Could New Mexico uphold a Weight Distance Tax assessment against Casias Trucking when its mileage audit averaged odometer data across every month, ignored seasonal slowdowns, used questionable starting readings, and rejected fuel receipts?
Apply this to your situation
This page answers the general question as of 2012. Ezel answers yours, under current New Mexico tax law, with citations.
Plain-English summary
Casias Trucking overcame the presumption that New Mexico's Weight Distance Tax assessment was correct because the Department's mileage-estimation method was not reliable. The hearing officer abated $62,872.09 in tax, $12,574.42 in penalty, $17,650.85 in interest, and an additional $10,000 penalty.
Casias Trucking hauled sand, gravel, asphalt, and demolition materials within New Mexico. Its work involved short trips to construction sites and varied seasonally, with a summer peak and slower winter months.
The company filed Weight Distance Tax returns but kept disorganized records. Owner Louie Casias admitted that he had reported only half the mileage because he mistakenly believed that was correct. His own mileage summary contained inaccurate odometer entries, including readings that moved backward.
Those weaknesses did not make any audit estimate automatically valid. The decision held that the Department's chosen method still had to withstand scrutiny.
The audit spread averaged mileage across unlike months
For trucks with available readings, the Department generally took a beginning odometer reading from the vehicle title and a later reading obtained in May or June 2010. It divided the difference over the intervening time to calculate monthly mileage and then applied that average to quarters in the audit period.
The auditor treated every month alike. The calculation did not adjust for construction-hauling slowdowns caused by winter weather or the economy, even though the Department's own interview notes recognized a second- and third-quarter summer peak.
The result attributed more than 365,000 miles to the company in each audit year and more than 425,000 miles in some years. Casias credibly testified that his trucks could not have traveled the distances asserted.
Some odometer inputs were questionable
Some vehicle titles had inaccurate starting odometer readings. Two showed 0888888, and the evidence did not establish that the odometers were working correctly. The Department also lacked readings for some trucks and assigned them an averaged mileage figure.
The hearing officer found it unclear whether inaccurate title readings also reflected broken odometers, but the uncertainty was one of several serious problems undermining the estimate.
The Department rejected individual fuel receipts
Casias Trucking produced individual fuel receipts for 2007 through 2009. The hearing officer found those receipts reliable and uncontroverted even though the company's separate summary was inaccurate.
The Department suspected that additional fuel might have been bought by check, but it did not introduce bank statements, checks, or other evidence showing that receipts were missing. It rejected the fuel-receipt approach and did not use it to estimate total mileage.
The decision contrasted that choice with a different Department method described in Cordero Transport, D&O 12-09, where auditors used total fuel purchases and an industry MPG average when bookkeeping and invoices were poor.
Poor records did not rescue an unreliable estimate
New Mexico law required taxpayers to maintain records permitting accurate tax computation, and Department regulations allowed alternative estimation methods when records were inadequate.
Still, the hearing officer found this audit's combination of questionable odometer inputs, equal treatment of busy and slow months, and rejection of the fuel receipts sufficiently flawed that it could not be relied upon. Casias Trucking therefore rebutted the assessment's presumption of correctness.
Result: protest granted; tax, both penalties, and interest abated.
What this means for you
Trucking businesses with incomplete records
Poor bookkeeping creates serious audit risk, but it does not eliminate the Department's obligation to use a reasonable and supportable estimation method. The taxpayer here won because it proved the method itself was unreliable.
Businesses with seasonal operations
An estimate that treats every month as identical can be vulnerable when credible evidence and the auditor's own notes show substantial seasonal variation.
Tax professionals challenging an estimated assessment
The useful distinction is between criticizing the final number and proving defects in how it was produced. Casias Trucking identified specific problems with starting readings, vehicle use, seasonal assumptions, and the rejection of alternative fuel evidence.
Common questions
Q: Did Casias Trucking have good records?
A: No. The owner admitted reporting only half the mileage, and his summary had inaccurate odometer readings. The decision nevertheless found the Department's audit method independently unreliable.
Q: What was wrong with averaging the odometer readings?
A: The calculation spread mileage evenly across all months and years without adjusting for seasonal construction-hauling slowdowns, and some starting readings were inaccurate or questionable.
Q: Why did the fuel receipts matter?
A: The individual receipts were reliable and uncontroverted evidence of fuel purchases. The Department rejected them without presenting bank or check evidence establishing that other fuel purchases were missing.
Q: Did the decision calculate a replacement tax amount?
A: No. Because the Department declined the opportunity to make adjustments and its methodology could not be relied upon, the hearing officer abated the assessed tax, penalties, and interest.
Q: Was the separate one-way-haul issue the basis for the win?
A: No. The decisive issue was the reliability of the audit used to calculate the asserted mileage and tax.
Citations and references
Statutes and regulations:
- NMSA 1978, § 7-1-17 — presumption that Department assessments are correct
- NMSA 1978, § 7-15A-3 — Weight Distance Tax on registered vehicles over 26,000 pounds using state highways
- NMSA 1978, § 7-15A-4 — responsibility for paying Weight Distance Tax
- NMSA 1978, § 7-15A-6(B) — special reduced rate for qualifying one-way hauls
- NMSA 1978, § 7-1-10(A) — taxpayer recordkeeping obligation
- 3.1.5.8(A), (B), and (C) NMAC — record adequacy and alternative estimation methods
Cases:
- Wing Pawn Shop v. Taxation and Revenue Department, 111 N.M. 735, 809 P.2d 649 (Ct. App. 1991)
- MPC Ltd. v. N.M. Taxation and Revenue Dep't, 2003-NMCA-021, 133 N.M. 217, 62 P.3d 308
Source
- Listing: New Mexico Decisions & Orders
- Decision post: Casias Trucking
- Decision PDF: D&O 12-24
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
CASIAS TRUCKING No. 12-24
TO ASSESSMENT ISSUED UNDER LETTER
ID NO. 067784480
DECISION AND ORDER
A formal hearing on the above-referenced protest was held on January 26, 2012, March 6,
2012 and continued on March 7, 2012, before Monica Ontiveros, Hearing Officer. The Taxation
and Revenue Department (“Department”) was represented by Ida M. Luján, Esq, attorney for the
Department. Casias Trucking (“Taxpayer”) appeared for the hearing and was represented by
Wayne G. Chew, Esq. On March 30, 2012, the Department filed its Department’s Closing
Argument and Proposed Findings of Fact and Conclusions of Law. On March 30, 2012, Taxpayer
filed its Proposed Findings of Facts and Conclusions of Law and Closing Statement. On April 5,
2012, the Department filed its Department’s Objection to Extrinsic Evidence. On April 20, 2012,
Taxpayer filed its Taxpayer’s Response to Department’s Objection to Extrinsic Evidence. (The
Taxpayer’s Response to Department’s Objection to Extrinsic Evidence was e-mailed to Mr. John
Griego, legal assistant, on April 19, 2012.)
On July 3, 2012, an Order on Facts Presented was filed in this matter allowing both parties
an opportunity to respond to the issue of whether the methodology used by the Department to
audit Taxpayer was reliable. On July 27, 2012, the Department filed the Department’s Response
to Hearing Officer’s Order on Facts Presented. On July 26, 2012, Taxpayer filed Taxpayer Casias
Trucking Respectfully Responds to the Hearing Officer’s Concerns Set Forth in the July 3, 2012
Order on Facts Presented.
Mr. Louie P. Casias, owner of Casias Trucking, appeared for the hearings and testified.
The Department’s witnesses included Ms. Mayra Cabrera, auditor, Ms. Lizzy Vedamanikan, audit
supervisor, and Ms. Sylvia Sena, protest auditor. Ms. Jennifer Carlisle, protest auditor, is a
Department employee and observed the proceedings. The exhibits introduced into the record are
Exhibits #1, 7, 8, 9, 10, 11, 12, 13, 14, 17, 18, 19, 20, A, B, C, D, E, F, G, H, I, J, K, L, M, N, O,
P, Q, R, S, T, U and V. The Department objected to Exhibits #8, 10, 12, 13, and 20 based on
relevance because the exhibits were outside the audit period. The Exhibits were admitted over
objection.
Based on the evidence and arguments presented, IT IS DECIDED AND ORDERED AS
FOLLOWS:
FINDINGS OF FACT
-
Taxpayer is a trucking business located in Albuquerque, New Mexico.
-
Taxpayer’s business is to haul sand, gravel, asphalt and demolition materials within
the state of New Mexico.
- Mr. Louie P. Casias is the sole owner and proprietor of Taxpayer. Taxpayer filed
weight distance returns and paid weight distance tax for the audit period at issue.
- The Department assessed Taxpayer on December 8, 2010, in weight distance tax in
the amount of $62,872.09 in principal, $12,574.42 in penalty, $17,650.85 in interest and
$10,000.00 in an additional penalty amount for the tax period of March 31, 2004 through
December 31, 2009.
- The Notice of Assessment was mailed to Casias Trucking, 7900 Richmond NW,
Albuquerque, New Mexico 87120.
In the Matter of Casias Trucking
page 2 of 18
-
Taxpayer’s correct address is 7900 Richwood NW, Albuquerque, New Mexico
-
Administrative file, protest letter and Exhibit #J.
-
The Department neither mailed the Notice of Assessment to the correct address nor
did it mail a courtesy copy of the Notice of Assessment to Taxpayer’s certified public accountant,
Leigh Van Gilst, despite knowing that Taxpayer had employed a CPA to file its returns.
Administrative file, protest letter and Exhibit #J.
- The Department argued that Taxpayer used the wrong address on one return,
therefore, it is Taxpayer’s fault that the Department used the incorrect address. Exhibit #V.
During the hearing, the Department did not present any evidence indicating that the Department
changed its records based on this one return filed by Taxpayer.
- The Department argued that the liability was asserted against Taxpayer and
therefore, it was not necessary to mail a courtesy copy of the Notice of Assessment to the certified
public accountant. It also argued that it did not mail the Notice of Assessment to Taxpayer’s
certified public accountant because it did not have a tax authorization on file from Taxpayer
allowing the Department to mail the Notice of Assessment to the certified public accountant. The
Department presented no evidence that Taxpayer either signed or refused to sign a tax
authorization form. In any event, the Department certainly could have or should have requested a
tax authorization form from the certified public accountant since it was in contact with Ms. Van
Gilst. Exhibit # J.7.
- Taxpayer became aware of the Notice of Assessment when it received a “Tax
Collection Notice” dated February 9, 2011. Administrative file, protest letter and Exhibit #J.
In the Matter of Casias Trucking
page 3 of 18
- When Taxpayer learned of the Notice of Assessment, Taxpayer retained an
attorney, Wayne G. Chew, Esq.
- On March 7, 2011, Mr. Chew filed a protest letter and a request for a retroactive
extension to file a written protest. Protest Letter, Attachment C.
- On March 16, 2011, the Department granted the extension to file a written protest
and accepted the protest letter which was accepted by the Department under a retroactive
extension of time granted pursuant to NMSA 1978, Section 7-1-24 (B)(2003). Protest Letter,
Attachment B and Exhibit #K.
-
On June 15, 2011, the Department requested a hearing in this matter.
-
On June 16, 2011, the Hearings Bureau mailed a Notice of Administrative Hearing
in this matter setting the hearing for January 26, 2012.
-
The hearing was held on January 26, 2012 and continued on March 6 and March 7,
-
An Amended Notice of Administrative Hearing was mailed to the parties on February 6,
2012, setting the hearing for March 6, 2012.
- The Department conducted an audit of Taxpayer. The original audit period was
from January 1, 2007 through December 31, 2009.
- The Department expanded its audit because it believed that the expanded statute of
limitations applied to Taxpayer because Taxpayer had underreported by 25%.
- On March 17, 2010, Ms. Vendamanikam visited with Mr. Casias and asked him a
series of questions. Exhibit #B.
- On March 17, 2010, Ms. Cabrera visited with Mr. Casias and asked him a series of
In the Matter of Casias Trucking
page 4 of 18
questions. Exhibit #A.
- The Department began the audit of Taxpayer on March 17, 2010. Exhibit #H, page
C1.2.
- Taxpayer hauled construction materials to ongoing construction projects within
New Mexico. Mr. Casias testified that much of his work consisted of traveling short distances
and waiting at the construction site to drop a load of sand or gravel at the construction site. Mr.
Casias credibly testified as to the type of hauling his trucks did.
- Mr. Casias testified that he did not haul materials on long trips and he did not haul
materials out of state.
- Mr. Casias testified that he hauled full loads (one way loads) anywhere from 30 to
50 miles per day per truck. Mr. Casias testified that he had 5-6 trucks operating at the same time.
If Mr. Casias had 5-6 trucks operating at the same time and he hauled full loads on a one way haul,
then his trucks traveled with full loads around 78,000 miles per year or 300 miles a day x 5 days a
week x 52 weeks. If the trucks are taxed on both the empty and full load, then the mileage would
be around 156,000 miles per year.
- Mr. Casias testified that when he reported his mileage to Ms. Van Gilst, his
certified public accountant, he only reported half of the mileage because he believed that this was
a correct manner in which to report his mileage. Mr. Casias testified that he now understands that
this was an incorrect manner in which to report his mileage.
- The Department argued that Mr. Casias titled more than 7-10 trucks during the
audit period. They also argued that the trucks were driven around 11,000-15,000 miles a quarter.
In the Matter of Casias Trucking
page 5 of 18
- When Ms. Vedamanikam interviewed Mr. Casias, she confirmed that he did mostly
“on-site” hauling and that he had a “summer peak – 2nd and 3rd qtr.” Exhibit #B.1.
- From the evidence presented, Taxpayer had a total of 10 trucks during the audit
period. Mr. Casias credibly testified that not all the trucks were in use at the same time. This
evidence was not rebutted by the Department.
- Taxpayer bought and sold trucks for his business. Some of the mileage for the
trucks was not included in the audit because it was unclear whether the trucks were ever used in
Taxpayer’s business. This evidence was not rebutted by the Department.
- Mr. Casias credibly testified that the trucks were inexpensive trucks with a
purchase price that ranged from $150.00 to $50,000.00.
- Mr. Casias credibly testified that he only had 7 drivers who worked for him at any
one time. This evidence was not rebutted by the Department.
- When Taxpayer purchased some of the trucks, the odometer reading was not
correctly stated on the title for the vehicles. Exhibit #7 (WD100327); Exhibit #9 (WD98551) and
Exhibit #8 (WD43361).
-
A private titling company titled the trucks for Taxpayer.
-
As for the trucks with incorrect odometer readings, (WD100327) and (WD98551),
there is insufficient evidence to prove that the odometers were working correctly.
- Taxpayer reported his mileage based on the amount of fuel purchased along with
the mileage. Taxpayer presented his fuel receipts to the Department during the initial audit
meeting.
In the Matter of Casias Trucking
page 6 of 18
- Taxpayer presented fuel receipts for its trucks for tax years 2007-2009. Exhibits
17, #18 and #19. The Department rejected these fuel receipts and the auditor did not use them to
determine the total mileage for purposes of the weight distance tax.
- Mr. Casias prepared Exhibit #1 by taking the fuel receipts and writing down the
mileage of the truck and the amount of fuel purchased. Mr. Casias provided Ms. Van Gilst with
this information. Ms. Van Gilst reported the amounts to the Department when she prepared the
weight distance tax returns for Taxpayer.
- During the audit, the Department reviewed the fuel reports provided by Taxpayer.
The Department alleged that it was unable to verify whether all of the fuel receipts were provided
for each vehicle. Exhibit #H, page C1.3.
- The Department believed that Taxpayer had paid for fuel by check but it did not
place into evidence any steps it took to ascertain whether the fuel receipts provided were all of the
receipts in existence.
- In the notes of Ms. Cabrera, she noted that Mr. Casias told her that he paid for
some fuel by company check or other type of check. Exhibit #B.2.
- The Department did not review any of the bank statements of Taxpayer to
determine whether Mr. Casias had written checks for fuel.
- Exhibit #1 is inaccurate and does not accurately reflect the odometer readings of
the trucks at the time the trucks fueled up. (For example, some of the odometer readings go
backwards instead of forward.) Exhibit G.
- The Department did not base its audit on the amount of fuel and miles reported per
In the Matter of Casias Trucking
page 7 of 18
gallon by Taxpayer.
- The Department based its audit on an averaging of miles multiplied by the numbers
of months in a year.
- The Department used an averaging of miles method of auditing Taxpayer, which is
to say that it took a period of time multiplied by the amount of miles in one month and then again
multiplied by 12 months in a calendar year.
- For some of the trucks, the Department calculated the amount of underreported fuel
tax by taking the beginning odometer reading and subtracting the miles from the ending odometer
reading. Exhibit #H, page C1.3. The beginning odometer reading was taken from the title of each
vehicle.
-
The Department got the ending odometer readings on May 26, 2010 and June 14,
-
Exhibit #H, page C1.3.
-
The total miles were then divided by the time period between when the vehicle was
titled and when the ending odometer reading was taken. Exhibit #H, page C1.3.
- The total miles were then divided to arrive at a monthly amount, which was then
multiplied to arrive at a quarterly amount of miles traveled. Exhibit #H, page C1.3.
- The Department confirmed at the time of the audit that the odometers in all the
vehicles were in good working condition. Exhibit #H, page C1.3.
-
The auditor treated all months for each truck equally. Exhibit #H, page C1.3.
-
The Department did not make any allowances in its audit for any months in which
Taxpayer’s business might be slow because of weather or the economy. All months were treated
In the Matter of Casias Trucking
page 8 of 18
the same or equally.
- The trucks that the Department was able to get odometer readings for trucks:
WD109625, WD98791, WD98551, WD96332, WD93494 and WD106629. Exhibit H, C1.3. For
these vehicles the auditor averaged the number of miles based on the odometer readings.
- The trucks that the Department was unable to get odometer readings for trucks:
WD101229, WD100327, WD98792, and WD98551. For these vehicles the auditor averaged the
number of miles to 12,936. Exhibit #H, C1.3.
- Some of Taxpayer’s trucks had incorrect odometer readings when they were
purchased. For example, trucks WD100327 and WD98551 had an odometer reading of 0888888.
Exhibits #7 and #9. Despite the Department’ assertion in its audit, it is not clear whether the
odometers were ever working in these vehicles.
- Taxpayer reported weight distance tax for all periods. However, Taxpayer
incorrectly reported the mill rate for the audit periods March 31, 2004 through March 31, 2008;
hence the zero reported amounts on work papers Exhibit #H, F1.1-F1.8.
- The Department gave Taxpayer credit in the work papers for the incorrectly
reported mill rate in its work papers Exhibit #H, D2.1-D2.8.
- Taxpayer submitted a Summary of the distance miles reported in each quarter along
with the reported gallons compared to the audited gallons.
- The number of gallons on the Summary does not match the total quantity of fuel
purchased by credit card for tax year 2007. Taxpayer’s Summary and Exhibit #17.
- The audit conducted by Ms. Cabrera was her twelfth audit.
In the Matter of Casias Trucking
page 9 of 18
- Mr. Casias credibly testified that his trucks could not have possibly traveled the
distances the Department was proposing.
- The Department claims that Taxpayer drove 365,710 miles in 2004. Exhibit #H,
D2.2
- The Department claims that Taxpayer drove 404,104 miles in 2005. Exhibit #H,
D2.3
- The Department claims that Taxpayer drove 425,664 miles in 2006. Exhibit #H,
D2.4
- The Department claims that Taxpayer drove 425,664 miles in 2007. Exhibit #H,
D2.6
- The Department claims that Taxpayer drove 368,274 miles in 2008. Exhibit #H,
D2.7
- The Department claims that Taxpayer drove 427,155 miles in 2009. Exhibit #H,
D2.8.
- The Department claims that Taxpayer’s total mileage for the period at issue is
2,416,571, less the credited miles, or 2,286,729. Exhibit #H, D2.8. Taxpayer reported only
129,842 miles. Exhibit #H, D2.8. These miles are considered the credited miles in the audit. The
audit narrative details that the total New Mexico miles reported by Taxpayer was 228,992.
Exhibit #H.G1.2. (The difference in reported mileage may be due to the credit that the auditor
gave Taxpayer for one-way hauls. It is not clear from the audit why there is a difference in these
amounts.)
In the Matter of Casias Trucking
page 10 of 18
- At the time of the audit, Taxpayer did not maintain his driver’s vehicle inspection
reports because he was only required to keep them for 90 days. Exhibit #20. (Audio File, Part I,
46:03).
- Prior to the commencement of the audit, the auditors had formed an opinion about
Taxpayer’s veracity.
- Mr. Casias testified that he could not have underreported the mileage by the
amount the Department contended. (Audio File, Part I, 1:18-1:22).
DISCUSSION
The issue to be determined is whether Taxpayer underreported its weight and fuel tax in
the amount of $62,872.09 in principal, $12,574.42 in penalty, $17,650.85 in interest and
$10,000.00 in an additional penalty amount for the tax period of March 31, 2004 through
December 31, 2009. The Department asserts in its Response to Hearing Officer’s Order on Facts
Presented that the penalty amount applies to the third and fourth quarters of 2009. However, the
Notice of Assessment states that the period in question is from March 31, 2004 through December
31, 2009. The only issue in dispute is factual in nature and that is whether the audit conducted by
Ms. Cabrera may be relied upon.
All objections not ruled on are deemed denied.
Burden of Proof.
Section 7-1-17 provides that any assessment of taxes made by the Department is presumed
to be correct. NMSA 1978, Section 7-1-17 (2007). Where an exemption or deduction from tax is
claimed, the statute must be construed strictly in favor of the taxing authority, the right to the
In the Matter of Casias Trucking
page 11 of 18
exemption or deduction must be clearly and unambiguously expressed in the statute, and the right
must be clearly established by the taxpayer. Wing Pawn Shop v. Taxation and Revenue Department,
111 N.M. 735, 740, 809 P.2d 649, 654 (Ct. App. 1991). Accordingly, it is Taxpayer’s burden to
present evidence and legal argument to show that it is entitled to an abatement, in full or in part, of
the assessment issued against it. When a taxpayer presents evidence sufficient to rebut the
presumption, the burden shifts to the Department to show that the assessment is correct. See MPC
Ltd. v. N.M. Taxation and Revenue Dep’t., 2003-NMCA-021, ¶ 13, 133 N.M. 217, 62 P.3d 308.
Weight Distance Tax Act.
The Weight Distance Tax Act imposes a tax on all registered vehicles with a declared
weight in excess of 26,000 pounds that travel on state highways. See NMSA 1978, Section 7-15A-
3 (1988). NMSA 1978, Section 7-15A-3 (1998) states that, “(a) tax is imposed upon the
registrants, owners and operators for the use of the highways of this state by all motor vehicles
having a declared gross weight or gross vehicle weight in excess of twenty-six thousand pounds
and registered in this state…” Furthermore, “(t)he tax shall be paid by the Registrant, owner or
operator of a motor vehicle registered in this state to which the tax applies.” NMSA 1978, Section
7-15A-4 (1988). There is a special reduced tax rate if a taxpayer provides records of a one-way
haul. See Section 7-15A-6(B) (2004). The Department contends that it credited Taxpayer for the
one-way hauls. It is unclear whether the credit was based on Taxpayer’s reported mileage or on
the Department’s calculated mileage amount of 2,286,729 miles.
Audit.
Taxpayer argued that the Department made significant mistakes in the audit, and therefore
In the Matter of Casias Trucking
page 12 of 18
the audit was not reliable. At the time of this audit, the auditor in this case, Ms. Cabrera, had
conducted only 11 audits prior to this audit. (Audio File, Part III, 2:26-2:40). Ms. Cabrera began
working with the Department right after she received her bachelor’s degree from the University of
Phoenix. Ms. Cabrera had six months of on the job training with the Department prior to the
completing her first audit. (Audio File, Part III, 1:40-1:49). Ms. Cabrera had at least one
supervisor review her audit prior to the audit being finalized.
There are a number of significant concerns with the audit. The major concern is that the
auditor used an averaging method to determine the number of miles driven by Taxpayer, which
was based on the assumption that each month is equally alike in the number of miles each truck
traveled. In addition, the averaging method utilized by the auditor never provided Taxpayer with
any allowance for slow periods as described by Mr. Casias as the “summer peak – 2nd and 3rd qtr.”
Exhibit #B.1. To reiterate the methodology, for some of the trucks, the Department calculated the
amount of underreported fuel tax by taking the beginning odometer reading and subtracting the
miles from the ending odometer reading. Exhibit #H, page C1.3. The beginning odometer
reading was taken from the title of each vehicle. The Department got the ending odometer
reading on May 26, 2010 and June 14, 2010. Exhibit #H, page C1.3. The total miles were then
divided by the time period between when the vehicle was titled and when the ending odometer
reading was taken. Exhibit #H, page C1.3. The total miles were then divided to arrive at a
monthly amount which was then multiplied to arrive at a quarterly amount of miles traveled.
Exhibit #H, page C1.3. Some of the titles to the vehicles clearly had beginning odometer readings
that were not accurate. It is clear to the Hearing Officer that the auditors did not know at the time
In the Matter of Casias Trucking
page 13 of 18
of the audit that the odometers may not have been operating correctly. It is unclear, however, if
these inaccurate beginning odometer readings also meant that the odometers were not functioning.
In addition, what is without explanation is why the Department did not make any
allowances in its audit for any months in which Taxpayer’s business might be slow because of
weather or the economy. Clearly Taxpayer’s trucks were not hauling the same number of miles
during the busy summer months as the slow construction winter months. Instead the Department
elected to average the number of miles for each month during the calendar year for all the years at
issue.
Taxpayer introduced its own summary of the total number of miles driven plus the amount
of fuel used. Exhibit #1. However this exhibit is unreliable as to the odometer readings. Mr.
Casias prepared Exhibit #1 by taking the fuel receipts and writing down the mileage of the truck
and the amount of fuel purchased. Exhibit #1 is inaccurate and does not accurately reflect the
odometer readings of the trucks at the time the trucks fueled. (For example, some of the odometer
readings go backwards instead of forward.) Exhibit #G. The Hearing Officer found that Mr.
Casias was credible in his testimony that that he was not the best record keeper and any mistakes
that he made, were errors that any unsophisticated taxpayer could make. Taxpayer introduced
numerous individual fuel receipts which were reliable and were not in any way controverted by
the Department’s evidence. Exhibits #17, 18 and 19.
In reading the initial interview notes prepared by Ms. Cabrera, Mr. Casias told her that
sometimes he paid for fuel by check. Exhibit #A.2. There was no evidence introduced by the
Department that any other fuel receipts existed. No bank statements were introduced by the
In the Matter of Casias Trucking
page 14 of 18
Department or checks indicating that Taxpayer had in fact paid by check for fuel. Therefore
without any contradictory evidence, the amount of money expended by Taxpayer on fuel is
uncontroverted. The Department rejected any attempt to audit Taxpayer based on fuel receipts.
The Department argued that had Taxpayer kept better records, it would not have been
forced to used the methodology it decided to use. Generally, Taxpayer “shall maintain books of
account or other records in a manner that will permit the accurate computation of state taxes or
provide information required by the statute under which he is required to keep records.” NMSA
1978, Section 7-1-10(A)(2001). The Department’s regulations provide that “(t)he adequacy or
inadequacy of taxpayer records is a matter of fact to be determined by the secretary or secretary’s
delegate. Taxpayer had a duty to provide the secretary or secretary’s delegate, upon request, with
books of account and other records upon which to establish a basis for taxation.” Regulation
3.1.5.8(A) NMAC (2000). The regulation further provides that “(f)ailure of a taxpayer to keep
adequate books of account or other records will cause the department to use alternative methods to
determine or estimate taxes dues.” Regulation 3.1.5.8(B) NMAC (2000). “Alternative methods
which may be used by the department include, but are not limited to: (1) bank deposit method.”
Regulation 3.1.5.8(C)(1) NMAC (2000). Had the Department’s audit made adjustments to the
audit for slow or winter months, the Hearing Officer would have found the methodology more
reliable. The Hearing Officer provided the Department with an opportunity to make adjustments,
and the Department has taken the position that no adjustments should be made for winter months
or slower periods. However, between the issues with the odometers, the lack of adjustments for
slow periods and the Deaprtment’s rejection of the fuel receipts, the Hearing Officer finds the
In the Matter of Casias Trucking
page 15 of 18
methodology used in this audit sufficiently flawed that it cannot be relied upon.
In this case, Taxpayer had an obligation to keep its business records in an orderly manner.
Despite this obligation, Taxpayer was successful in rebutting the presumption of correctness as to
the assessment. The Department contends that Taxpayer or Mr. Casias is without credibility and
contradicted himself on numerous facts. Mr. Casias filed weight distance tax returns. He was not
a nonfiler who appeared to be purposefully not complying with the tax laws. He hired an
accountant to assist him with his filing requirements and he admitted to making errors in law when
he provided the accountant with mileage information. Taxpayer was also able to prove that the
Department showed a lack of trust between the Department’s auditors and Taxpayer prior to the
commencement of the audit. There was testimony that some of the Department’s employees had
seen Taxpayer’s truck(s) in certain suspicious locations. The Department completely disregarded
Taxpayer’s records in favor of a methodology of arriving at a principal amount of tax due that can
only best be described as high.
In determining the amount of tax due by Taxpayer, the Department should use a
methodology that is fair to this Taxpayer as well as any other taxpayer regardless of its dislike or
suspicions about a taxpayer. The methodology should be reliable and not suspect. The
methodology in this case is not reliable because no allowances were made for any months in
which Taxpayer’s business might be slow because of weather or the economy. All months were
treated the same or equally.
It is interesting to note that in Cordero Transport, No. 12-09, a similar case, the
Department’s auditors took a different approach. In this case, the auditors could not rely on the
In the Matter of Casias Trucking
page 16 of 18
taxpayer’s poor bookkeeping and invoices. The auditors did not use an averaging method based
on odometer readings but instead used Taxpayer’s total gallons of fuel purchased, as shown on
Taxpayer’s fuel receipts, and then applied the industry average to extract the total traveled miles in
New Mexico.
The Hearing Officer acknowledges that when taxpayers present poor records to the
Department’s auditors, it is difficult for the Department to arrive at an accurate tax liability
amount. However, Mr. Chew made a simple but important point during the hearing. Even though
Taxpayer’s records were not the best, the Department’s methodology in auditing Taxpayer should
withstand scrutiny. By selecting certain months of odometer readings and then averaging the
mileage and applying the mileage from those readings to all months at issue without any seasonal
adjustments was not a reliable manner in which to arrive at a fair and accurate amount of tax due.
No allowances were proposed by the Department, so therefore, the Hearing Officer has no choice
but to deem the audit unreliable.
CONCLUSIONS OF LAW
A. Taxpayer filed a timely, written request for retroactive extension to file a protest. The
Department granted that retroactive extension. Taxpayer filed a protest within the period of the
retroactive extension. Jurisdiction lies over the parties and the subject matter of this protest.
B. Taxpayer provided sufficient evidence that the Department’s audit was not reliable
and Taxpayer was able to overcome the presumption of correctness of the assessment under NMSA
1978, § 7-1-17 (2007).
In the Matter of Casias Trucking
page 17 of 18
C. The amount of tax due, penalty and interest should be abated.
FOR THE FOREGOING reasons, the Taxpayer's protest IS GRANTED.
DATED: November 20, 2012.
MONICA ONTIVEROS
Hearing Officer
Taxation & Revenue Department
Post Office Box 630
Santa Fe, NM 87504-0630
CERTIFICATE OF SERVICE
On November 21, 2012, a copy of the foregoing Decision and Order was mailed by
certified mail # 7008 0500 0001 4687 9221 and by first class mail to Mr. Wayne G. Chew, Esq.
located at P.O. Box X, Albuquerque, New Mexico 87110. A copy was also delivered by
interoffice mail to Ida M. Lujan, Esq., Attorney for the Taxation and Revenue Department, 1100
S. St. Francis, Santa Fe, and New Mexico 87504.
NOTICE OF RIGHT TO APPEAL
Pursuant to NMSA 1978, Section 7-1-25 (1989), the taxpayers have the right to appeal this
decision by filing a notice of appeal with the New Mexico Court of Appeals within 30 days of the
date shown above. See, Rule 12-601 NMRA of the Rules of Appellate Procedure. If an appeal is
not filed with the Court of Appeals within 30 days, this Decision and Order will become final.
In the Matter of Casias Trucking
page 18 of 18
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