Could Southwest Mobile Service deduct maintenance services resold by its customer using a timely multijurisdictional certificate or NTTCs obtained after New Mexico's 60-day deadline?
Apply this to your situation
This page answers the general question as of 2015. Ezel answers yours, under current New Mexico tax law, with citations.
Plain-English summary
Southwest Mobile Service could not deduct maintenance services resold by its customer because its multijurisdictional certificate did not cover New Mexico service sales and its NTTCs arrived after the Department's 60-day deadline. The gross receipts tax and interest were upheld, but penalty was abated because Richard Cameron reasonably relied on his accountant, his customer, and a certificate he accepted in good faith.
The original gross receipts tax assessment was $294,259.04 tax, $58,851.70 penalty, and $151,821.08 interest for January 2002 through March 2008. Cameron withdrew his protests concerning separate workers' compensation and withholding assessments, so the decision addressed only gross receipts tax, related penalty, and interest.
A timely MTC did not cover New Mexico service sales
Cameron performed building and vehicle maintenance for UPS Oasis, which resold the services to its parent corporation. Oasis gave him multijurisdictional uniform sales and use tax certificates (MTCs), represented that it would pay applicable tax, and later proved that it paid New Mexico gross receipts tax on its resales.
New Mexico recognized an MTC like an NTTC only for sales of tangible personal property. The certificate's notes specifically said New Mexico did not permit it for the resale of taxable services. Because Cameron sold maintenance services, his timely, good-faith MTC did not establish the deduction.
Both NTTCs missed the mandatory deadline
During the 2008 audit, the Department gave Cameron a letter allowing 60 days to obtain proper nontaxable transaction certificates. Cameron entrusted the audit documents to his accountant, who repeatedly assured him the necessary paperwork was being handled.
Oasis did not execute the first proper NTTC until February 2, 2009. It later executed a second certificate on April 2, 2009, with a note stating an effective date of January 1, 2001. Both execution dates fell after the 60-day deadline.
Section 7-9-43 said deductions requiring NTTCs “shall be disallowed” when the seller does not possess them within 60 days of the Department's notice. The hearing officer treated that denial as mandatory. A backdated effective date did not make the later-executed certificate timely.
Oasis's tax payment did not erase Cameron's assessment
Equitable recoupment required one taxable event, inconsistent tax theories, and a strict identity of interest. Cameron did not establish the required identity with Oasis—there was no indemnity agreement—and both parties were taxed under gross receipts tax rather than inconsistent theories.
The decision also rejected the double-taxation argument because taxing separate entities on their own transactions is not prohibited double taxation.
Reasonable reliance removed penalty, but not interest
Cameron's accountant knew the business arrangement and attended the audit meeting. She repeatedly said she was obtaining the required documents. Oasis and the accountant also assured Cameron that the MTC was appropriate, and he had accepted it in good faith.
Based on that totality of evidence, the hearing officer found Cameron was not negligent and abated the penalty. Interest remained mandatory because the tax was unpaid when due.
Result: protest GRANTED IN PART AND DENIED IN PART. The gross receipts tax and interest remained; the gross receipts tax penalty was abated.
What this means for you
Service sellers using resale certificates
Confirm that the exact certificate type covers services in New Mexico. A multistate form accepted for tangible property may not protect a service transaction.
Businesses under audit
Treat a 60-day NTTC demand as a hard deadline. Later execution or a stated earlier effective date did not cure untimeliness here.
Sellers whose customer remitted tax downstream
Do not assume the customer's tax payment automatically eliminates the seller's liability. Equitable recoupment has separate identity-of-interest and inconsistent-theory requirements.
Taxpayers relying on professionals
Document the advice, assurances, certificates, and audit communications. Reasonable reliance may support penalty relief even when the underlying tax and interest remain.
Common questions
Q: Why did the MTC fail?
A: New Mexico recognized that certificate for tangible personal property, not the maintenance services Cameron sold.
Q: Did the later NTTC with a 2001 effective date work?
A: No. Oasis executed it after the 60-day deadline, so the decision treated it as untimely.
Q: Why was equitable recoupment denied if Oasis paid tax?
A: Cameron did not prove a strict identity of interest with Oasis, and the taxes were not imposed under inconsistent theories.
Q: Why was penalty abated?
A: Cameron reasonably relied on his accountant's repeated assurances, Oasis's representations, and a timely MTC he accepted in good faith.
Q: What liabilities did Cameron withdraw from the protest?
A: He withdrew the workers' compensation and withholding portions, leaving only gross receipts tax, penalty, and interest for decision.
Citations and references
Statutes and regulations:
- NMSA 1978, §§ 7-9-43 and 7-9-48 — NTTC possession deadline and service-for-resale deduction
- NMSA 1978, § 7-5-1, Article V — Multistate Tax Compact exemption certificates
- NMSA 1978, §§ 7-1-28(F), 7-1-67(A), and 7-1-69 — equitable recoupment, mandatory interest, and negligence penalty
- Regulations 3.2.201.8 and 3.2.201.13 NMAC — deduction documentation and New Mexico's recognition of MTCs
- Regulations 3.1.11.10 and 3.1.11.11 NMAC — negligence and reliance on professional advice
Cases cited:
- Siemens Energy and Automation v. New Mexico Taxation and Revenue Department, 1994-NMCA-173 — MTC safe harbor and equitable recoupment
- Leaco Rural Telephone Cooperative, Inc. v. Bureau of Revenue, 1974-NMCA-076 — timely, good-faith, properly executed NTTC requirements
- Teco Investments, Inc. v. Taxation and Revenue Department, 1998-NMCA-055 — equitable recoupment elements
- New Mexico Sheriffs and Police Association v. Bureau of Revenue, 1973-NMCA-130 — separate entities taxed on their own transactions
Source
- Listing: New Mexico Decisions & Orders
- Decision post: Southwest Mobile Service and Richard Cameron
- Decision PDF: D&O 15-08
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
SOUTHWEST MOBILE SERVICE AND RICHARD CAMERON, No. 15-08
TO THE ASSESSMENTS ISSUED UNDER
LETTER ID NOS. L2087800896 and L0308437056
DECISION AND ORDER
A formal hearing on the above-referenced protest was held January 21 and 22, 2015,
before Dee Dee Hoxie, Hearing Officer. The Taxation and Revenue Department (Department)
was represented by Ms. Elena Morgan, Staff Attorney. Mr. Tom Dillon, Auditor, and Ms.
Veronica Galewaller also appeared on behalf of the Department. Mr. Richard Cameron
(Taxpayer) appeared for the hearing with his attorney, Ms. Tracy Sanders. Mr. Shawn Harrison
also appeared as a witness for the Taxpayer. The Hearing Officer took notice of all documents in
the administrative file. Based on the evidence and arguments presented, IT IS DECIDED AND
ORDERED AS FOLLOWS:
FINDINGS OF FACT
- On December 21, 2009, the Department assessed the Taxpayer for workman’s
compensation tax, penalty, and interest for the tax period from March 31, 2003 through
March 31, 2008. The assessment was for $2,433.80 tax, $486.76 penalty, and $1,030.47
interest [L2087800896].
- On December 21, 2009, the Department assessed the Taxpayer for gross receipts tax,
withholding tax, penalty and interest for the tax period from January 31, 2002 through
March 31, 2008. The assessment was for gross receipts tax of $294,259.04, penalty of
$58,851.70, and interest of $151,821.08. The assessment was for withholding tax of
$10,280.05, penalty of $2,056.02, and interest of $4,035.62. [L0308437056]
-
On January 22, 2010, the Taxpayer filed a formal protest letter.
-
On September 18, 2013, the Department filed a Request for Hearing asking that the
Taxpayer’s protest be scheduled for a formal administrative hearing.
- On September 18, 2013, the Hearings Bureau issued a notice of hearing for December 19,
2013.
-
On December 18, 2013, the Taxpayer filed a request for continuance of the hearing.
-
An order was issued on December 18, 2013 that advised the parties that the December
19, 2013 hearing would be held as a telephonic scheduling conference and that the
hearing on the merits would be reset.
- On December 19, 2013, the Taxpayer failed to appear and failed to have a bona fide
employee, accountant, or attorney appear on his behalf.
-
On January 3, 2014, an order to show cause was issued.
-
On January 23, 2014, the Taxpayer’s attorney filed an entry of appearance and response
to the order to show cause.
- On March 25, 2014, a scheduling conference was held by telephone. The hearing on the
merits was set for September 18, 2014.
-
On August 22, 2014, the parties submitted a stipulated motion to continue the hearing.
-
On September 5, 2014, the request to continue was granted, and notice of the new hearing
date on January 21, 2015 was issued.
- At the hearing, the Taxpayer announced that he was withdrawing his protest as to the
workman’s compensation assessment and as to the assessment on the withholding tax.
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Letter ID Nos. L2087800896 and L0308437056
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Therefore, the only issue at protest was the gross receipts tax and the penalty and interest
applicable thereto.
-
The Taxpayer was conducting business in New Mexico from 2002 through 2008.
-
The Taxpayer was providing maintenance services on buildings and vehicles to UPS
Oasis (Oasis). Oasis was reselling the Taxpayer’s services to its parent corporation.
- The Taxpayer was also providing maintenance services for Oasis in Utah, Wyoming, and
Idaho. The Taxpayer’s contracts with Oasis indicated that the Taxpayer was not to
charge sales tax to Oasis and that Oasis would be responsible for paying each state’s
applicable sales tax.
- Oasis provided the Taxpayer with multijurisdictional uniform sales and use tax
certificates (MTCs) on the services that the Taxpayer provided for them.
- The Taxpayer checked the MTCs to be sure that New Mexico was listed as a
participating state. New Mexico was listed.
- The Taxpayer believed that its sales in New Mexico were not subject to the gross receipts
tax based on the MTCs provided, the representations made by Oasis, and the advice of its
accountant, who was a CPA.
-
The Taxpayer accepted the MTCs in good faith.
-
The Taxpayer did not file reports on its gross receipts tax.
-
In 2008, the Department commenced an audit of the Taxpayer.
-
The Taxpayer met with the auditor in May 2008. The Taxpayer took several of his
employees and his accountant to the meeting with the auditor.
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Letter ID Nos. L2087800896 and L0308437056
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- At the meeting in May 2008, the auditor served the Taxpayer with a letter (the 60-day
letter) that advised him that he had 60 days to obtain appropriate nontaxable transaction
certificates (NTTCs).
- The Taxpayer signed in receipt of the 60-day letter, but did not recall being served with
it. The Taxpayer explained that a lot of information and documents were exchanged at
the meeting with the auditor. The Taxpayer entrusted all of the documents to his
accountant.
- Over the next several weeks and months, the Taxpayer spoke repeatedly to his accountant
about the audit. The accountant repeatedly reassured the Taxpayer that the necessary
documents were being obtained and that things were being taken care of.
- During the audit, Oasis provided proof that it had paid the New Mexico gross receipts tax
on its resales of the Taxpayer’s services.
-
The Taxpayer failed to obtain a NTTC from Oasis within 60 days of the 60-day letter.
-
After the assessment was made and the protest was filed, the Taxpayer learned that his
accountant had not been handling the case properly and had not obtained the necessary
documents.
- The Taxpayer immediately requested a NTTC from Oasis. Oasis was issued and
executed a proper NTTC to the Taxpayer on February 2, 2009. The Taxpayer provided
the NTTC to the Department.
- The auditor on the case advised that the Taxpayer needed a NTTC that was dated within
or prior to the 60-day deadline from the 60-day letter.
- The Taxpayer requested another NTTC from Oasis that was backdated for that time
period. Oasis provided an NTTC that was issued to them by the Department in 1998 and
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Letter ID Nos. L2087800896 and L0308437056
page 4 of 14
executed to the Taxpayer on April 2, 2009. Oasis indicated in a typewritten note that the
NTTC was effective from January 1, 2001. The Taxpayer provided the backdated NTTC
to the Department.
- The Department rejected the NTTC as untimely because its execution to the Taxpayer
was after the 60-day deadline. The Department argued that the backdated NTTC was
fraudulent and evidence of bad faith.
- The Department conceded that the Taxpayer would have been able to deduct the sales to
Oasis from his gross receipts if the Taxpayer had obtained the NTTC within the 60-day
deadline. The Department also conceded that the MTC would have allowed the Taxpayer
to deduct his sales to Oasis from his gross receipts if the Taxpayer were selling tangible
property rather than services.
DISCUSSION
The issue to be decided is whether the Taxpayer is liable for gross receipts tax, penalty,
and interest as assessed. The Taxpayer argued that the MTC was accepted in good faith at the
time of the contract and should serve as conclusive evidence that the Taxpayer was entitled to the
deductions. The Department argued that the MTC was only valid for sales of tangible personal
property and that a NTTC was required within the 60-day deadline for the deductions to be valid.
Burden of Proof.
Assessments by the Department are presumed to be correct. See NMSA 1978, § 7-1-17.
Tax includes, by definition, the amount of tax principal imposed and, unless the context
otherwise requires, “the amount of any interest or civil penalty relating thereto.” NMSA 1978, §
7-1-3. See also El Centro Villa Nursing Ctr. v. Taxation and Revenue Department, 1989-NMCA-
070, 108 N.M. 795. Therefore, the assessment issued to the Taxpayer is presumed to be correct,
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and it is the Taxpayer’s burden to present evidence and legal argument to show that he is entitled
to an abatement. The burden is on the Taxpayer to prove that he is entitled to an exemption or
deduction. See Public Services Co. v. N.M. Taxation and Revenue Dep’t., 2007-NMCA-050, ¶
32, 141 N.M. 520. See also Till v. Jones, 1972-NMCA-046, 83 N.M. 743. “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 exemption or deduction must be clearly and unambiguously
expressed in the statute, and the right must be clearly established by the taxpayer.” Sec. Escrow
Corp. v. State Taxation and Revenue Dep’t., 1988-NMCA-068, ¶ 8, 107 N.M. 540. See also
Wing Pawn Shop v. Taxation and Revenue Dep’t., 1991-NMCA-024, ¶ 16, 111 N.M. 735. See
also Chavez v. Commissioner of Revenue, 1970-NMCA-116, ¶ 7, 82 N.M. 97.
Gross Receipts Tax.
Services performed within the State of New Mexico are subject to the gross receipts tax.
See 3.2.1.18 (A) NMAC (2003). The Taxpayer admitted that he was engaged in a service
business performing maintenance. There was no dispute that the Taxpayer’s services would
ordinarily be subject to gross receipts tax. The Taxpayer argued that he was entitled to deduct
his gross receipts based on his timely acceptance of a MTC and his eventual acceptance of a
NTTC.
NTTCs.
“Receipts from selling a service for resale may be deducted from gross receipts…if the
sale is made to a person who delivers a nontaxable transaction certificate to the seller. The
buyer delivering the nontaxable transaction certificate must resell the service in the ordinary
course of business and the resale must be subject to the gross receipts tax[.]” NMSA 1978, § 7-
9-48 (emphasis added). A taxpayer may deduct certain gross receipts only when they are
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Letter ID Nos. L2087800896 and L0308437056
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provided with NTTCs from buyers. See NMSA 1978, § 7-9-43 (2011). A taxpayer should be in
possession of NTTCs when the receipts from the transaction are due, but may also produce
NTTCs within a deadline set by the Department. See id. The seller must accept the NTTC in
good faith. See id.
The Taxpayer was served with the 60-day letter in May 2008. The Taxpayer received the
proper NTTC from Oasis in February 2009. Therefore, the NTTC was not received timely. The
Taxpayer received another NTTC from Oasis in April 2009 that attempted to establish its
effective date as January 1, 2001. However, this NTTC was also received past the 60-day
deadline and was, ultimately, not timely. See NMSA 1978, § 7-9-43. A taxpayer can be
protected from tax liability when the taxpayer accepts a NTTC in good faith even though the
transaction was not actually subject to deduction. See Leaco Rural Telephone Coop., Inc. v.
Bureau of Revenue, 1974-NMCA-076, 86 N.M. 629. However, that protection will be
conclusive only when three requirements are met; the acceptance of the NTTC must be timely,
must be in good faith, and the NTTC must be properly executed. See id. at ¶ 15. The Taxpayer’s
acceptance of the NTTC was not timely as it occurred after the 60-day deadline. If a taxpayer is
not in possession of NTTCs within sixty days of the notice from the Department requiring
possession of NTTCs, “deductions claimed by the seller or lessor that require delivery of these
nontaxable transaction certificates shall be disallowed.” NMSA 1978, § 7-9-43 (emphasis
added). The word “shall” indicates that the denial of the deduction is mandatory, not
discretionary. See Marbob Energy Corp. v. N.M. Oil Conservation Comm’n, 2009-NMSC-013, ¶
22, 146 N.M. 24.
MTCs.
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Letter ID Nos. L2087800896 and L0308437056
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The Taxpayer accepted a timely MTC in good faith and argued that the same safe-harbor
protection is afforded to him by that acceptance. A MTC that is recognized by the Department is
treated the same as a NTTC. See NMSA 1978, § 7-9-43 (A). See also Siemens Energy and
Automation v. N.M. Taxation and Revenue Dep’t., 1994-NMCA-173, ¶ 16, 119 N.M. 316
(indicating that MTCs and NTTCs serve the same purpose). The Department has elected to
recognize MTCs only in reference to the sales of tangible personal property. See 3.2.201.13
NMAC. The Department argued that the MTC could not be accepted in good faith and could not
be conclusive evidence that the Taxpayer was entitled to a deduction because the MTC indicated
on its face that it was subject to the notes on the following pages and that one of the footnotes
said that “New Mexico do[es] not permit the use of this certificate to claim a resale exemption
for the purchase of a taxable service for resale.” Exhibit DD. Another footnote explained that
New Mexico only accepts the MTC for sales of tangible property. See id.
The Taxpayer explained that he read the face of the MTC, which provides in the
certification by the buyer that the certificate is for “any property or service”. See id. The
Taxpayer also checked to be sure that New Mexico was listed as a state that accepted the MTCs.
The Taxpayer did not read the footnotes and did not understand that the MTC was not accepted
in New Mexico for sales of services. The Taxpayer was also relying on the representations made
by Oasis and by his accountant that he did not owe New Mexico tax on his services to Oasis.
Oasis paid the New Mexico gross receipts tax on the Taxpayer’s services when they were resold
to the parent corporation.
The Taxpayer argued that a MTC was “other documentation”, as referenced to in the 60-
day letter, that proved he was entitled to take a deduction. The legislature has specified in the
statute that other documentation can be used to prove a deduction, but only in reference to those
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Letter ID Nos. L2087800896 and L0308437056
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sections that deal with tangible property. See NMSA 1978, § 7-9-43 (B) and (E). Therefore,
other documentation is not sufficient to prove a deduction for the sale of services. See also
3.2.201.8 (C) NMAC (prohibiting acceptance of any other documentation to prove a deduction
unless explicitly allowed by statute).
The Taxpayer argued that his good faith acceptance of the MTC should be treated the
same as a good faith acceptance of a NTTC. The issuance and acceptance of MTCs are part of
the Multistate Tax Compact. See NMSA 1978, 7-5-1. Article V of that section provides that a
seller who accepts an exemption certificate in good faith is “relieved of liability for a sales or use
tax with respect to the transaction.” Id. That language has been interpreted to offer the seller a
safe harbor with absolute relief from tax liability when the seller accepted a MTC in good faith,
regardless of whether the underlying transaction qualified for the exemption. See Siemens, 1994-
NMCA-173, ¶ 15. Interpretations that would strip MTCs of their value in promoting uniformity
and convenience are not favored. See id. at ¶ 24. Requiring “sellers to make a factual inquiry,
and then make such a sophisticated legal decision on each MTC…would totally eviscerate any
purpose for the MTC certificate and render the Compact a sham in this area.” Id. at ¶ 25.
However, MTCs must be “authorized by the appropriate state”. NMSA 1978, § 7-5-1, Article V.
Even if the MTC could be treated as a NTTC, it is not clear that the Taxpayer would be
entitled to take the deduction. According to the Department, a NTTC must be in the proper form
and of the proper type to be valid. See 3.2.201.8 (D) NMAC (2001). There is caselaw that
indicates that a NTTC will protect a taxpayer from liability even when the transaction could not
properly be deducted. See Leaco, 1974-NMCA-076. See also Continental Inn of Albuquerque v.
N.M. Taxation and Revenue Dep’t., 1992-NMCA-030, 113 N.M. 588. However, there is also
caselaw that indicates that a taxpayer is only protected from liability if the NTTC provided
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Letter ID Nos. L2087800896 and L0308437056
page 9 of 14
actually covered the transaction at issue and that a taxpayer is responsible for knowing when a
NTTC is not sufficient to justify taking a deduction. See McKinley Ambulance Service v. Bureau
of Revenue, 1979-NMCA-026, 92 N.M. 599. See also Arco Materials, Inc. v. State of N.M.
Taxation and Revenue Dep’t., 1994-NMCA-062, 118 N.M. 12. Moreover, “the statute must be
construed strictly in favor of the taxing authority, the right to the exemption or deduction must be
clearly and unambiguously expressed in the statute, and the right must be clearly established by
the taxpayer.” Sec. Escrow Corp. v. State Taxation and Revenue Dep’t., 1988-NMCA-068, ¶ 8,
107 N.M. 540. See also Wing Pawn Shop v. Taxation and Revenue Dep’t., 1991-NMCA-024, ¶
16, 111 N.M. 735. See also Chavez v. Commissioner of Revenue, 1970-NMCA-116, ¶ 7, 82
N.M. 97. The statute clearly indicates that MTCs are treated as NTTCs only when the
Department has deemed them to be so treated. See NMSA 1978, § 7-9-43. Again, the
Department has authorized MTCs only in reference to the sales of tangible personal property.
See 3.2.201.13 NMAC. See also NMSA 1978, § 7-9-43 (A) (giving the Department the
authority to determine which MTCs will be deemed as NTTCs). Therefore, a MTC will only be
treated as a NTTC when the MTC is for the sale of tangible property. Since the MTC in this
case was for the sale of services, it does not afford the Taxpayer the same protections as a
properly executed NTTC would.
Equitable Recoupment.
An assessment may be abated when another person paid the amount of the tax “on behalf
of the taxpayer on the same transaction; provided that the requirements of equitable recoupment
are met.” NMSA 1978, § 7-1-28 (F) (2013). The Taxpayer argued that Oasis had already paid
the taxes. The purpose of the doctrine of equitable recoupment is to prevent the unjust
enrichment of one party due to another’s mistake and to bypass harsh applications of a
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Letter ID Nos. L2087800896 and L0308437056
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procedural bar on limitations periods. See City of Carlsbad v. Grace, 1998-NMCA-144, ¶ 20-21,
126 N.M. 95. In tax transactions, there are three elements that must be met for equitable
recoupment to apply. See Teco Investments, Inc. v. Taxation and Revenue Dep’t., 1998-NMCA-
055, ¶ 8, 125 N.M. 103. There must be 1) a single taxable event, 2) taxes assessed on that single
event on inconsistent theories, and 3) a strict identity of interest. See id. Identity of interest
means that the same taxpayer is being taxed under two inconsistent theories on the same
transaction. See id. at ¶ 13. Two separate parties can establish an identity of interest in certain
circumstances. See id. at ¶ 11 (holding that an indemnity agreement was sufficient to establish
an identity of interest between two parties). In this instance, the Taxpayer failed to establish a
strict identity of interest between his business and Oasis. Although Oasis contracted with the
Taxpayer and indicated that it would pay the gross receipts tax on the transaction, there was no
indemnity agreement. See also Siemens, 1994-NMCA-173, ¶ 33 (indicating equitable
recoupment does not apply when there is not an identity of interest). Moreover, the taxes were
also not paid on an inconsistent theory. Rather, the Taxpayer was assessed for gross receipts tax,
and Oasis paid the gross receipts tax. See Teco, 1998-NMCA-055 (indicating that the tax
theories must inconsistent). Therefore, equitable recoupment does not apply.
Fairness and Double Taxation.
The Taxpayer argued that assessing the Taxpayer for transactions on which Oasis already
paid the gross receipts tax is prohibited as double taxation. Double taxation is not necessarily
prohibited, and it is not considered double taxation when two separate entities are taxed on their
own transactions. See N.M. Sheriffs and Police Ass’n. v. Bureau of Revenue, 1973-NMCA-130,
85 N.M. 565.
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Letter ID Nos. L2087800896 and L0308437056
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The Taxpayer argued that assessing the Taxpayer for transactions for which he could
have taken a deduction if he had obtained the NTTC a few months sooner is fundamentally
unfair. This is essentially an argument for equitable estoppel. Estoppel may be found against the
state where there is “a shocking degree of aggravated and overreaching conduct or where right
and justice demand it." Wisznia v. State, Human Servs. Dep't, 1998-NMSC-011, ¶ 17, 125 N.M.
- However, even if estoppel were to apply, the Hearing Officer could not grant it. See AA
Oilfield Serv. v. New Mexico SCC, 1994-NMSC-085,118 N.M. 273 (holding that an administrative
agency cannot grant the equitable remedy of estoppel because that power is held exclusively by the
judiciary).
Penalty.
Penalty is due whenever a person fails to pay a tax when it is due, if that failure was due to
negligence. See NMSA 1978, § 7-1-69. A taxpayer may be entitled to abatement of penalty
when the taxpayer relied on advice of counsel or an accountant, or in various other
circumstances. See 3.1.11.11 NMAC (2001). The Taxpayer was using an accountant during the
tax periods. The accountant knew of the Taxpayer’s business dealings with Oasis and was aware
of the MTC that was issued. The accountant was present during the audit meeting in 2008 and
knew what materials were being requested. The accountant repeatedly reassured the Taxpayer
that she was working on the audit and was getting the necessary documents. The Taxpayer
relied on the advice of his accountant. Moreover, the Taxpayer had a timely MTC, which he
accepted in good faith, and which his accountant and Oasis assured him was an appropriate
document to forego charging gross receipts tax to Oasis. Based upon the totality of the evidence,
the Taxpayer was not negligent, and penalty is abated.
Interest.
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Letter ID Nos. L2087800896 and L0308437056
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Interest “shall be paid” on taxes that are not paid on or before the date on which the tax is
due. NMSA 1978, § 7-1-67 (A). Again, the word “shall” indicates that the assessment of interest
is mandatory, not discretionary. See Marbob Energy Corp. v. N.M. Oil Conservation Comm’n.,
2009-NMSC-013, ¶ 22, 146 N.M. 24. The assessment of interest is not designed to punish
taxpayers, but to compensate the state for the time value of unpaid revenues. Because the tax
was not paid when it was due, interest was properly assessed.
CONCLUSIONS OF LAW
A. The Taxpayer filed a timely written protest to the assessment of gross receipts tax,
penalty and interest for the tax period from January 31, 2002 through March 31, 2008 under
Letter ID number L0308437056, and jurisdiction lies over the parties and the subject matter of this
protest. Other items protested by the Taxpayer were abandoned and withdrawn prior to the hearing.
B. The Taxpayer failed to obtain a timely NTTC. See NMSA 1978, § 7-9-43. See also
3.2.201.8 NMAC. See also Leaco, 1974-NMCA-076 (indicating that the first requirement is timely
acceptance of a NTTC).
C. The timely MTC provided to the Taxpayer did not afford the same protection as a
NTTC because the Department has authorized the use of MTCs only for sales involving tangible
personal property. See NMSA 1978, § 7-9-43. See 3.2.201.13 NMAC.
D. The Taxpayer was not negligent in failing to pay the gross receipts tax because he
was relying on advice from his accountant as well as representations made to him by the multistate
corporation that issued a MTC to him. Therefore, penalty is HEREBY ABATED. See NMSA
1978, § 7-1-69. See also 3.1.11.10 and 3.1.11.11 NMAC.
E. The Taxpayer failed to overcome the presumption of correctness on the
assessment of gross receipts tax and interest. See NMSA 1978, § 7-1-17.
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Letter ID Nos. L2087800896 and L0308437056
page 13 of 14
For the foregoing reasons, the Taxpayer's protest is DENIED IN PART and GRANTED
IN PART.
DATED: February 23, 2015.
Dee Dee Hoxie
DEE DEE HOXIE
Hearing Officer
Taxation & Revenue Department
Post Office Box 630
Santa Fe, NM 87504-0630
Southwest Mobile Service and Richard Cameron
Letter ID Nos. L2087800896 and L0308437056
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