Could Brewer Oil recover a September 2006 fuel-tax overpayment after filing its refund claim in July 2010?

Plain-English summary

Brewer Oil Company lost a $50,165.04 fuel-excise-tax refund because it filed the claim after New Mexico's statutory deadline. The three-year period was not paused by a later audit, the death of a knowledgeable employee, other internal demands, or the Department's failure to send a promised spreadsheet explaining the overpayment.

In February 2009, the Department told Brewer Oil that it had overpaid September 2006 fuel excise tax by $71,230.12. After offsets, $50,165.04 remained. Brewer Oil did not understand how the overpayment arose because the employee who had prepared its fuel reports for the prior decade had died in 2008.

A Department employee suggested applying for a refund and offered to prepare an explanatory spreadsheet, but Brewer Oil never received it. The company was also handling a separate 2007-2009 fuel-tax audit, updating its computer system, moving recordkeeping operations, and coping with the employee's death.

Brewer Oil submitted its refund application on July 22, 2010. The Department denied it as untimely.

The deadline expired on December 31, 2009

The decision applied the statutory rule that a refund claim must be made within three years after the end of the calendar year in which payment was originally due. Because the overpayment related to September 2006, the relevant calendar year ended December 31, 2006. The last day to file was therefore December 31, 2009.

The July 2010 application came after that clear outer limit. The hearing officer relied on Kilmer v. Goodwin for the principle that the taxpayer bears responsibility for maintaining and pursuing a refund claim because the taxpayer can more easily track its status.

Neither the audit nor the promised spreadsheet tolled time

Brewer Oil asked to have the overpayment credited against an assessment from the later 2007-2009 audit. It argued that the refund period should be tolled during that audit and that it had reasonably waited for the Department's spreadsheet.

The decision found no statutory tolling rule for either circumstance. Brewer Oil's operational difficulties were understandable, but waiting for the spreadsheet did not remove its responsibility to submit a timely claim. Once the limitations period expired, the Department had no statutory authority to grant the refund or apply it against the later assessment.

Result: the protest was denied, and the remaining overpayment could not be refunded or credited.

What this means for you

Businesses that discover an old overpayment

File a protective refund claim before the statutory deadline even if the exact calculation is still being investigated. This decision treated the deadline as a firm outer limit.

Taxpayers receiving informal agency help

Do not wait for promised spreadsheets, explanations, or other assistance when a refund period is running. Helpful agency communications do not replace the taxpayer's duty to file.

Businesses in a later audit

A separate audit does not automatically pause a refund deadline or preserve an older overpayment for offset. The decision found no tolling provision that linked the later audit to the earlier refund period.

Common questions

Q: How much overpayment remained after offsets?
A: $50,165.04 remained from the original $71,230.12 September 2006 overpayment.

Q: When was the refund claim due?
A: December 31, 2009—three years after the end of 2006, the calendar year in which payment was originally due.

Q: When did Brewer Oil file?
A: July 22, 2010, nearly seven months after the deadline.

Q: Did the Department employee's unfulfilled spreadsheet promise extend the deadline?
A: No. The decision held that Brewer Oil still had responsibility to file its claim within the statutory period.

Q: Could the refund be credited against the later audit assessment?
A: No. Because the refund claim was time-barred, the Department lacked authority to allow it or apply it to the subsequent assessment.

Citations and references

Statutes:

• NMSA 1978, § 7-1-26(D)(1) (2003) — three-year limitations period and no authority to allow a late refund
• NMSA 1978, § 7-1-27(A) — written refund claim subject to statutory time limits

Case cited:

• In the Matter of the Protest of Val Kilmer and Joanne Whalley v. Goodwin, 2004-NMCA-122, 136 N.M. 440, 99 P.3d 690

Source

• Listing: New Mexico Decisions & Orders
• Decision post: Brewer Oil Company
• Decision PDF: D&O 11-26

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 No. 11-26
BREWER OIL COMPANY
TO DENIAL OF REFUND ISSUED UNDER
LETTER ID NO. L1253162048.

DECISION AND ORDER

A formal hearing on the above-referenced protest was held on October 5, 2011, before

Sally Galanter, Hearing Officer. Mr. Jay Lamberth, Vice President and Chief Financial Officer

appeared on behalf of Brewer Oil Company (“Taxpayer”). The Taxation and Revenue

Department ("Department") was represented by Nelson J. Goodin, Chief Legal Counsel. All

documents in the administrative file are admitted into the record. Based on the evidence and

arguments presented, IT IS DECIDED AND ORDERED AS FOLLOWS:

FINDINGS OF FACT

1. The Department notified Taxpayer in February 2009 of its September 2006 fuel

excise tax overpayment. The original amount of overpayment was $71,230.12. After offsets were

applied, the balance of the overpayment was $50,165.04.

2. Taxpayer did not understand the basis for the overpayment as its employee who

had prepared its fuel tax reports for the prior ten years had died in 2008.

3. A Department employee suggested to Taxpayer to apply for the refund and

offered to prepare a spreadsheet explaining the overpayment. Taxpayer never received the

spreadsheet.
In the Matter of the Protest of Brewer Oil Company
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4. In September 2009, a fuel tax audit commenced for the subsequent tax period

from January 2007, through December 2009. The audit was finalized June 2010.

5. In 2009, Taxpayer was involved in the audit, updating its computer system and

transferring its record keeping operations to its main office and dealing with the death of its

employee.

6. Taxpayer completed the application for refund for the September 2006

overpayment on July 22, 2010.

7. By letter dated August 13, 2010, the Department denied Taxpayer’s refund

request because the refund was not filed within the limitations set out in NMSA 1978, §7-1-26

(2007).

8. On September 20, 2010, Taxpayer filed a written protest to the Department’s

denial of their refund claim.

9. On May 4, 2011, the Department acknowledged receipt of the protest, explained

its reasoning for the denial and provided taxpayer notification of its legal options.

10. On May 20, 2011, the Department requested a setting for hearing.

11. On June 16, 2011, the Hearing Bureau sent a Notice of Administrative Hearing,

scheduling the hearing for October 5, 2011, at 9:00 a.m.

DISCUSSION

The sole issue to be decided is whether Taxpayer is entitled to a refund of the

overpayment of fuel excise tax for tax period September 2006. Taxpayer claimed that it was

waiting for the Department employee’s offered spreadsheet explaining the overpayment and that

its delay in filing the claim was at least partially due to not receiving the documentation.
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Taxpayer requested that the refund be credited toward what was owed from an audit assessment

for years 2007 through 2009. Taxpayer argued that it was entitled to a tolling of time to file a

claim for refund during the audit period. The Department’s position is that the refund claim is

untimely because it was not submitted within three years of the end of the calendar year in which

the payment was originally due.

Statute of Limitations on Claims for Refund. Section7-1-27 (A) allows an individual

who is owed a refund to claim the refund “by directing to the secretary, within the time limited

by the provisions of Subsections D, E and F of this section, a written claim for refund.” The

applicable subsection D limits the possibility of obtaining a refund, stating that “no credit or

refund of any amount may be allowed or made to any person unless as the result of a claim made

by that person as provided in this section: (1) within three years of the end of the calendar year in

which: (a) the payment was originally due…”

The refund was for an overpayment for tax period September 2006. The end of the

calendar year in which payment was originally due was December 31, 2006. In counting the

three years, December 31, 2009 would have been the last date for which a claim for refund could

have been made within the statutory three-year requirement. The claim for refund was dated and

sent to the Department on July 22, 2010.

The question as to whether the application for the refund submitted by Taxpayer is time

barred based on the time restraints in the statute was answered in the Court of Appeals decision,

In the matter of the protest of Val Kilmer and Joanne Whalley v. Jan Goodwin, Secretary, New

Mexico Taxation and Revenue, 2004-NMCA-122, 136 N.M. 440, 99 P.3d 690. While this case

dealt with a request for a refund claim based on the Department’s inaction in approving or
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denying the claim, the court determined that the legislature has placed the “burden of

maintaining an active claim on the taxpayer.” The court explained that the legislature has

allocated that responsibility to taxpayers as “it is the taxpayer who can more easily keep track of

the status of a refund claim.” See id. at ¶16. In Kilmer, the court determined that legislative intent

in creating the statute is paramount and that “when the language is free from ambiguity, we will

not resort to any other means of interpretation.” See id. at ¶18. The court then determined that the

time deadlines as set out in the statute have a “clear and definite outer limit” and that Taxpayer’s

argument would undermine the legislature’s definite time limit. See id. at ¶20. The policy

reasons for having a statute of limitations for claims for refund are clear. It would be fiscally

irresponsible for the State if it allowed claims for refund to be filed at any time. Therefore as the

time limitation for requesting a refund and submitting the application for a refund is clear and

definite and as the claim was made after this deadline, the claim for refund is time barred by the

statute.

Taxpayer’s claim that the refund request was delayed based on a Department employee’s

promise to supply documentation that was never forthcoming does not negate Taxpayer’s

responsibility to timely file a request for the refund within the three-year time period. Taxpayer was

understandably dealing with another audit and many internal issues. It was nevertheless

unreasonable, in light of the statutory scheme, for Taxpayer to assume that nothing needed to be

done to claim the refund until the state supplied the agreed upon spreadsheet. See id. at ¶41. As

the refund claim was filed after the time allowed by statute, the Department was barred from

allowing the refund and applying it toward the subsequent assessment.

Further, NMSA 1978, §7-1-26 is very clear as to the responsibilities of a taxpayer in
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seeking a refund and the inability of the department to allow this refund after the statute of

limitations has expired. The statute does not allow for any tolling of the time period within which a

taxpayer is required to file a timely refund request for any reason. Therefore as Taxpayer’s claim for

refund was filed beyond the December 31, 2009 statute of limitations time period, the Department

had no statutory authority to grant the claim for refund pursuant to Section 7-1-26 (D) (1) (2003)

and properly denied the claim for refund.

CONCLUSIONS OF LAW

A. Taxpayer filed a timely, written protest to the Department’s denial of its claim for

refund of September 2006 fuel excise tax, and jurisdiction lies over the parties and the subject

matter of this protest.

B. Taxpayer’s claim for refund is time barred pursuant to NMSA 1978, §7-1-26.

C. Section 7-1-26 does not provide for a tolling of the time running for the filing of a

claim for refund.

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

DATED October 18, 2011.

SALLY GALANTER
Hearing Officer
Taxation & Revenue Department
801 4th St. N.W. – Suite K
Albuquerque, New Mexico

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