Gonzales v.

Allstate Ins. Co., 1996-NMSC-41, 122 N.M. 137, 142, 921 P.2d 944, 949 (1996); New Mexico

Pharmaceutical Ass'n v. State, 106 N.M. 73, 75, 738 P.2d 1318, 1320 (1987). When an

administrative construction is of long standing, as is the case here, it is given even greater weight. In

re Application of Sleeper, 107 N.M. 494, 498, 760 P.2d 787, 791 (Ct. App.), cert. quashed, 107 N.M.

413, 759 P.2d 200 (1988).

Also of significance is the fact that the 2000 Legislature amended Section 7-1-67, effective

January 1, 2001, by deleting the language requiring interest to be computed “at the rate of one and

one-fourth percent per month or any fraction thereof” and replacing it with a directive that interest be

computed “on a daily basis.” See 2000 N.M. Laws, ch. 28, § 11. The 2000 amendment substantially

rewrote the provisions of Section 7-1-67(B).1 As stated by the New Mexico Court of Appeals in In

re Estate of Greig, 107 N.M. 227, 229, 755 P.2d 71, 73 (Ct. App. 1988): "When the legislature

enacts a new law or amends an existing one, it does so for the express purpose of

changing the law as it previously existed." The 2000 amendment confirms that the legislative intent

in enacting the original version of Section 7-1-67 was to calculate interest on a monthly basis.

CONCLUSIONS OF LAW

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It is worth noting that the legislature did not change similar language in Section 7-1-69 NMSA 1978, which still
imposes a late-payment penalty of “two percent per month or any fraction of a month from the date the tax was due
multiplied by the amount of tax due but not paid....” The Taxpayer in this case has not challenged the Department’s
interpretation of Section 7-1-69 to require imposition of a full month’s penalty on the Taxpayer’s payment of tax
eleven days late.

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1. The Taxpayer filed a timely, written protest to Assessment No. 2507781 pursuant to

Section 7-1-24 NMSA 1978, and jurisdiction lies over the parties and the subject matter of this

protest.

2. The Department correctly assessed one month's interest on the Taxpayer’s late

payment of gross receipts tax eleven days after the due date.

For the foregoing reasons, the Taxpayer's protest IS DENIED.

DATED July 21, 2000.

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