Could a large monthly CRS taxpayer avoid a penalty for a one-day-late payment because it did not receive personal notice of the special payment rule?

Plain-English summary

Crawford Chevrolet owed a $460.80 penalty because its monthly combined-reporting-system payment arrived one day late under New Mexico's special payment rule. The company did not need personal notice from the Department before the statutory requirement applied.

Crawford was registered for gross receipts, compensating, and withholding taxes, reported together under the monthly CRS system. Its average monthly payments during 2004 exceeded $25,000, making it subject to the 2005 special payment methods in Section 7-1-13.1.

For a check payment, the rule required the Department to receive the check one banking day before the statutory due date. Crawford's office manager had not read the CRS Filer's Kit or checked the Department's online information and did not know about the rule.

Most 2005 payments nevertheless arrived on time. The manager delayed mailing the September reporting-period check in October, and it arrived one day late. The Department assessed a $460.80 penalty.

Self-reporting placed the duty on Crawford

Section 7-1-13(B) placed responsibility on the taxpayer to determine and timely pay its obligations. The governing statutes and regulations supplied legal notice.

The Department also included special-payment information in the semiannual CRS Filer's Kit and published a detailed explanation in FYI-401 online and in print. Crawford could not wait for individualized notice before complying.

Past compliance did not authorize a waiver

Crawford asked the hearing officer to consider its history of timely payment. But Section 7-1-69 did not authorize the Department or hearing officer to waive the penalty on that ground.

An administrative agency could not alter the standard chosen by the Legislature merely because the taxpayer had otherwise complied.

Result: protest DENIED. The $460.80 penalty remained due.

What this means for you

Businesses whose monthly tax payments grow

Monitor whether prior-year payment levels trigger a different payment method or earlier receipt deadline. The obligation can arise from the statute without a personalized Department letter.

Taxpayers paying CRS liability by check

Account for the required receipt date, not merely the mailing or ordinary due date. Here, a one-day delay produced the penalty.

Tax staff using filing packets and online guidance

Read periodic filer materials and published procedures. Failure to review available instructions did not excuse the missed deadline.

Businesses with strong compliance histories

Past timely payments did not give the hearing officer discretion to waive a penalty required for the late period.

Common questions

Q: Why was Crawford subject to the special payment method?
A: Its average monthly gross receipts, compensating, and withholding tax payments during 2004 exceeded $25,000.

Q: What deadline applied to its check?
A: The Department had to receive the check one banking day before the statutory due date.

Q: How late was the September 2005 payment?
A: One day late.

Q: Did the Department have to send personal notice?
A: No. The statute, self-reporting system, filer kit, and published guidance supplied notice.

Q: Could an otherwise good payment history eliminate the penalty?
A: No. The hearing officer found no statutory authority to waive it for that reason.

Citations and references

Statutes:

• NMSA 1978, § 7-1-13(B) — taxpayer's self-reporting obligation
• NMSA 1978, § 7-1-13.1 — special payment methods
• NMSA 1978, § 7-1-69(A) — penalty for failure to use required special payment methods

Cases cited:

• Tiffany Construction Co. v. Bureau of Revenue, 90 N.M. 16, 558 P.2d 1155 (Ct. App. 1976)
• Vivigen, Inc. v. Minzner, 117 N.M. 224, 870 P.2d 1382 (Ct. App. 1994)
• State ex rel. Taylor v. Johnson, 1998-NMSC-015, 961 P.2d 768
• State ex rel. State Park & Recreation Commission v. New Mexico State Authority, 76 N.M. 1, 411 P.2d 984 (1966)

Source

• Listing: New Mexico Decisions & Orders
• Decision post: Crawford Chevrolet, Inc.
• Decision PDF: D&O 06-10

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
CRAWFORD CHEVROLET, INC.
ID No. 02-104565-00-8, TO ASSESSMENT No. 06-10
OF PENALTY ISSUED UNDER LETTER
ID L0637693440

DECISION AND ORDER

A formal hearing on the above-referenced protest was held on June 19, 2006, before

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

represented by Jeffrey W. Loubet, Special Assistant Attorney General. Crawford Chevrolet

(“Taxpayer”) was represented by Margaret Marino, its office manager. Based on the evidence and

arguments presented, IT IS DECIDED AND ORDERED AS FOLLOWS:

FINDINGS OF FACT

1. The Taxpayer is engaged in business in New Mexico and is 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. During calendar year 2004, the Taxpayer’s average monthly payment of gross

receipts, compensating, and withholding taxes exceeded $25,000. As a result, the Taxpayer was

required to pay its 2005 CRS taxes according to the special payment methods set out in NMSA 1978,

§ 7-1-13.1.

3. The CRS Filer’s Kit the Department mails to CRS taxpayers every six months

includes information concerning special payment requirements. In addition, the Department has

issued Publication FYI-401, which contains a detailed explanation of special payment procedures.

That publication is posted on the Department’s web site and also can be requested in printed form.

4. The Taxpayer’s office manager did not read the CRS Filer’s Kit or check the

information available on the Department’s web site. As a result, she was not aware that the

Taxpayer was required to mail its monthly check in payment of 2005 CRS taxes so that the

Department received the check one banking day before the statutory due date.

5. For most months during 2005, the office manager mailed the Taxpayer’s CRS

payment early enough to meet the special payment requirements.

6. In October 2005, the office manager delayed mailing the check for the September

2005 reporting period and the payment for that month’s taxes was one day late.

7. On November 8, 2005, the Department issued an assessment under Letter ID. No.

L0637693440, assessing the Taxpayer for $460.80 of penalty resulting from the Taxpayer’s failure to

follow the special payment requirements of NMSA 1978, § 7-1-13.1.

8. On December 7, 2005, the Taxpayer filed a written protest to the assessment.

DISCUSSION

The issue to be decided is whether the Taxpayer is liable for the ten percent negligence

penalty imposed by NMSA 1978, § 7-1-69(A) for failure to pay tax “in accordance with the

provisions of Section 7-1-13.1 NMSA 1978 when required to do so....” The Taxpayer acknowledges

that its payment of CRS taxes for the September 2005 reporting period was late, but maintains that

penalty should be waived because it was not notified that it was subject to the special payment

requirements set out in the statute.

The Taxpayer’s argument is based on a misunderstanding of New Mexico’s self-reporting tax

system. It is up to the Taxpayer—not the Department—to determine the Taxpayer’s obligation for

taxes due to the state and to pay those taxes in a timely manner. See, NMSA 1978, § 7-1-13(B);

Tiffany Construction Co. v. Bureau of Revenue, 90 N.M. 16, 17, 558 P.2d 1155, 1156 (Ct. App. 1976),

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cert. denied, 90 N.M. 255, 561 P.2d 1348 (1977). In Vivigen, Inc. v. Minzner, 117 N.M. 224, 228, 870

P.2d 1382 (Ct. App. 1994), the court of appeals rejected an argument very similar to that raised by

the Taxpayer in this case, noting that:

Vivigen seems to be complaining that the Department did not definitively tell it that
it needed to pay compensating taxes on out-of-state purchases so that it could have
avoided taxes, interest, and penalties for compensating taxes accrued from and after
February 1989. Any necessary notice, however, was provided by New Mexico
statutes. (emphasis added).

Here, New Mexico’s tax statutes and regulations, as well as the information contained in the CRS

Filer’s Kit and Publication FYI-401, gave the Taxpayer notice of its obligation to use the special

payment methods set out in § 7-1-13.1. The Taxpayer was not entitled to wait for the Department to

notify it of this obligation before penalty accrued on late payments.

The Taxpayer also asks that penalty be waived because it has a history of timely payment.

This is not something the Department can consider. In State ex rel. Taylor v. Johnson, 1998-NMSC-

015 ¶ 022, 961 P.2d 768, 774-775, the New Mexico Supreme Court made the following observations

concerning the power of administrative agencies:

Generally, the Legislature, not the administrative agency, declares the policy and
establishes primary standards to which the agency must conform. See State ex rel.
State Park & Recreation Comm'n v. New Mexico State Authority, 76 N.M. 1, 13, 411
P.2d 984, 993 (1966). The administrative agency's discretion may not justify altering,
modifying or extending the reach of a law created by the Legislature....

NMSA 1978, § 7-1-69 governs the imposition of penalty and does not give the Department or its

hearing officer authority to waive penalty based on a taxpayer’s past reporting history.

CONCLUSIONS OF LAW

A. The Taxpayer filed a timely, written protest to the Department’s assessment of penalty,

and jurisdiction lies over the parties and the subject matter of this protest.

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B. The Taxpayer had a legal obligation to pay its 2005 CRS taxes using the special

payment methods set out in NMSA 1978, § 7-1-13.1, and the fact that the Taxpayer did not receive

personal notice of this obligation did not excuse it from compliance.

C. Because the Taxpayer did not pay its CRS taxes for the September 2005 reporting

period within the time frame required by NMSA 1978, § 7-1-13.1, penalty was properly imposed.

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

DATED June 21, 2006.

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