Did erroneous oral advice from a New Mexico tax employee excuse Adobe Rose Bed and Breakfast from tax and interest on guests staying more than 30 days?

Plain-English summary

Adobe Rose Bed and Breakfast owed $18,299.56 of gross receipts tax and $4,069.89 of interest on payments from guests staying more than 30 days, even though a Department employee had orally advised the owner that those stays were exempt rent. The employee admitted the advice was wrong, but oral advice did not satisfy New Mexico's statutory-estoppel rule, and the administrative hearing officer could not grant equitable relief.

Adobe Rose was a six-bedroom bed and breakfast just outside Artesia. It was owner Clent Schoonover's first business, and its primary customers were federal law-enforcement agents assigned as instructors at the Federal Law Enforcement Training Center. Those guests usually stayed longer than 30 days.

Unsure about the tax treatment, Schoonover called the Department in 2004. A Department employee told him that a guest staying more than 30 days would be a lessee paying rent and would not generate gross receipts tax. The advice was never put in writing.

Schoonover relied on it. He charged tax to shorter-stay guests but priced longer stays without gross receipts tax.

Long stays did not turn B&B rooms into exempt leases

During a later audit, the Department determined that the B&B had no landlord-tenant relationship with its guests. Section 7-9-53(B) stated that receipts of hotels, motels, rooming houses, guest ranches, and similar lodging facilities were not receipts from leasing real property. The statute identified a separate exception for trailer-park spaces rented for at least one month, not for B&B rooms.

Schoonover did not dispute at the protest hearing that the long-term lodging receipts were legally taxable.

The Department acknowledged its employee's mistake

The same employee who gave the advice had become an audit supervisor. When the issue surfaced, he confirmed that he had provided inaccurate advice and said the Department had no basis to dispute Schoonover's account.

He recommended that no negligence penalty be imposed. The protest auditor agreed that Schoonover had been “morally wronged” because the incorrect advice deprived him of the opportunity to charge guests tax when the business was operating.

The Department therefore assessed only $18,299.56 of tax and $4,069.89 of interest for January 2005 through October 2008. It did not assess the $1,829.96 penalty that the decision said might otherwise have applied.

Oral advice did not create statutory estoppel

Section 7-1-60 protected a taxpayer only when the taxpayer acted according to an effective regulation or a ruling personally addressed to that taxpayer in writing by the Secretary.

Schoonover had neither. The Department employee's unwritten telephone advice therefore could not statutorily bar the assessment.

Equitable estoppel was unavailable in the administrative hearing

The decision treated Schoonover's fairness argument as a claim for equitable estoppel. It recognized several facts supporting his position: the Department made a false representation, expected him to act on it, he lacked knowledge of the correct rule, and he detrimentally priced rooms without tax.

But the hearing officer found that sole reliance on oral advice was not reasonable where the statute directly addressed lodging receipts and the owner could have sought a formal written ruling or professional advice.

The decision also criticized the appearance created when the employee who gave the wrong advice later supervised the audit, although it found no actual impropriety and no statute, regulation, or ethics rule authorizing abatement on that basis.

Most importantly, New Mexico precedent treated the Department's administrative adjudication as quasi-judicial and did not give it authority to grant equitable relief. Only a court could consider the broader equitable-estoppel remedy.

Interest was mandatory

Section 7-1-67 required interest from the day after tax became due until payment. The hearing officer had no discretion to remove it based on good faith, fairness, or the Department's admitted mistake.

Result: protest DENIED. Tax and interest remained due; no negligence penalty was assessed.

What this means for you

Hotels, B&Bs, and other lodging operators

Do not assume a stay becomes an exempt real-property lease merely because it exceeds 30 days. Check the lodging-specific statute and regulation for the facility type involved.

Taxpayers asking an agency for guidance

Obtain a formal written ruling when reliance matters. This decision held that unwritten telephone advice did not meet New Mexico's statutory-estoppel requirements.

Businesses discovering incorrect agency advice

Preserve the communication and raise penalty-abatement grounds promptly. Here, the admitted error eliminated negligence penalty even though it did not remove principal or mandatory interest.

Common questions

Q: Were stays longer than 30 days exempt as rent?
A: No. The lodging statute did not treat B&B room receipts as exempt real-property leases.

Q: Did the Department dispute that its employee gave wrong advice?
A: No. The employee confirmed the mistake, and the Department accepted Schoonover's account.

Q: Why did statutory estoppel fail?
A: The taxpayer had no applicable regulation or personal written ruling from the Secretary—only oral telephone advice.

Q: Could the hearing officer grant equitable estoppel?
A: No. The decision held that this quasi-judicial administrative proceeding lacked authority to award equitable relief.

Q: Was any penalty imposed?
A: No. The Department omitted negligence penalty because of its erroneous advice.

Q: Why was interest still due?
A: The interest statute was mandatory whenever tax was not timely paid.

Citations and references

Statutes and regulations:

• NMSA 1978, § 7-9-53(B) (1998) — lodging receipts not treated as real-property leasing
• Regulation 3.2.211.8(F) NMAC — lodging receipts
• NMSA 1978, § 7-1-60 (1993) — statutory estoppel for an effective regulation or personal written ruling
• NMSA 1978, § 7-1-67 (2003) — mandatory interest
• NMSA 1978, § 7-1-13 — self-reporting duty
• NMSA 1978, § 7-1-69 (2003) and Regulation 3.1.11.11(A) NMAC — negligence penalty and nonnegligence
• NMSA 1978, § 7-1-17(C) (2007) — presumption that an assessment is correct

Cases cited:

• Taxation and Revenue Department v. Bien Mur Indian Market, 108 N.M. 228, 770 P.2d 873 (1989)
• AA Oilfield Service v. New Mexico State Corporation Commission, 118 N.M. 273, 881 P.2d 18 (1994)
• Kilmer v. Goodwin, 2004-NMCA-122
• Johnson & Johnson v. Taxation and Revenue Department, 123 N.M. 190, 936 P.2d 872 (Ct. App. 1997)

Source

• Listing: New Mexico Decisions & Orders
• Decision post: Adobe Rose Bed & Breakfast
• Decision PDF: D&O 10-12

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
ADOBE ROSE BED AND BREAKFAST No. 10-12
TO ASSESSMENT ISSUED UNDER LETTER
ID NO. L2077512576

DECISION AND ORDER

A formal hearing on the above-referenced protest was held on July 20, 2010, before Brian

VanDenzen, Hearing Officer. The Taxation and Revenue Department ("Department") was

represented by Peter Breen, Special Assistant Attorney General. Mr. Tom Dillon appeared as a

witness on behalf of the Department. Mr. Clent D. Schoonover (Taxpayer) appeared pro se. In

addition to the documents contained in the Administrative File, Department A, the Audit, is

admitted into the record. Based on the evidence and arguments presented, IT IS DECIDED AND

ORDERED AS FOLLOWS:

FINDINGS OF FACT

1. During the relevant time period, Taxpayer was the sole proprietor and owner of

Adobe Rose Bed and Breakfast (“B&B”), a 6-bedroom bed and breakfast just outside of the city

limits of Artesia, New Mexico.

2. Taxpayer’s business was the first business that Mr. Schoonover attempted to

operate.

3. Taxpayer began operating this business sometime on or shortly before 2004.

4. Taxpayer’s primary customer was federal law enforcement agents on assignment

as instructors at the Federal Law Enforcement Training Center.

5. These federal law enforcement agents would usually stay at the B&B for a period

of time exceeding thirty-days.

6. Because of Taxpayer’s uncertainty as to whether he needed to pay gross receipts

taxes on customers staying more than thirty-days at the B&B, Taxpayer contacted the

Department to seek guidance in 2004.

7. Taxpayer spoke on the phone with Department employee, Mr. Joe Bellicini.

8. Mr. Bellicini of the Department advised the Taxpayer that any guest staying more

than thirty-days would be considered a lessee paying rent, and therefore not subject to gross-

receipts taxes.

9. Mr. Bellicini of the Department did not reduce this opinion to writing.

10. Taxpayer relied on this advice in good-faith and did not impose gross-receipts

taxes to guests staying more than thirty-days at the B&B.

11. Taxpayer did impose gross-receipts taxes to guests staying less than thirty-days at

the B&B.

12. On November 24, 2008, Mr. Bellicini, by that time Audit Supervisor with the

Department, informed the Taxpayer that he had been selected for audit by the Department.

13. At all times, the Taxpayer acknowledges that the audit was conducted

professionally and courteously.

14. As part of that audit, the Department determined that the Taxpayer had no Tenant-

Landlord relationship with any of the guests of the B&B under NMSA 1978, Section 7-9-53(B),

and that therefore all moneys received by guests who stayed at the B&B for more than thirty-days

were taxable gross receipts.

In the Matter of the Protest of Adobe Rose Bed & Breakfast, page 2 of 13

15. The Taxpayer informed auditor Dan Pogan that Mr. Bellicini of the Department

had previously advised him that income earned from guests staying more than 30-days at the

B&B would be treated as rental income not subject to gross receipts taxes.

16. The next day, Auditor Dan Pogan informed the Taxpayer that Mr. Bellicini of the

Department had confirmed providing inaccurate advise to the Taxpayer.

17. In an email of May 11, 2009, Mr. Bellicini of the Department indicated that the

Department had no basis to dispute Taxpayer’s claim that an “employee of the Department

advised that the taxpayer that renting rooms for greater than 30 days were deductible gross

receipts.” As such, Mr. Bellicini of the Department recommended that the imposition of penalty

be waived in assessing the Taxpayer.

18. On May 14, 2009, the Department assessed the Taxpayer for $18,299.56 in gross

receipts taxes and $4,069.89 in interest for unpaid gross-receipts taxes for a period from January

31, 2005 through October 31, 2008.

19. As per Mr. Bellicini’s recommendation, the Department did not assess the

Taxpayer for a negligence penalty under NMSA 1978, Section 7-1-69 (2003).

20. Protest Auditor Thomas Dillon accepted the Taxpayer’s position that he was

orally misled by a Department employee, and consequently in recognition of that error, the

Department did not assess penalty against the Taxpayer.

21. Protest Auditor Dillon believes that the Taxpayer was morally wronged in this

situation because, based on the Department’s erroneous advice, Taxpayer did not have an

opportunity to impose gross receipts tax on his customers whom stayed for more than 30-days.

22. Protest Auditor Dillon personally sympathized with the Taxpayer’s circumstance,

and said that if the law allowed him to do so, he would waive the tax principal and interest

In the Matter of the Protest of Adobe Rose Bed & Breakfast, page 3 of 13
assessed against the Taxpayer because to the Taxpayer’s inability to impose gross receipts tax on

these customers during the relevant period of time.

23. Taxpayer priced the rate of the room without imposing gross receipts taxes on

customers staying at the B&B for more than 30-days.

24. Taxpayer filed an undated formal letter of protest.

25. The Department, through counsel, took the position that the Taxpayer’s undated

protest letter was timely filed.

DISCUSSION

The issue in this case is whether the Taxpayer is liable for unpaid gross receipts taxes and

interest for tax periods January 31, 2005 through October 31, 2008 when he in good-faith relied

on the erroneous oral statements of Department employee Mr. Joe Bellicini that no gross receipts

taxes were due for income on receipts from B&B guests whom stayed more than 30-days, and

consequently Taxpayer did not impose gross receipts tax on the Taxpayer’s long-term guests

during this relevant period of time. Moreover, in addition to his fairness argument related to his

reliance on Mr. Bellicini’s erroneous advice, Taxpayer also argues that Mr. Bellicini also had a

conflict of interest when he later signed off as the supervisor of the audit conducted on the

Taxpayer in this matter.

Presumption of Correctness and Burden of Proof.

Under NMSA 1978, §7-1-17(C) (2007), the assessment issued in this case is presumed to

be correct. Consequently, the Taxpayer has the burden to overcome the assessment and establish

In the Matter of the Protest of Adobe Rose Bed & Breakfast, page 4 of 13
that he was not required to pay the tax principal, interest, and penalty. See Archuleta v.

O'Cheskey, 84 N.M. 428, 431, 504 P.2d 638, 641 (NM Ct. App. 1972).

Assessment of Interest

Separate from any issues about the inaccurate advice provided by the Department to the

Taxpayer, the Taxpayer does not dispute during this protest that he was in fact and in law

statutorily required to pay gross receipts tax during the relevant tax periods for receipts of renters

at the B&B. See NMSA 1978, Section 7-9-53 (B) (1998) and Regulation 3.2.211.8(F) NMAC

[5/31/01].

When a taxpayer fails to make timely payment of taxes due to the state, “interest shall be

paid to the state on that amount from the first day following the day on which the tax becomes

due...until it is paid.” NMSA 1978, Section 7-1-67 (2003). Under the statute, the Department has

no discretion in the imposition of interest, as the statutory use of the word “shall” makes the

imposition of interest mandatory regardless of the explanation or justification provided by a

taxpayer. See State v. Lujan, 90 N.M. 103, 105, 560 P.2d 167, 169 (1977).

Assessment of Penalty.

When a taxpayer fails to pay taxes due to the State as a result of negligence or disregard

of rules and regulations, NMSA 1978, Section 7-1-69(A) (2007) imposes a penalty of two

percent per month “from the date the tax was due,” not to exceed twenty percent of the

outstanding tax liability. The term “negligence” is defined in Regulation §3.1.11.10 NMAC

(1/15/01) to include “inadvertence, indifference, thoughtlessness, carelessness, erroneous belief or

inattention.”

In the Matter of the Protest of Adobe Rose Bed & Breakfast, page 5 of 13
Regulation §3.1.11.11 NMAC (1/15/01) provides instances of nonnegligence where no

penalty should be assessed against a taxpayer under the civil penalty statute. Likely in

recognition of this regulation and in accord with Mr. Bellicini’s recommendation, the Department

did not attempt to assess any civil penalty against the Taxpayer in this matter. See Regulation

§3.1.11.11(A) NMAC (1/15/01).

Statutory and Equitable Estoppel

While the evidence establishes that the Taxpayer was lawfully assessed for unpaid

principal gross receipts tax and interest, Taxpayer nevertheless argues that under basic principles

of fairness, accountability, and justice, the principal gross receipts tax and interest should be

abated because he relied in good faith on Departmental employee Mr. Bellicini’s erroneous

advice that collection of gross receipts taxes were unnecessary for renters staying for more than

30-days at the B&B. While the pro se Taxpayer did not use the terms estoppel or equity, his

fairness argument falls squarely under the rubric of those legal concepts.

A. Statutory Estoppel.

Under NMSA 1978, Section 7-1-60 (1993), the State is estopped from acting against a

taxpayer only when a complaining taxpayer can show that the complaining taxpayer’s

action or inaction complained of was in accordance with any
regulation effective during the time the asserted liability for tax
arose or in accordance with any ruling addressed to the party
personally and in writing by the secretary, unless the ruling had
been rendered invalid or had been superseded by regulation or by
another ruling similarly addressed at the time the asserted liability
for tax arose. id.

In the Matter of the Protest of Adobe Rose Bed & Breakfast, page 6 of 13
In sum, the statute only prohibits the Department from acting in two circumstances: when the

taxpayer acted according to a regulation or when the taxpayer acted according to a written revenue

ruling by the Secretary specifically addressed to the taxpayer.

In this case, the Taxpayer did not receive a written revenue ruling from the secretary

specifically addressed to him. Nor did the Taxpayer act in accord with any regulation. Consequently,

statutory estoppel pursuant to NMSA 1978, § 7-1-60 (1993) does not bar the Department from

assessing unpaid gross receipts and interest on the Taxpayer.

B. Equitable Estoppel.

Aside from statutory estoppel, the Taxpayer’s fairness, accountability, and conflict of

interest arguments also form the basis of a claim for equitable estoppel against the Department.

As a general rule, courts are reluctant to apply the doctrine of equitable estoppel against the

state. This general rule is given even greater weight in cases involving the assessment and

collection of taxes. See Kerr-McGee Nuclear Corp. v. Property Tax Division, 95 N.M. 685, 625

P.2d 1202 (Ct. App. 1980). In such cases, estoppel applies only pursuant to statute or when “right

and justice demand it.” Taxation and Revenue Department v. Bien Mur Indian Market, 108 N.M.

228, 770 P.2d 873 (1989).

Moreover, like in the present protest, equitable estoppel generally does not apply against the

State when a taxpayer relied on the oral advice of a Department employee. See Bien Mur Indian

Market at 231, 876; See also, Kilmer v. Goodwin, 2004-NMCA-122, ¶ 28, 136 N.M. 440, 447,

99 P.3d 690, 697 (N.M. Ct. App. 2004); Rainaldi v. Public Employees Retirement Board, 115

N.M. 650, 658-59, 857 P.2d 761, 769-70 (1993) (estoppel cannot lie against the state when the

act sought would be contrary to the requirements expressed by statute); Trujillo v. Gonzales, 106

In the Matter of the Protest of Adobe Rose Bed & Breakfast, page 7 of 13
N.M. 620, 622, 747 P.2d 915, 917 (1987) (county not estopped by promises of county

commissioners made outside of a legally called board meeting and individual had no right to rely

on those oral representations).

In determining whether estoppel is appropriate, the conduct of both parties must be

considered. See Gonzales v. Public Employees Retirement Board, 114 N.M. 420, 427, 839 P.2d 630,

637 (Ct. App.), cert. denied, 114 N.M. 227, 836 P.2d 1248 (1992). See also, Johnson & Johnson v.

Taxation and Revenue Department, 123 N.M. 190, 195, 936 N.M. 872, 877 (Ct. App.), cert. denied,

123 N.M. 167, 936 P.2d 337 (1997).

There are three factors that must be considered about the party to be estopped, in this case

the Department. First, did that Department’s conduct amount to either a false representation or a

concealment of material facts? See id. In this case, the Department conceded that Mr. Bellicini’s

advice was an unknowing but nevertheless false representation to the Taxpayer about the

Taxpayer’s tax obligations. The second factor is whether the Department had actual or

constructive knowledge of the true facts. See id. Again, in its May 11, 2009 email, the Department

did not dispute that a Department employee knew that the Taxpayer was asking about whether

renting rooms for more than 30-days were deductible gross receipts. The third factor is whether the

party had an intention or expectation that the other party would act on the representations at issue.

See id. Whenever the Department in any manner informs a taxpayer that no tax is due, it follows

through basic common sense that the Department expects that taxpayer to act in accord with that

representation. That is why, as Mr. Breen indicated, Department employees are trained that if there

is any doubt about whether the amount is subject to tax, Department employees are to error on the

side of indicating that the tax is due until clearly shown otherwise.

As to the party claiming estoppel, there are also three factors to consider. See id. The first

factor is whether the Taxpayer had a lack of knowledge of the true facts. See id. In this case, the

In the Matter of the Protest of Adobe Rose Bed & Breakfast, page 8 of 13
Taxpayer indicated the B&B was his first business and he lacked knowledge about his tax

obligations, which is why he contacted the Department. The second factor is whether the Taxpayer

detrimentally relied on the adverse party's representations or concealment of facts. See id. In this

case, the Taxpayer did not impose gross receipts tax onto his long-terms guests when he otherwise

would have but for the Department’s erroneous advice.

The final factor to consider is whether the Taxpayer’s reliance was reasonable. The

Taxpayer’s detrimental reliance on Mr. Bellicini’s oral statements was not reasonable. As mentioned,

relating to this reasonable factor, estoppel is disfavored when the reliance is on an oral statement of a

Departmental employee over the telephone. While it reasonable for a taxpayer to rely on the written

consideration of a formal revenue ruling, it is less reasonable to rely on the oral statements of one of the

hundreds of Department employees of various expertise and training, whom over the phone may not

have time to obtain all the necessary facts or may not be presented fully with all the relevant facts

before responding to a taxpayer’s inquiries.

Moreover, New Mexico has a self-reporting tax system, and taxpayers have a statutory

obligation to determine their own tax liabilities and accurately report those liabilities to the state.

See Section 7-1-13 NMSA 1978; Tiffany Construction Co. v. Bureau of Revenue, 90 N.M. 16, 17,

558 P.2d 1155, 1156 (Ct.App.1976). The statute at issue in this case, NMSA 1978, Section 7-9-

53 (B) (1998) is not particularly difficult to understand. In relevant part, NMSA 1978, Section 7-

9-53 (B) (1998) reads that “(r)eceipts received by hotels, motels, rooming houses, campgrounds,

guest ranches, trailer parks or similar facilities….” except for receipts received from trailer parks

for rental of a trailer space for at least one month “…are not receipts from leasing real property

for the purposes of this section” and thus are not subject to the exemption at issue in this case. In

In the Matter of the Protest of Adobe Rose Bed & Breakfast, page 9 of 13
light of this fairly direct statutory mandate, it is not reasonable to solely rely on the oral

representations of a Department employee.

If there is any question in a taxpayer’s mind about his or her tax obligations, or if the

taxpayer receives oral advise from a Department employee that appears to contradict a clear

statutory mandate, a taxpayer is always free to consult with a qualified tax professional such as a

C.P.A. or a licensed attorney. The Taxpayer in this instance, despite acknowledging that he was

uncertain about his tax obligations because it was his first attempt to operate a small business,

choose not to consult with a qualified tax professional about his tax obligations as part of

operating his new business. A qualified tax professional in this case, in addition to possibly

providing the Taxpayer with accurate advice regarding his tax liabilities, would have provided

the Taxpayer with an additional layer of liability protection through such things like malpractice

insurance and other professional licensure obligations.

Although the Taxpayer may not have been reasonable in his reliance on Mr. Bellicini’s

erroneous advice under this final factor, the Taxpayer still may have a claim of estoppel in the

interest of right and justice for three reasons. First, there seems to be no dispute between that parties

that the Taxpayer in this specific case is suffering a moral wrong. The Department’s Protest Auditor

Mr. Dillon acknowledged that the Taxpayer in this matter was “morally…wronged” by the inaccurate

Department advice before the taxes at question were due, thus preventing the Taxpayer from imposing

gross receipts tax on his long-term renters. Because of this, Department’s Protest Auditor Mr. Dillon

further stated that if the law allowed him to do so, he would abate the tax principal and interest in this

matter. Moreover, Mr. Breen in his closing argument acknowledged that this protest is an “ugly”

situation. It is difficult to fathom a situation where a strict application of the law should apply when

In the Matter of the Protest of Adobe Rose Bed & Breakfast, page 10 of 13
both parties in an adversarial process concede that the outcome of that strict application, while

technically legal, may nevertheless be ugly or a moral wrong.

Secondly, based on the erroneous advice at the time when the B&B was still solvent, the

Taxpayer calculated room rates for his long-term customers without any amount set aside for gross

receipts. Unfortunately, as a practical matter the Taxpayer is no longer in business running the B&B

because financial difficulties mandated the sale of that business in 2010 at a significant loss.

Consequently, the Taxpayer is no longer in a position to recoup and collect the outstanding tax

principal and interest at stake in this protest as part of the regular course of his business, making the

Taxpayer’s situation even more difficult.

Finally, as the Taxpayer’s argues, the Department compounded the original mistake by

allowing Mr. Bellicini, the employee that originally provided the Taxpayer with the erroneous

advice, to supervise and approve the later audit. Rather than trying to minimize his error, Mr.

Bellicini candidly and admirably acknowledged his earlier mistake both to the auditors and to his

supervisors (in fact, Mr. Bellicini actually recommended that no penalty be imposed against the

Taxpayer). While there is no statute directly on point compelling any Department action,

common sense dictates that as soon as Mr. Bellicini reported his previous error to the

Department, the Department should have removed Mr. Bellicini from any role in the Taxpayer’s

audit. The Department’s failure to do so, despite the obvious potential appearance of a conflict,

undermines the Taxpayer’s confidence in the legitimacy of the Department’s later actions. Even

though there is no actual evidence of impropriety by the Mr. Bellicini or Department, the

appearance of a conflict alone by the Department allowing Mr. Bellicini to continue supervising

the audit certainly increases the appearance of unfairness suffered by the Taxpayer under the

“right and justice demand it” standard articulated in Bien Muir. However, beyond playing a part

In the Matter of the Protest of Adobe Rose Bed & Breakfast, page 11 of 13
in the equity analysis, there is no actionable statute, regulation, or ethical rule that would grant

the Taxpayer’s proposed remedy of abatement of otherwise properly assessed tax, penalty, and

interest in the event of an appearance of a conflict.

C. Equitable Estoppel Unavailable as an Administrative Remedy.

The Taxpayer’s protest certainly presents a sympathetic and unfortunate situation. Even

the Department’s protest auditor admitted that the Taxpayer is suffering a moral wrong in this

protest and the Department’s attorney acknowledged that this is an “ugly” protest. The problem

is that despite any inclination towards sympathy for the Taxpayer in this protest, equitable

estoppel does not appear to be a possible remedy in an administrative protest hearing before the

Department.

The adjudicative functions of an administrative agency like the Department are

considered by New Mexico courts to be “quasi-judicial” powers. According to the New Mexico

Supreme Court, the quasi-judicial powers of an administrative agency do not include the

authority to grant equitable relief to a party before the agency. See AA Oilfield Service v. New

Mexico State Corporation Commission, 118 N.M. 273, 279, 881 P.2d 18, 24 (1994). Since

equitable estoppel is a form of equitable relief, it is not a remedy pursuant to AA Oilfield Service

that may be granted during this administrative protest hearing before the Department under the

Tax Administration Act regardless of the merits of the Taxpayer’s claim for equitable relief.

Under AA Oilfield Service, it appears that only the judiciary may rule on the Taxpayer’s broader

claim for equitable relief.

Despite sympathy for the Taxpayer’s fairness and accountability argument, the

Department’s assessment of principal tax and interest is statutorily supported. Rather than

In the Matter of the Protest of Adobe Rose Bed & Breakfast, page 12 of 13
attempting to minimize his error, Mr. Bellicini took the action of specifically bringing the error in

this case to the attention of his supervisors, asking the Department to not impose penalty against

the Taxpayer. Although the Taxpayer may take no consolation from it, the Department’s

determination to not impose penalty in the amount of $1,829.96, where it otherwise might be

entitled to do so but for the errors, is in itself a real consequence for the Department’s error.

CONCLUSIONS OF LAW

1. Taxpayer filed a timely, written protest to Assessment No. # L2077512576, and

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

2. The Taxpayer is liable for tax principal and interest for gross receipts during tax

reporting periods from January 31, 2005 through October 31, 2008.

3. Equitable estoppel is not a remedy available in this quasi-judicial administrative

proceeding before the Department.

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

DATED: September 27, 2010.

In the Matter of the Protest of Adobe Rose Bed & Breakfast, page 13 of 13