Could a registered gas-station owner shift gross receipts tax to informal operators and defeat reconstructed assessments without producing business records?

Plain-English summary

Abdul Al-Kasir was responsible for gross receipts tax from two Albuquerque gas stations, and the Department could reconstruct their sales when he failed to provide adequate records. Business registrations, returns, bank accounts, checks, and federal tax filings outweighed his claims that other people operated the stations.

The case covered Gas For Less and Super Save over several periods from 1999 through 2003. The Department issued three assessments:

• $132,046.11 of gross receipts tax, plus interest, for Gas For Less reporting periods from March 31, 2001, through June 30, 2002;
• $353,644.84 of gross receipts tax, plus penalty and interest, against Al-Kasir for periods from June 30, 1999, through September 30, 2002; and
• $69,535.12 of gross receipts tax, plus penalty and interest, for Super Save periods from September 30, 2002, through June 30, 2003.

Al-Kasir acknowledged responsibility for Super Save from October 2002 through June 2003 and withdrew his protest to that assessment. The remaining issues were whether he operated the stations during the earlier periods and whether the Department's estimation methods were proper.

The evidence tied Gas For Less to Al-Kasir

Al-Kasir leased the Gas For Less property, registered himself as its sole proprietor, obtained the city business registration, filed its quarterly CRS returns, signed its tax checks, and maintained bank accounts in its name.

He said Ray Arun took over day-to-day operations. But there was no formal sublease, the property lease barred assignment without written consent, and the station continued to use Al-Kasir's name and business license. A private arrangement about who should pay tax could not shift the legal incidence of tax between Al-Kasir and the state.

The evidence also supported Super Save ownership and operation

Al-Kasir claimed that Said Guermali and later Smoker's Co-op operated Super Save. The record showed that Guermali's registrations ended in July 1999, when Al-Kasir transferred the property to himself, registered Super Save as his sole proprietorship, filed CRS returns, obtained NTTCs, and paid a fuel supplier.

Although Smoker's Co-op later signed a lease, Al-Kasir and its president used Al-Kasir's bank accounts for station expenses. Al-Kasir continued signing fuel checks, and his 2001 federal return reported $837,839 of business receipts from gasoline sales at Super Save rather than rental income.

He did not meet his burden to prove that someone else, rather than he, operated the station during the disputed period.

Missing records authorized reconstruction

Section 7-1-10(A) required taxpayers to maintain records allowing accurate tax computation. Al-Kasir did not provide invoices, cash-register tapes, daily sales reports, journals, ledgers, or comparable station records, even after a subpoena and multiple opportunities.

Section 7-1-11(D) and Regulation 3.1.5.8 allowed reasonable alternative methods when records did not exist or were insufficient. The auditor used:

• the gross receipts on Al-Kasir's 1999 federal Schedule C;
• station bank deposits for 2000 and 2001; and
• third-party fuel gallons multiplied by AAA of New Mexico's average retail gasoline price for 2002.

Unsupported objections did not defeat the estimates

Al-Kasir said bank deposits included other income but did not identify individual nontaxable deposits or document their sources. He said his stations charged less than the market average but produced no register tapes, invoices, ledgers, or other evidence of actual selling prices.

Because assessments were presumed correct under Section 7-1-17(C), those unsupported assertions did not carry his burden. The chosen bank-deposit and industry-comparison methods were authorized and reasonable on the available record.

Result: protest DENIED. Al-Kasir was responsible for both stations' tax, and the reconstructed assessments stood.

What this means for you

Business owners allowing another person to operate under their license

An informal agreement may not shift tax liability to the operator. Registrations, licenses, returns, bank accounts, and actual conduct can keep the registered owner responsible to the state.

Businesses leasing an operating location

A written lease is relevant but not conclusive when financial records and tax filings show the purported landlord continued operating the business.

Cash-intensive businesses

Maintain register tapes, invoices, ledgers, bank reconciliation, and sales records. If adequate records are missing, the Department may reconstruct receipts using indirect methods.

Taxpayers challenging an estimated audit

Identify specific deposits or transactions and support them with records. General testimony that deposits were nontaxable or prices were below average did not overcome the assessment here.

Common questions

Q: Why was Al-Kasir responsible for Gas For Less?
A: He held the lease and registrations, filed returns, signed checks, maintained business accounts, and allowed the station to operate under his name and license.

Q: Did a private agreement with another operator shift the tax?
A: No. The decision said private arrangements could not shift the taxpayer's legal obligation as between the state and the taxpayer.

Q: Why did the Department estimate receipts?
A: Al-Kasir did not provide the ordinary business records needed to calculate actual sales.

Q: What estimation methods were used?
A: Federal Schedule C receipts, bank deposits, and supplier-reported gallons multiplied by average retail gasoline prices.

Q: How could Al-Kasir have challenged the estimates?
A: He needed credible evidence identifying nontaxable deposits or showing actual station prices and receipts; he produced none.

Citations and references

Statutes and regulation:

• NMSA 1978, § 7-1-10(A) — duty to maintain records permitting accurate tax computation
• NMSA 1978, § 7-1-11(D) — reasonable estimation when records are missing or insufficient
• NMSA 1978, § 7-1-17(C) — presumption that an assessment is correct
• Regulation 3.1.5.8 NMAC — alternative audit methods

Cases cited:

• MPC Ltd. v. New Mexico Taxation & Revenue Department, 2003-NMCA-021, 133 N.M. 217, 62 P.3d 308
• Continental Inn v. New Mexico Taxation and Revenue Department, 113 N.M. 588, 829 P.2d 946 (Ct. App. 1992)
• Torridge Corp. v. Commissioner of Revenue, 84 N.M. 610, 506 P.2d 354 (Ct. App. 1972)
• Archuleta v. O'Cheskey, 84 N.M. 428, 504 P.2d 638 (Ct. App. 1972)

Source

• Listing: New Mexico Decisions & Orders
• Decision post: Abdul Al-Kasir
• Decision PDF: D&O 06-14

Original ruling text

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

IN THE MATTER OF THE PROTESTS OF
ABDUL AL-KASIR No. 06-14
ID No. 02-403814-00-8
ASSESSMENT ISSUED UNDER LETTER ID NO. L0538793984
GAS FOR LESS
ID No. 02-464211-00-8
ASSESSMENT ISSUED UNDER LETTER ID NO. L0404576256
SUPER SAVE
ID No. 02-941381-00-8
ASSESSMENT ISSUED UNDER LETTER ID NO. L1145919488

DECISION AND ORDER

A formal hearing on the above-referenced protest was held on August 2, 2006 and then

continued to August 23, 2006, before Margaret B. Alcock, Hearing Officer. The Taxation and

Revenue Department (“Department”) was represented by Jeffrey W. Loubet, Special Assistant

Attorney General. Abdul Al-Kasir, doing business as Gas for Less and Super Save, was

represented by his attorney, Louis J. Vener. Based on the evidence and arguments presented, IT

IS DECIDED AND ORDERED AS FOLLOWS:

FINDINGS OF FACT
Gas For Less, 1700 Bridge Boulevard SW
Albuquerque, New Mexico

1. Beginning in March 2001, Abdul Al-Kasir leased property located at 1700 Bridge

Boulevard SW in Albuquerque, New Mexico, from Kenneth and Alfred Mondragon. The lease

term ended February 28, 2006, with renewal options. (Dept. Ex. B at B5.6).

2. The lease specified that Mr. Al-Kasir could use the premises only for conducting

the business of a retail gasoline station, grocery store, and U-Haul dealership and provided that

he could not “assign or sublease any interest in the Premises” without the landlord’s prior written

consent. (Dept. Ex. A at B5.6-B5.7).

3. In March 2001, Mr. Al-Kasir filed an “Application for Business Tax Identification

Number” with the Taxation and Revenue Department stating that he was the owner and sole

proprietor of the business operating at 1700 Bridge Boulevard SW under the name “Gas for

Less.” Mr. Al-Kasir described the nature of his business as “Gas sell” and listed the start date as

April 1, 2001. (Dept. Ex. B at B 11.5).

4. Effective April 1, 2001, the City of Albuquerque issued a business registration

certificate for the business located at 1700 Bridge Boulevard SW to Mr. Al-Kasir DBA Gas For

Less. (Dept. Ex. B at B11.7).

5. Mr. Al-Kasir filed quarterly gross receipts tax returns under the name Gas for Less

for reporting periods beginning April 2001 and ending June 2002. Mr. Al-Kasir’s signature

appears on the CRS returns with the title “Manager.” The checks accompanying the returns were

also signed by Mr. Al-Kasir. (Dept. Ex. B at B11.8 to B11.12).

6. Beginning in May 2001, Mr. Al-Kasir maintained a bank account at New Mexico

Educators Federal Credit Union under the name “Abdul W. Al-Kasir/DBA Gas for Less” using

the address at 1700 Bridge Boulevard SW. (Dept. Ex. B at B5.9 to B5.42).

7. Mr. Al-Kasir maintained a second bank account at New Mexico Educators

Federal Credit Union under the name “Abdul W. Al-Kasir/DBA Gas for Less” using the address

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of the Super Save service station at 6102 Central Avenue, SW in Albuquerque. (Dept. Ex. A at

B5.93 to B5.109).

8. At some point, Mr. Al-Kasir allowed Ray Arun, who had been employed at the

Super Save service station on Central Avenue, to take over at least some of the day-to-day

operation of Gas For Less. (Dept. Ex. B at B11.6; Taxpayer Ex. 1).

9. Mr. Al-Kasir knew that Mr. Arun was in the country illegally and could not obtain

a business license in his own name. (Al-Kasir Testimony).

10. Mr. Al-Kasir did not enter into a sublease or other formal contract with Mr. Arun,

who operated Gas For Less under Mr. Al-Kasir’s name and business license. (Dept. Ex. B at

B11.6; Taxpayer Ex. 1, Answer, Crossclaim and Counterclaim ¶ 2).

11. On May 15, 2002, Mr. Al-Kasir canceled the CRS ID number for Gas For Less.

(Dept. Ex. B at B10.2, GN1.1).

Super Save, 6102 Central SW
Albuquerque, New Mexico

12. In 1995, Tri-Peaks, Inc. was the owner and operator of a gas station and

convenience store located at 6102 Central SW in Albuquerque. (Dept. Ex. A at B3.1; Al-Kasir

Testimony).

13. In 1997, Abdul Al-Kasir bought out the other shareholders and became the sole

owner of Tri-Peaks. (Al-Kasir Testimony).

14. Mr. Al-Kasir retired Tri-Peaks’ CRS ID number with the Department effective

January 1, 1999. (Dept. Ex. A at DN1.1).

15. On May 1, 1999, Tri-Peaks entered into a lease agreement with Said Guermali to

rent the gas station and convenience store, with all equipment and inventory, for $2,800 for the

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first three months and $3,000 thereafter. The lease term was for one year with the option to

renew on an annual basis. (Taxpayer Ex. 3; Dept. Ex. A at B5.2).

16. Effective April 1, 1999, Said Guermali registered the gas station business located

at 6102 Central SW with the Department under “Guermali & Taibi,” but retired this CRS

registration effective June 1, 1999. (Dept. Ex. A at DN1.1).

17. Effective June 1, 1999, Mr. Guermali registered the gas station business located at

6102 Central SW with the Department under the name “Guermali Inc.,” but retired this second

CRS registration effective July 3, 1999. (Dept. Ex. A at DN1.1)

18. In July 1999, Mr. Al-Kasir transferred the property at 6102 Central SW out of the

corporation, Tri-Peaks, Inc., and into his individual name. (Al-Kasir Testimony).

19. Effective July 16, 1999, Mr. Al-Kasir registered the gas station located at 6102

Central SW with the Department as a sole proprietorship doing business under the name “Super

Save.” On the registration application, Mr. Al-Kasir described the business as “Gas station/

convenience store/sale & repair used cars/U-Haul rental.” (Dept. Ex. A at DN1.1, B10.1).

20. Mr. Al-Kasir filed quarterly CRS reports for reporting periods July 1999 through

December 2000 under the Super Save registration. (Dept. Ex. A at GN1.1).

21. On September 3, 1999, the Department issued 100 Type 2 nontaxable transaction

certificates (“NTTCs”) to Super Save. On April 4, 2000, Mr. Al-Kasir executed one of Super

Save’s Type 2 certificates to a third party gasoline distributor. (Dept. Ex. A at DN1.1)

22. On November 1, 2000, Mr. Al-Kasir entered into a Real Estate Lease with

Smoker’s Co-op Corporation to lease the commercial property located at 6102 Central SW

“known as the Super Save Gas Station together with the Mini-mart, excepting the used car lot

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and storage area and the U-Haul Business.” The lease agreement was signed by Abdul Al-Kasir

as landlord and by Samir Summa, president of Smoker’s Co-op Corporation, as tenant. (Dept.

Ex. A at B5.3).

23. On February 5, 2001, Mr. Al-Kasir sent a letter to Kewa Gas, Limited, stating that

Mr. Kasir had leased the gas station located at 6102 Central SW to Smoker’s Co-op Corporation,

doing business as Super Save, and advising Kewa that “I will no longer be responsible for further

gasoline purchases at the described location.” (Dept. Ex A at B11.2; Taxpayer Ex. 3).

24. Effective November 1, 2000, Mr. Al-Kasir retired his CRS ID number for Super

Save. (Dept. Ex. A at DN1.1, B10.1).

25. Smoker’s Co-op registered with the Department for payment of CRS taxes in

August 2000. Effective November 1, 2000, the corporation updated its CRS registration to add

the Super Save gas station. (Dept. Ex. A at DN1.2).

26. Smoker’s Co-op never retired its CRS ID number, but the last CRS report filed

under this number was for reporting period January 2001. (Dept. Ex. A at DN1.2)

27. The check issued to the Department in payment of Smoker’s Co-op’s CRS tax

liability for the January 2001 reporting period was signed by Samir Summa and was drawn on

the same bank account used by Mr. Al-Kasir in making CRS payments to the Department during

the 1999 and 2000 tax years. (Dept. Ex. A at DN1.2).

28. Beginning in November 2000, the name on one of Mr. Al-Kasir’s accounts at
    New Mexico Educators Federal Credit Union changed from (Dept. Ex. A at B5.83):
    Abdul W. Al-Kasir Abdul W. Al-Kasir
    DBA Super Save to: Samir Z Y Summa
    6102 Central Ave SW DBA Super Save
    Albuquerque NM 87105 6102 Central Ave SW
    Albuquerque NM 87105

5

29. In January 2000, Mr. Al-Kasir signed a check to Kewa Gas, Ltd., a third party

gasoline distributor, from another account at New Mexico Educators Federal Credit Union. In

November 2000, Mr. Summa signed a check to Kewa Gas from the same account. The name

shown on the checks for that account was “Super Save Food Mart & Gas.” (Dept. Ex. A at

B11.7 to B11.8)

30. On May 29, 2001, Mr. Al-Kasir signed two checks made out to Kewa Gas from a

third account at New Mexico Educators Federal Credit Union where the name on the checks was

“Gas For Less/Super Save.” One check had the notation “For Gas For Less,” and the second

check had the notation “For Super Save Gas.” (Dept. Ex. A at B11.5).

31. On June 20, 2001, Mr. Al-Kasir signed another check to Kewa Gas from the “Gas

For Less/Super Save” account with the notation “For Super Save Gas.” (Dept. Ex. A atB11.4).

32. In October 2002, Mr. Al-Kasir again registered the Super Save gas station with

the Department under his name as sole proprietor. (Dept. Ex. A at GN1.1).

The Department’s Audit

33. In January 2003, the Department sent letters of intent to audit to Mr. Al-Kasir: one

to the location of Gas For Less at 1700 Bridge Boulevard SW and one to the location of Super

Save at 6102 Central SW. (Dept. Ex. A at B8; Dept. Ex. B at B8).

34. On January 31, 2003, Mr. Al-Kasir met with the auditor and they agreed that the

auditor would contact him in April 2003 to set up an appointment to come to his place of

business and review his records to determine if all gross receipts taxes had been paid. (Dept. Ex.

A at B4.1 to B4.2).

6

35. At that time, Mr. Al-Kasir maintained that the did not operate the service stations

during most of the audit period and provided a copy of the May 1, 1999 lease agreement between

Tri-Peaks and Said Guermali and a copy of the November 1, 2000 real estate lease between Mr.

Al-Kasir and Smoker’s Co-op Corporation. . (Dept. Ex. A at B4.1 to B4.2).

36. In early April 2003, the auditor made several telephone calls to schedule an

appointment with Mr. Al-Kasir, who told the auditor that his family had just been killed in Iraq

and he needed another month to deal with the situation. . (Dept. Ex. A at B4.2).

37. The auditor called again in May and was referred to Mr. Al-Kasir’s attorney,

Robert Fiser. The auditor set up an appointment with Mr. Fiser, who subsequently canceled the

meeting when Mr. Al-Kasir failed to provide Mr. Fiser with the records requested by the

Department. (Dept. Ex. A at B4.3).

38. In June 2003, the Department issued a subpoena to Mr. Al-Kasir for the records

she needed to conduct the audit, including bank statements, invoices or bills from vendors, cash

register tapes and daily sales reports, journals, general ledgers, financial statements, leases or

other contracts, and federal and state income tax returns filed for the audit period. (Dept. Ex. A

at B5.9 to B5.11).

39. On June 17, 2006, Mr. Al-Kasir provided copies of his federal income tax returns

for tax years 1999-2001 and bank statements for the periods January-December 2000 and

October and November 2001. A cover letter from Mr. Fiser stated that most of the requested

records were unavailable. (Dept. Ex. A at B5.13).

40. Each of Mr. Al-Kasir’s federal income tax returns included a Schedule C (Profit

or Loss From Business) listing the following gross receipts from Super Save, 6102 Central SW in

7
Albuquerque, and stating the nature of the business as the sale of gasoline (Dept. Ex. A at F6.1 to

F6.37):

1999 Gross Receipts, Schedule C $ 593,626 (page F6.3)
2000 Gross Receipts, Schedule C $1,607,086 (page F6.17)
2001 Gross Receipts, Schedule C $ 837,839 (page F6.30)

41. Mr. Al-Kasir’s income tax returns did not report any income from wages or from

the lease or rental of real property. (Dept. Ex. A at F6.1 to F6.37).

42. On his 1999 and 2000 returns, Mr. Al-Kasir listed his occupation as “sole

proprietor.” On his 2001 return, he listed his occupation as “service station.” (Dept. Ex. A at

F6.2, F.6.15 and F.6.28).

43. Because Mr. Al-Kasir had not provided any invoices, cash register tapes, journals,

ledgers or other records from the two service stations, the auditor had to rely on Mr. Al-Kasir’s

bank statements and tax returns, information obtained from the Department’s records, and

information obtained from third parties in order to determine the amount of gross receipts taxes

due for the audit period. (Dept. Ex. A at GN1.2, DN1.3, Akers Testimony).

44. For 1999, the auditor calculated taxes based on the gross receipts reported on

Schedule C to Mr. Al-Kasir’s 1999 federal income tax return; for 2000 and 2001, the auditor

calculated taxes based on the deposits reflected on Mr. Al-Kasir’s bank statements; for 2002, the

auditor calculated taxes based on the average retail price of gasoline as reported by AAA of New

Mexico multiplied by the number of gallons of gasoline sold to Super Save and Gas For Less by

third party distributors. (Dept. Ex. A at DN1.3, Akers Testimony).

45. On July 3, 2003, the auditor sent Mr. Al-Kasir the first draft of her audit work

papers for the Super Save service station, noting that the gross receipts were “largely estimated

8
based on bank deposits, the federal 1040 returns and third party information due to the lack of

records provided” and asking Mr. Al-Kasir to contact her if he had any questions. Mr. Al-Kasir

did not respond to this letter or provide additional records. (Dept. Ex. A at B5.117, Akers

Testimony).

46. On July 3, 2003, the auditor sent Mr. Al-Kasir the first draft of her audit work

papers for the Gas For Less service station, noting that the gross receipts were “largely estimated

based on bank deposits and third party information due to the lack of records provided” and

asking Mr. Al-Kasir to contact her if he had any questions. Mr. Al-Kasir did not respond to this

letter or provide additional records. (Dept. Ex. B at B5.43, Akers Testimony).

47. On November 10, 2003, the Department sent Mr. Al-Kasir letters transmitting

copies of the final draft of both audits, stating: “Please note that this is not a formal assessment.

You have ten (10) working days from the date of this letter to contact our office to schedule a

district level conference, or should you have any questions about the audit please call (505) 841-

6251 before November 25, 2003. If we do not hear from you prior to this date, a formal

assessment will be generated and mailed out.” Mr. Al-Kasir did not respond to these letters.

(Dept. Exs. A and B, left side of audit file).

48. On December 16, 2003, the Department assessed Gas for Less under Letter ID

L0404576256 for $132,046.11 of gross receipts tax, plus interest, for reporting periods March 31,

2001 through June 30, 2002. (Record Proper).

49. On December 16, 2003, the Department assessed Abdul Al-Kasir under Letter ID

L0538793984 for 353,644.84 of gross receipts tax, plus penalty and interest, for reporting periods

June 30, 1999 through September 30, 2002. (Record Proper).

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50. On December 16, 2003, the Department assessed Super Save under Letter ID

L1145919488 for $69,535.12 of gross receipts tax, plus penalty and interest, for reporting periods

September 30, 2002 through June 30, 2003. (Record Proper).

51. On January 13, 2004, Mr. Al-Kasir filed written protests to the Department’s

assessments. (Record Proper).

52. At the administrative hearing held on August 23, 2006, Mr. Al-Kasir

acknowledged that he was responsible for the operation of the Super Save gas station from

October 2002 through June 2003, and withdrew his protest to the assessment issued to Super

Save under Letter ID L1145919488.

DISCUSSION

The issues to be decided are: (1) whether Abdul Al-Kasir is the person responsible for

payment of gross receipts taxes on sales of gasoline from the Gas For Less service station during

the period April 2001 through June 2002 and the Super Save service station during the period

July 1999 through September 2002; and (2) whether the auditor was entitled to use alternative

methods of reconstructing the gross receipts of the two service stations.

Burden of Proof. There is a statutory presumption that any assessment of tax made by

the Department is correct. NMSA 1978, § 7-1-17(C). See also, MPC Ltd. v. New Mexico

Taxation & Revenue Department, 2003 NMCA 21, ¶ 13, 133 N.M. 217, 62 P.3d 308.

Accordingly, it is Mr. Al-Kasir’s burden to come forward with evidence and legal argument to

show that he is not liable for the gross receipts taxes assessed by the Department.

Ownership and Operation of Service Stations. Gas For Less. The Department

assessed Mr. Al-Kasir for gross receipts taxes on the sale of gasoline from the Gas For Less

10
service station during the period April 1, 2001 through June 30, 2002. Mr. Al-Kasir maintains

that he did not operate the service station during this period of time. As set out in detail in the

findings of fact, there is substantial evidence to establish that Mr. Al-Kasir was the party

responsible for the taxes assessed. This evidence includes Mr. Al-Kasir’s registration of Gas For

Less with the City of Albuquerque and the Taxation and Revenue Department; his filing of CRS

returns under the Gas For Less name and CRS number; his maintenance of at least two bank

accounts under the name Gas For Less; and his May 29, 2001 check to Kewa Gas, Ltd. with the

handwritten notation “For Gas For Less.”

Mr. Al-Kasir maintains that after he leased the gas station from the Mondragons he turned

it over to Ray Arun,1 who operated the station until June 2003, when Mr. Al-Kasir had him

evicted. Mr. Al-Kasir acknowledges, however, that he did not enter into a sublease or other

formal contract with Mr. Arun. In addition, the terms of Mr. Al-Kasir’s lease agreement

prohibited him from assigning or subleasing “any interest in the Premises” without the landlord’s

prior written consent. There is no evidence that such consent was requested or obtained.

At the administrative hearing, Mr. Al-Kasir introduced several documents related to a

2004 lawsuit filed in the Second Judicial District Court by Joe’s Moving, Inc. In that lawsuit, the

plaintiff alleged that defendants Ray Arun and his girlfriend, Grace Montes, were operating the

Gas For Less service station and allowed gasoline to become mixed with the station’s diesel fuel,

resulting in damage to the plaintiff’s truck engines. In support of its suit, the plaintiff obtained an

affidavit from Olivia Miera, stating that she was employed by Ray Arun and Grace Montes as a

1
Mr. Arun’s name appears under various spellings in the documents submitted at the hearing. This
decision adopts the spelling shown under Mr. Arun’s signature on Taxpayer Ex. 3.

11
cashier at Gas For Less during November and December 2002, when the incident occurred. Ms.

Miera’s affidavit further states that Ms. Montes visited the station at least once daily to take

custody of the cash in the register and give Ms. Miera instructions and that the licenses and

permits displayed on the wall behind the cash register were issued to Ms. Montes.

There are several problems with this evidence. First, Ms. Miera’s affidavit pertains to

facts as they existed in November and December 2002, five to six months after the end of the

audit period. There is nothing to indicate whether the statements in the affidavit are applicable to

the operation of Gas For Less between April 2001 and June 2002, the period at issue in this

protest. Second, Ms. Miera’s affidavit is contradicted by the Answer, Crossclaim and

Counterclaim filed by Grace Montes, which is included in Taxpayer’s Exhibit 1. Paragraph 2 of

Ms. Montes’ answer states:

Defendant Grace Montes denies that she was the authorized operator of the
retail gas station known as “Gas-4-Less”, located at 1700 Bridge Boulevard,
Southwest, in the city of Albuquerque, New Mexico, and affirmatively asserts
that the lessee of the gas station was Abdul Al-Kasir who retained and allowed
Ray Aarum to operate the gas station, which at all times material was operated
under the license of Abdul Al-Kasir.

Ms. Montes’ assertions are confirmed by a February 10, 2003 letter Mr. Al-Kasir’s attorney sent

to Ray Arun in connection with a subsequent eviction proceeding. The letter, a copy of which

appears at page B11.6 of Department Exhibit B, states as follows:

On July 1, 2001, Abdul agreed to permit you to operate the business as your
own enterprise; you agreed to obtain your own business licence and to pay all
taxes during your tenure as a sub-tenant. It appears that you operated under
Abdul’s name and licence after that. On December 22, 2002, the Department
of Tax and Revenue required Abdul to pay penalties for late registration.
Other licences are in the name of Abdul Al-Kasir.

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At the administrative hearing, Mr. Al-Kasir testified that Mr. Arun was “not legal” and

could not obtain a business license in his own name, something Mr. Al-Kasir presumably knew

because he had employed Mr. Arun to work at the Super Save station on Central Avenue. Even

after Mr. Arun took over the day-to-day operation of Gas For Less, Mr. Al-Kasir continued to file

quarterly CRS returns using the CRS ID number the Department issued to him as sole proprietor

of Gas For Less and identifying himself as “Manager.” This evidence supports the conclusion

that, regardless of any private agreement between Mr. Al-Kasir and Mr. Arun, the Gas For Less

service station was operated under Mr. Al-Kasir’s name and business license during the audit

period, and he is responsible for gross receipts taxes on the sale of gasoline from that station.

See, Continental Inn v. New Mexico Taxation and Revenue Department, 113 N.M. 588, 591, 829

P.2d 946, 949 (Ct. App. 1992) (contracts between a taxpayer and a third party regarding the

payment of taxes cannot shift the taxpayer's legal incidence of the tax as between the state and

the taxpayer).

Super Save. At the August 23, 2006 hearing, Mr. Al-Kasir acknowledged that he was

responsible for the operation of the Super Save gas station from October 2002 through June

2003. The matter still at issue is whether Mr. Al-Kasir was responsible for operation of the

station during the earlier period July 1999 through September 2002. Mr. Al-Kasir maintains that

he does not owe gross receipts taxes for this period because the station was leased to Said

Guermali from May 1999 until approximately September 2000 and was leased to Smoker’s Co-

op Corporation from November 2000 through September 2002. The evidence does not support

Mr. Al-Kasir’s assertions.

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Lease to Said Guermali. Mr. Al-Kasir provided a copy of a lease agreement entered into

on May 1, 1999 between Tri-Peaks, Inc. and Said Guermali, under which Mr. Guermali was to

rent the gas station and convenience store located at 6102 Central Avenue SW in Albuquerque

for a period of one year, with the option to renew on an annual basis. Effective April 1, 1999,

Mr. Guermali registered the business for payment of CRS taxes under “Guermali & Taibi,” but

retired this CRS registration effective June 1, 1999. He then registered the business under the

name “Guermali Inc.,” but retired this second CRS registration effective July 3, 1999.

In July 1999, Mr. Al-Kasir transferred the property at 6102 Central SW out of the name

Tri-Peaks, Inc. and into his individual name. Effective July 16, 1999, Mr. Al-Kasir registered a

business located at 6102 Central SW for payment of CRS taxes. The business was identified as

Mr. Al-Kasir’s sole proprietorship doing business under the name “Super Save.” The nature of

the business was described as “Gas station/convenience store/sale & repair used cars/U-Haul

rental.” Mr. Al-Kasir subsequently filed quarterly CRS reports for reporting periods July 1999

through December 2000 under the Super Save registration. In September 1999, Mr. Al-Kasir

obtained 100 Type 2 NTTCs under the Super Save name; in April 2000, Mr. Al-Kasir executed

one of these NTTCs to a third party gasoline distributor. In January 2000, Mr. Al-Kasir signed a

check drawn on an account at New Mexico Educators Federal Credit Union to Kewa Gas, Ltd., a

third party gasoline distributor. The name shown on the check was “Super Save Food Mart &

Gas.”

Mr. Al-Kasir testified that after he turned the Super Save gas station over to Mr.

Guermali in May 1999, he went back to teaching computer science, which was his original

profession. He also testified that he received regular lease payments from Mr. Guermali. Mr.

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Al-Kasir’s 1999 and 2000 federal income tax returns do not show any wage income or income

from the lease of real property. The only income reported on those returns is business income

from the Super Save gas station.

Based on the evidence in the record, the lease between Tri-Peaks and Said Guermali was

terminated in July 1999 when Mr. Al-Kasir transferred the property located at 6102 Central

Avenue SW from Tri-Peaks to himself in his individual capacity. Beginning on July 16, 1999,

the date Mr. Al-Kasir registered Super Save for payment of CRS taxes, Mr. Al-Kasir was the

owner and operator of the business and is liable gross receipts taxes on sales of gasoline from the

station.

Lease to Smoker’s Co-op Corporation. Mr. Al-Kasir maintains that Smoker’s Co-op

Corporation operated the Super Save gas station from November 2000 to September 2002 and

that he had no involvement with the business during that period. There is evidence in the record

that Smoker’s Co-op entered into a lease of Super Save in November 2000. There is also

evidence, however, that Mr. Al-Kasir continued to operate the business after that date.

This evidence includes the fact that both Mr. Al-Kasir and Samir Summa, the president of

Smoker’s Co-op, paid Super Save expenses with checks drawn on Mr. Al-Kasir’s bank accounts

at New Mexico Educators Federal Credit Union. Beginning with the November 2000 bank

statement, the name on one of these accounts was changed from “Abdul W. Al-Kasir/DBA Super

Save” to “Abdul W. Al-Kasir/Samir Summa/DBA Super Save.” In May and June 2001, Mr. Al-

Kasir signed checks printed with the name “Gas For Less/Super Save” to Kewa Gas, Ltd. In

each case, there was a hand written notation that the payment was “For Super Save Gas.”

Although Mr. Al-Kasir testified that he was not involved with the Super Save station after

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November 2000, the only income reported on his 2001 federal income tax return was business

income identified on Schedule C as receipts from sales of gasoline at Super Save. The amount of

gross receipts reported for the business was $837,839, substantially higher than the lease

payments Mr. Al-Kasir was to receive under his lease agreement with Smoker’s Co-op.

Mr. Al-Kasir has not met his burden of proving that he was not operating the Super Save

service station during the period November 2000 through September 2002, and the Department’s

decision to assess Mr. Al-Kasir for gross receipts taxes due for these reporting periods was

justified.

Audit Methodology. NMSA 1978, § 7-1-10(A) requires every person to "maintain

books of account or other records in a manner that will permit the accurate computation of state

taxes...." NMSA 1978, 7-1-11(D) states:

D. If the taxpayer’s records and books of account do not exist or are
insufficient to determine the taxpayer’s tax liability, if any, the department
may use any reasonable method of estimating the tax liability, including but
not limited to using information about similar persons, businesses or
industries to estimate the taxpayer’s liability.

Department Regulation 3.1.5.8 under § 7-1-10 sets out several alternative audit methods that may

be used when a taxpayer’s records are insufficient:

C. Alternative methods which may be used by the department include, but are
not limited to:
(1) bank deposit method;
(2) documents and records of persons other than the taxpayer;
(3) federal returns and other government reports;
(4) cost of sales markup—weighted percentage;
(5) net worth analysis;
(6) industry comparison; and
(7) provisional assessment of taxes based on best available information....
D. Any one, or a combination, of the methods listed above or other methods
may be used for taxpayer records reconstruction or verification.

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In this case, Mr. Al-Kasir failed to provide adequate business records to the Department,

even after being served with a formal subpoena and after being given numerous opportunities to

provide additional records during the course of the administrative protest. Because no invoices,

cash register tapes, journals, ledgers or similar records were available for the two service stations

subject to audit, the auditor had to rely on alternative methods to determine the amount of gross

receipts generated during the audit period.

Use of Bank Deposit Method. For 1999, the auditor calculated the tax based on the gross

receipts reported on Schedule C to Mr. Al-Kasir’s 1999 federal income tax return. The auditor

selected this method because no other records were provided for 1999. For 2000 and 2001, the

auditor calculated the tax based on the deposits made to the bank accounts Mr. Al-Kasir

maintained under the names of the two service stations. The auditor selected this method

because these deposits were substantially higher than the gross business receipts reported on Mr.

Al-Kasir’s 2000 and 2001 federal income tax returns. At the administrative hearing, Mr. Al-

Kasir testified that he had other sources of income and the deposits made to his bank accounts

were not taxable receipts. He made no attempt, however, to identify the source of the individual

deposits listed on the bank statements, nor did he provide any documents to substantiate his

claim that these receipts were not subject to gross receipts tax.

In Torridge Corp. v. Commissioner of Revenue, 84 N.M. 610, 612, 506 P.2d 354, 356 (Ct.

App. 1972), cert. denied, 84 N.M. 592, 506 P.2d 336 (1973), the New Mexico Court of Appeals

upheld the Department’s use of the bank deposit method to calculate gross receipts taxes when

adequate records are not available:

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We conclude that the bank deposit method is a reasonable method of
reconstruction of records, regardless of what the reasons are for not having
records. After the audit and the notice of assessment of taxes is delivered to
taxpayer, taxpayer must carry the burden of proof in order to negate the
presumption of correctness.

The court also approved the use of test months to estimate business receipts:

The ‘test months' method was used for the audit period, January 1, 1968 to
March 31, 1971. The test months were used to determine gross receipts
subject to tax. There is evidence that the test months method is acceptable
practice. Although there is conflicting evidence, the Commissioner could
draw the inference from the evidence of the auditor, that the gross receipts
were the amount computed by use of the test months and bank deposit
methods. See Archuleta v. O'Cheskey, 84 N.M. 428, 504 P.2d 638 (Ct. App.),
decided November 30, 1972. The Commissioner's decision, that the taxpayers
failed to establish the inaccuracy of the gross receipts ascertained by the audit,
is supported by evidence. Accordingly, the presumption of correctness of the
assessments for January 1, 1968 to March 31, 1971, has not been overcome.

Here, Mr. Al-Kasir has not met his burden of showing that the funds deposited in the bank

accounts he maintained under the names of Super Save and Gas For Less did not represent

taxable receipts from those businesses.

Use of Industry Comparison. In determining gross receipts taxes for the 2002 tax year,

the auditor had no first-hand information available since Mr. Al-Kasir did not provide federal

income tax returns, bank statements or any other records for that year. For this reason, the

auditor relied on an industry comparison and calculated gross receipts tax based on the average

retail price of gasoline as reported by AAA of New Mexico, multiplied by the number of gallons

of gasoline sold to Super Save and Gas For Less by third party distributors. This approach is

specifically authorized by NMSA 1978, § 7-1-11(D), which states that when records are not

available, the Department may use “information about similar persons, businesses or industries to

estimate the taxpayer’s liability.”

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Mr. Al-Kasir maintains that Super Save and Gas For Less sold gasoline at a lower price

than other gas stations in Albuquerque and that use of AAA’s average retail price results in a

significant over-estimation of his gross receipts. Mr. Al-Kasir did not produce any evidence to

establish the actual price charged by Super Save and Gas For Less during the audit period. Even

for the period October 2002 through June 2003, during which Mr. Al-Kasir acknowledged he

was responsible for operation of the Super Save station, he has no cash register tapes, invoices,

general ledgers or other records from which any inference can be drawn concerning the price at

which gasoline was sold. That being the case, Mr. Al-Kasir has not met his burden of proving

that the auditor’s estimates were incorrect. As Judge Sutin stated in his specially concurring

opinion in Archuleta v. O'Cheskey, 84 N.M. 428, 504 P.2d 638 (Ct.App.1972): “The taxpayer

has a duty to provide the commissioner with books and records upon which to establish a

standard for taxation as provided by law. If he fails to do so, he cannot complain of the best

methods used by the commissioner.”

CONCLUSIONS OF LAW

A. Abdul Al-Kasir filed timely written protests to the assessments issued under Letter

ID Nos. L0538793984, L1145919488 and L0404576256, and jurisdiction lies over the parties and

the subject matter of this protest.

B. Mr. Al-Kasir was the person responsible for the operation of the Super Save and

Gas For Less service stations during the periods at issue in this protest, and he is responsible for

gross receipts taxes on sales from those stations.

C. The Department’s alternative methods of calculating Mr. Al-Kasir’s gross receipts

tax liability was in conformance with New Mexico statutes and regulations.

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D. Mr. Al-Kasir did not present sufficient credible evidence to overcome the

presumption of correctness that attaches to the Department’s assessments.

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

DATED September 6, 2006.

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