Could Academy Leasing recover $10,112 of gross receipts tax overpayments when the Department repeatedly failed to act on amended returns but the company did not timely protest the inaction?

Plain-English summary

Academy Leasing could not recover $10,112 of gross receipts tax overpayments because it failed to timely protest the Department's repeated inaction on its refund claims. The company originally filed within the three-year refund period, but Section 7-1-26 imposed additional deadlines after the Department failed to grant or deny the claim.

An internal audit of October 1996 through October 1998 found $465 of underpayments in some months and $10,112 of overpayments in others. Academy prepared amended CRS returns and a month-by-month reconciliation, then sent them by certified mail in October 1999.

The Department routed the balance-due returns to collection but took no recorded action on the returns showing refunds. Academy sent the amended returns again in May 2000 and April 2001, repeatedly contacted the Department, and asked for the refund to be processed. It eventually filed a fourth set with the Department's refund form in October 2002.

A timely claim still required action after Department silence

Section 7-1-26 limited refund claims to three years from the end of the calendar year in which the payment was originally due. Academy's first filing was within that period.

But the statute also limited how long the Department could act on a filed claim. Under the version governing the October 1999 claim, if the Department neither granted nor denied any portion within 120 days, the Department lost authority to act on it. The taxpayer then had 90 days to pursue a statutory remedy or could refile within the remaining refund limitations period.

The Department took no action by February 26, 2000. Academy did not protest during the following 90 days, so the first claim was extinguished and its remaining option was to refile.

Each refiling left fewer periods open

Academy refiled on May 25, 2000. By then, the 1996 periods were already outside the three-year refund window. The Department again did not act within the applicable period, and Academy again did not timely protest its inaction.

The April 2001 refiling could reach only 1998 payments still within the three-year period. The Department did not grant or deny that claim, and Academy did not file a protest during the decision's stated 90-day protest window.

By the October 2002 filing, all reporting periods from October 1996 through October 1998 were outside the three-year limitations period. The Department denied that filing as untimely.

Poor agency handling did not extend the statutory deadlines

The hearing officer described the Department's refusal to act—or even acknowledge the amended returns—as difficult to explain or defend. Even so, the statute placed the burden on Academy to protect the claims by protesting the Department's inaction on time.

Because Academy missed those protest periods, the Department was statutorily prohibited from granting the earlier claims. Because the final claim came after the refund limitations period, it could not be granted either.

Result: protest DENIED. Academy Leasing received no refund of the $10,112 overpayment claim.

What this means for you

Businesses filing New Mexico refund claims

Track both the original three-year filing period and the separate deadline triggered when the Department does not act. A timely initial claim does not remain pending indefinitely.

Taxpayers submitting amended CRS returns

Keep certified-mail proof and a complete copy, but also calendar the Department's statutory response period and the deadline to protest silence.

Companies considering refiling

Refiling does not restore tax periods that have already expired. Each delay can reduce the portion of the claim still reachable under the three-year rule.

Taxpayers facing poor agency administration

Document every contact, but do not rely on assurances that a claim will be forwarded or processed. Statutory protest deadlines can control despite agency mishandling.

Common questions

Q: How much did Academy claim it overpaid?
A: $10,112 of gross receipts tax.

Q: Was the first refund claim timely filed?
A: Yes. The decision treated the October 1999 amended returns and reconciliation as a timely claim.

Q: Why did that claim not remain open?
A: After 120 days of Department inaction, Academy had 90 days to pursue a statutory remedy but did not do so.

Q: How many times did Academy submit the amended returns?
A: Four times: in October 1999, May 2000, April 2001, and October 2002.

Q: Did the hearing officer approve of the Department's handling?
A: No. The decision called the Department's failure to act or acknowledge the returns difficult to explain or defend, but still enforced the statutory deadlines.

Citations and references

Statute:

• NMSA 1978, § 7-1-26 — refund limitations period, Department authority to act, and remedies after denial or inaction

Source

• Listing: New Mexico Decisions & Orders
• Decision post: Academy Leasing
• Decision PDF: D&O 03-23

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
ACADEMY LEASING CORPORATION No. 03-23
ID NO. 02-233251-00 0
DENIAL OF REFUND OF GROSS RECEIPTS
TAXES PAID FOR REPORTING PERIODS
OCTOBER 1996 THROUGH OCTOBER 1998

DECISION AND ORDER

A formal hearing on the above-referenced protest was held December 4, 2003, before

Margaret B. Alcock, Hearing Officer. The Taxation and Revenue Department ("Department") was

represented by Bridget A. Jacober, Special Assistant Attorney General. Academy Leasing Corporation

(“Taxpayer”) was represented by Gerald Landgraf, its president, and Matthew Terry, its accountant.

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

FINDINGS OF FACT

1. During the periods at issue, the Taxpayer was engaged in business in New Mexico

and was registered with the Department for payment of gross receipts, compensating, and

withholding taxes, which are required to be paid monthly under the Department’s combined

reporting system (“CRS”).

2. In 1999, the Taxpayer conducted an internal audit of reporting periods October 1996

through October 1998 and determined that its gross receipts taxes had been underpaid in certain

months and overpaid in other months. The amount of the underpayments was $465; the amount of

the overpayments was $10,112.

3. The Taxpayer subsequently prepared amended CRS returns for reporting periods

October 1996 through October 1998 to correct the errors on the original returns.

4. On October 29, 1998, the Taxpayer mailed the amended returns to the Department

with a reconciliation sheet detailing the underpayments and overpayments on a month-by-month

basis.

5. The amended returns and reconciliation sheet were mailed by certified mail, return

receipt requested, and were received by the Department on November 2, 1999.

6. Upon receiving the returns, the Department sent the amended returns showing a

balance due to its collection unit. There is no record that the Department took any action on the

amended returns showing a refund due to the Taxpayer.

7. In May 2000, the Taxpayer received a collection letter concerning the unpaid gross

receipts taxes shown on its amended returns.

8. In response to the collection letter, the Taxpayer filed another copy of its amended

returns showing a refund due of $10,112. The Department’s records show that this set of amended

returns was received on May 25, 2000.

9. The Department continued to send collection letters to the Taxpayer for the unpaid

gross receipts taxes shown on the Taxpayer’s amended returns.

10. On March 27, 2001, Gerald Landgraf, the Taxpayer’s president, sent the Department

a letter stating that he was in receipt of the Department’s demands for payment of gross receipts

taxes in the amount of $464.72. His letter explained that he had not paid this amount because the

amended returns filed with the Department also showed overpayments in excess of $10,000. Mr.

Landgraf stated that he “would appreciate it if you would review this matter soon and refund the

requested amount.”

11. On April 6, 2001, Mr. Landgraf called the Department and provided the collector

with a new address and telephone number for the Taxpayer. When Mr. Landgraf asked about the

2
refund amount shown on the Taxpayer’s amended returns, the collector told Mr. Landgraf that the

Department’s system had no record of any overpayments.

12. On April 9, 2001, Matthew Terry, the Taxpayer’s accountant, personally delivered a

third set of the Taxpayer’s amended CRS returns to the Department’s Albuquerque office.

13. The collector who accepted the returns told Mr. Terry the returns would be

forwarded to the Department’s Revenue Processing Division in Santa Fe. Mr. Terry asked to have

someone from the Department call him once the amended returns were processed.

14. On May 29, 2001, the Taxpayer filed a registration update to correct the Taxpayer’s

address on the Department’s records.

15. On July 9, 2001, Gerald Landgraf sent the Department a letter enclosing a check to

cover the Taxpayer’s outstanding gross receipts taxes. Mr. Landgraf’s letter then noted that the

Taxpayer still had not heard from the Department concerning the Taxpayer’s $10,000 of gross

receipts tax overpayments. His letter concluded: “I would appreciate hearing from you on this

overpayment matter.”

16. The Department did not respond to Mr. Landgraf’s July 9, 2001 letter.

17. On September 21, 2001, Mr. Terry called the Department to find out whether the

Taxpayer’s amended CRS returns had been processed. The collector told Mr. Terry that only the

returns showing a liability had been posted, but said he would try to determine what had happened to

the amended returns showing a refund due.

18. On September 24, 2001, the Department’s collector notified Mr. Terry that the

Department had returned the packet of amended CRS returns to the Taxpayer on April 17, 2001

because the packet “needed a claim for refund & NTTC’s.”

3

19. On October 4, 2002, the Taxpayer submitted a fourth set of its amended CRS returns

for reporting periods October 1996 through 1998. This time, the Taxpayer included the

Department’s refund form, Application for Tax Refund, with the returns.

20. On October 25, 2002, the Department sent the Taxpayer a letter denying its claim for

refund of CRS taxes in the amount of $10,112. The reason given for the denial was that the claim

had not been filed within the limitations period set out in NMSA 1978, § 7-1-26, which requires all

claims to be filed within three years of the end of the calendar year in which the payment was

originally due.

21. On January 14, 2003, the Taxpayer filed a written protest to the denial of its claim for

refund.

DISCUSSION

The issue presented is whether the Taxpayer is entitled to a refund of the $10,112 of gross

receipts taxes it overpaid during the period October 1996 through October 1998. The Taxpayer

points out that its original refund claim was filed in October 1999, which was within the three-year

limitations period set out in NMSA 1978, § 7-1-26. After failing to hear from the Department and

then being told that the Department had no record of its amended returns, the Taxpayer refiled its

refund claim in May 2000, in April 2001, and again in October 2002. Based on this history, the

Taxpayer argues that its claim should be accepted as timely. The Department responds that it was

statutorily prohibited from taking action on the Taxpayer’s refund claims once 120 days had passed

from the date of filing. In order to protect its claims, the Taxpayer was required to file a timely

protest of the Department’s inaction, which the Taxpayer failed to do.

With some exceptions not applicable here, NMSA 1978, § 7-1-26 limits the time within

which a claim for refund may be filed to three years from the end of the calendar year in which the

4
payment was originally due. The Department’s authority to grant refund claims filed within this

period—and the remedies available to a taxpayer whose refund has not been granted—are set out in

Subsection B of § 7-1-26. In October 1999, that section read, in pertinent part:

B. The secretary or the secretary’s delegate may allow the claim in whole or in
part or may deny the claim. If the claim is denied in whole or in part in writing, the
claim may not be refiled. If the claim is not granted in full, the person, within ninety
days after either the mailing or delivery of the denial of all or any part of the claim,
may elect to pursue one, but not more than one, of the remedies in Paragraphs (1)
and (2) of this subsection. If the department has neither granted nor denied any
portion of a claim for refund within one hundred twenty days of the date the claim
was mailed or delivered to the department, the department may not approve or deny
the claim, but the person may refile it within the time limits set forth in Subsection C
of this section or may within ninety days elect to pursue one, but only one, of the
remedies in Paragraphs (1) and (2) of this subsection…. (emphasis added.)

Effective July 1, 2000, Subsection B was amended to extend the time within which the Department

is authorized to act on a refund claim from 120 days to 210 days after the date of filing. After the

expiration of 210 days, the Department is prohibited from acting on the claim unless the Taxpayer

has filed a timely protest to the Department’s inaction.

In this case, the Taxpayer’s original claim for refund was filed on October 29, 1999, the date

its amended returns and reconciliation sheet were mailed to the Department. The Department failed

to take any action on the claim during the next 120 days. As of February 26, 2000, the Department

lost its authority to either grant or deny the refund. At that point, the Taxpayer had 90 days within

which to protest the Department’s inaction. Because the Taxpayer failed to file a protest during the

90-day period between February 26, 2000 and May 27, 2000, the October 1999 refund claim was

extinguished, and the Taxpayer’s only option was to refile the claim.

On May 25, 2000, the Taxpayer refiled its amended CRS returns with the Department. By

this time, the 1996 tax year was outside the three-year limitations period set out in § 7-1-26, but

taxes paid from January 1997 forward were still eligible for refund. The Department failed to take

5
any action on the Taxpayer’s claim before September 22, 2000, the expiration of the 120 days within

the Department was authorized to act. The Taxpayer failed to file a protest to the Department’s

inaction during the 90-day period between September 22, 2000 and December 21, 2000. As a result,

the May 2000 refund claim became moot.

On April 9, 2001, the Taxpayer refiled its claim for refund, by which time only the 1998 tax

year was still within the three-year limitations period. The Department did not take action to grant

or deny the claim, and the Taxpayer did not protest the Department’s failure to act during the 90-day

protest period of August 7, 2001 and November 5, 2001.

On October 22, 2002, the Taxpayer filed its refund claim for the fourth time. All of the

reporting periods covered by the refund claim were now outside the three-year limitations period

and, on October 25, 2002, the Department denied the Taxpayer’s claim on this basis.

Based on the specific time limitations § 7-1-26 places on the Department’s authority to act

on refund claims, and on the Taxpayer’s failure to protest the Department’s failure to act, the

Taxpayer’s refund cannot be granted. The Taxpayer is understandably frustrated by the sequence of

events relating to its claim. The Department’s refusal to act on the claim—or even to acknowledge

receipt of the Taxpayer’s amended returns—is difficult to explain or defend. Nonetheless, the law

clearly places the burden on the Taxpayer to protect its refund claim by filing a written protest to the

Department’s inaction. Because the Taxpayer did not file a protest within the time period provided

in the statute, the Department is statutorily prohibited from granting the Taxpayer’s claim.

CONCLUSIONS OF LAW

1. The Taxpayer filed a timely, written protest to the Department’s denial of the

Taxpayer’s claim for refund of gross receipts taxes, and jurisdiction lies over the parties and the subject

matter of this protest.

6

2. Because the Taxpayer failed to file a timely protest to the Department’s failure to act on

the refund claims filed in October 1999, May 2000, and April 2001, the Department is statutorily

prohibited from granting those claims.

3. Because the Taxpayer’s October 2002 refund claim was filed more than three years

after the end of the calendar year in which payment of taxes for the October 1996 through October 1998

reporting periods was due, the Department is prohibited from granting that claim.

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

DATED December 9, 2003.

7