Were Sharon Ray's Usana payments taxable gross receipts when she recruited New Mexico customers who ordered products online and used her associate ID?

Plain-English summary

Sharon Ray's Usana compensation was taxable gross receipts because she performed New Mexico sales services by recruiting and enrolling customers whose product purchases generated her payments. Product shipment from outside New Mexico did not change where her sales activity occurred.

Ray was a Usana associate from 2008 through 2011. She testified that she recruited New Mexico customers, who then ordered online using her associate ID, and that she received 10% of product amounts when purchases occurred.

Usana issued Forms 1099 reporting $3,650 for 2008, $2,950 for 2009, $2,700 for 2010, and $1,100 for 2011. Ray did not register for gross receipts tax or file CRS returns for those years.

Recruiting purchasers was a taxable sales service

Usana described associates as independent distributors and explained that commissions were earned through product sales volume in their down-line organizations and preferred-customer purchases.

Ray disputed being a distributor and argued that she did not receive commissions. But her own testimony tied payment to recruited customers' purchases, and Usana's records described associate compensation as commissions.

Regulations 3.2.1.14(HH)(4) and 3.2.105.10 treated commissions for New Mexico sales services as gross receipts. The underlying product seller's tax treatment did not eliminate the separate sales-service transaction.

Ray performed that service in New Mexico by recruiting and enrolling New Mexico customers. The fact that Usana shipped products directly from outside the state was not relevant to her commission receipt.

Additional Schedule C income was not contested

For 2008, Ray had $4,703 of Schedule C income in addition to the Usana Form 1099 amount. She did not protest gross receipts tax on that income, so it remained taxable without further dispute.

Hiring a CPA did not prove reliance on tax advice

Ray's CPA prepared her income-tax returns. Ray testified that the CPA did not advise her to register and file gross receipts returns.

The competent-accountant exception required proof of actual incorrect tax advice, reasonable reliance, and full disclosure. The record did not establish what advice was given about gross receipts tax.

Unawareness, erroneous belief, or inattention therefore remained negligence. Interest was mandatory until principal was paid.

Result: protest DENIED. The yearly assessments were:

• 2008: $532.75 principal, $106.55 penalty, and $110.53 interest;
• 2009: $188.15 principal, $37.63 penalty, and $30.43 interest;
• 2010: $172.20 principal, $34.44 penalty, and $21.00 interest; and
• 2011: $71.96 principal, $14.40 penalty, and $6.19 interest.

Interest continued to accrue until principal was paid.

What this means for you

Direct sellers and referral-based businesses

Payments tied to recruited customers' purchases may be taxable commissions for sales services even when you never hold inventory or ship products.

Online sales networks

Track where recruiting, enrollment, marketing, and customer assistance occur. The seller's fulfillment location does not necessarily determine the service provider's gross receipts.

Taxpayers relying on a return preparer

Income-tax preparation alone does not prove advice about gross receipts tax. Ask specifically about registration and business-tax filing duties and preserve the answer.

Common questions

Q: Did Ray physically sell or ship Usana products?
A: She testified that customers ordered online and Usana shipped directly, but she recruited and enrolled the customers.

Q: What triggered her compensation?
A: Purchases by customers associated with her ID and sales volume in the Usana structure.

Q: Why did out-of-state shipment not matter?
A: The taxed receipt was Ray's compensation for sales services she performed in New Mexico.

Q: Did hiring a CPA remove penalty?
A: No. The record did not show incorrect advice about gross receipts tax on which Ray relied.

Q: Was all 2008 Schedule C income disputed?
A: No. Ray did not protest tax on an additional $4,703.

Citations and references

Statutes and regulations:

• NMSA 1978, §§ 7-9-3.5(A)(1), 7-9-3(M), and 7-9-5(A) — gross receipts, service definition, and taxable-receipts presumption
• NMSA 1978, §§ 7-1-67 and 7-1-69 — mandatory interest and civil negligence penalty
• Regulations 3.2.1.14(HH)(4) and 3.2.105.10 NMAC — commissions for sales services and property sales
• Regulations 3.1.11.10 and 3.1.11.11(D) NMAC — negligence and competent-accountant reliance

Cases cited:

• Carlsberg Management Co. v. State, Taxation and Revenue Department, 1993-NMCA-121 — assessment presumption and taxpayer burden
• El Centro Villa Nursing Center v. Taxation and Revenue Department, 1989-NMCA-070 — reasonable reliance and limits on delegating tax responsibility
• Marbob Energy Corp. v. New Mexico Oil Conservation Commission, 2009-NMSC-013 — mandatory interest language

Source

• Listing: New Mexico Decisions & Orders
• Decision post: Sharon Ray
• Decision PDF: D&O 15-14

Original ruling text

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

IN THE MATTER OF THE PROTEST OF
SHARON RAY No. 15-14
TO ASSESSMENTS ISSUED UNDER LETTER
ID NOs. L1882541008, L0137710544, L1211452368 and L0674581456

DECISION AND ORDER

A formal hearing on the above-referenced protest was held on March 31, 2015, before

Monica Ontiveros, Hearing Officer. The Taxation and Revenue Department (“Department”) was

represented by Frank Crociata, attorney for the Department. Danny Pogan, audit supervisor,

appeared and testified as a witness for the Department. Sharon Ray (“Taxpayer”) appeared and

testified. Her husband, Ritchie Ray, appeared as a witness. The Exhibits introduced into the

record are Exhibits 1-4 and A. Based on the evidence and arguments presented, IT IS DECIDED

AND ORDERED AS FOLLOWS:

FINDINGS OF FACT

1. On September 2, 2014, the Department issued four gross receipts tax assessments

against Taxpayer: 1) in the amount of $532.75 in principal, $106.55 in penalty, and $110.53 in

interest for the tax year of January 1, 2008 through December 31, 2008 [Letter Id. No.

L1882541008]; 2) in the amount of $188.15 in principal, $37.63 in penalty, and $30.43 in interest

for the tax year of January 1, 2009 through December 31, 2009 [Letter Id. No. L0137710544]; 3)

in the amount of $172.20 in principal, $34.44 in penalty, and $21.00 in interest for the tax year of

January 1, 2010 through December 31, 2010 [Letter Id. No. L1211452368]; and 4) in the amount

of $71.96 in principal, $14.40 in penalty, and $6.19 in interest for the tax year of January 1, 2011
through December 31, 2011. [Letter Id. No. L0674581456].

2. Taxpayer was audited through the Department’s Schedule C mismatch program

whereby the Internal Revenue Service provides computer records of Schedule C returns which are

compared to the Department’s gross receipts tax program. [Exhibit 4].

3. Taxpayer filed a protest to the assessments on October 22, 2014.

4. The Department acknowledged the protest on October 27, 2014. [Letter Id. No.

L1882979280].

5. On December 11, 2014, the Department requested a hearing in this matter.

6. On December 12, 2014, the Hearings Bureau mailed a Notice of Administrative

Hearing setting the hearing for January 12, 2015. Taxpayer requested a continuance on January 2,

2015 and amended the request on January 6, 2015.

7. The Hearings Bureau issued a Continuance Order and Amended Notice of

Administrative Hearing on January 12, 2015 setting the hearing for March 31, 2015.

8. Taxpayer was not registered to do business in New Mexico for the tax years at

issue. [Exhibit 4].

9. Taxpayer failed to file gross receipts returns for the tax years at issue. [Exhibit 4].

10. During the tax years at issue, Taxpayer was an associate for Usana Health Sciences

(“Usana”). [03-31-15 CD 09:10-09:15].

11. Usana is a “down the line” sales organization. Usana Health Sciences, Inc., Annual

Report-Form 10-K, at 11 (January 2015).

12. Usana offers its products to customers through a process it calls “direct selling.”

Usana Health Sciences (April 2015) https://www.usana.com/dotCom/opportunity/directselling.

13. “Direct selling,” according to Usana’s website is the “distribution method

In the Matter of Sharon Ray
page 2 of 14
employed … where products are sold person-to-person, away from a fixed retail location.” Usana

Health Sciences (April 2015) https://www.usana.com/dotCom/opportunity/directselling.

14. Usana is located at 838 West Parkway Blvd., Salt Lake City, Utah 84120.

[Exhibits 1-3]; Usana Health Sciences, Inc., Annual Report-Form 10-K, at 1 (January 2015).

15. Usana manufactures and sells nutritional and personal care products. Usana Health

Sciences, Inc., Annual Report-Form 10-K, at 3 (January 2015).

16. Usana describes its associates as “Our customer base comprises two types of

customers: "Associates" and "Preferred Customers." Associates share in our company vision by

acting as independent distributors of our products in addition to purchasing our products for their

personal use. Preferred Customers purchase our products strictly for personal use and are not

permitted to resell or to distribute the products.” Usana Health Sciences, Inc., Annual Report-

Form 10-K, at 3 (January 2015).

17. Usana associates earn compensation in four ways:

• Commissions. “The primary way an Associate is compensated is through earning
commissions. Associates earn commissions through generating sales volume
points, which are a measure of the product sales of their down-line sales
organization. Sales volume points are assigned to each of our products and
comprise a certain percent of the product price in U.S. dollars. To be eligible to
earn commissions, an Associate must sell a certain amount of product each month
("Qualifying Sales"). Qualifying Sales may include product that the Associates
use personally or that they resell to consumers. Associates do not earn
commissions on these Qualifying Sales. Associates may earn commissions on
their sale of products above the Qualifying Sales as well as the sale of products
by Associates in their down-line organization and to Preferred Customers.
Additionally, Associates do not earn commissions for simply recruiting and
enrolling others in their down-line organization. Commissions are paid only when
products are sold. We pay Associate commissions on a weekly basis.”
• Bonuses. “We offer Associates several bonus opportunities, including our
leadership bonus, elite bonus, and lifetime matching bonus. These bonus
opportunities are based on a pay-for-performance philosophy and, therefore, are
paid out when the Associate achieves the required performance measures.”
• Retail Mark-Ups. “As discussed previously, in markets where retail mark-ups are
In the Matter of Sharon Ray
page 3 of 14
permitted, our Associates purchase products from us at the Preferred Price and
may resell them to consumers at higher retail prices. In this case, the Associate
retains the retail mark-up as another form of compensation.”
• Contests and Promotions. “We periodically sponsor contests and promotions
designed to incentivize Associates to generate sales, grow their down-line
organization, and increase product users. These promotions are also based on a
pay-for-performance philosophy and, therefore, are only paid upon the
achievement of the promotion objectives.”

Usana Health Sciences, Inc., Annual Report-Form 10-K, at 3 (January 2015).

18. Taxpayer claimed that she was not a distributor for Usana. [03-31-15 CD 13:49-

13:54].

19. Taxpayer testified that she received compensation from Usana when she recruited

and enrolled New Mexico customers and if the customers purchased products. Taxpayer testified

that she would receive 10% of the product amount. [03-31-15 CD 10:50-11:45, 13:02-13:45].

20. After the customer was recruited, the New Mexico customer would place their

order on-line and provide Taxpayer’s associate’s identification number on the order form. [03-31-

15 CD 13:05-13:41].

21. The Usana products were shipped directly to the customer in New Mexico. [03-31-

15 CD 13:54-14:12].

22. Taxpayer’s testimony is not entirely consistent with Usana’s public information

describing the four ways that an associate may be compensated.

23. Taxpayer received commissions from Usana. Usana Health Sciences, Inc., Annual

Report-Form 10-K, at 3 (January 2015).

24. Taxpayer may not have entirely understood the basis for her compensation from

Usana.

25. Taxpayer testified that she did not receive any products to sell for Usana. [03-31-

In the Matter of Sharon Ray
page 4 of 14
15 CD 13:12-13:15].

26. Usana issued Taxpayer a 1099 for tax years 2008, 2009, 2010 and 2011. [Exhibits

1-3].1

27. The amount of miscellaneous income reported on the 1099 from Usana was:

2008 $3,650.00

2009 $2,950.00

2010 $2,700.00

2011 $1,100.00

[Exhibits 1-4].

28. For tax year 2008, Taxpayer had additional income of $4,703.00 reported on her

Federal Schedule C return other than the Usana 1099 income. [Exhibit 4].

29. Taxpayer did not protest the gross receipts tax on the $4,703.00 income.

30. On May 16, 2014, the Department issued Taxpayer a Notice of Limited Scope

Audit Commencement-Gross Receipts letter. [Exhibit 4].

31. Taxpayer employed Julia C. Adams, CPA to prepare her income tax returns. [03-

31-15 CD 09:22].

32. Taxpayer testified that Ms. Adams did not advise her to register and file gross

receipts returns. [03-31-15 CD 14:15-15:00].

DISCUSSION

The sole issue to be determined is whether the Department properly assessed Taxpayer for

gross receipts tax, penalty and interest for the tax years January 1, 2008 through December 31,

1
Taxpayer did not have a copy of her 1099 for tax year 2008 but she did not dispute the amount listed for 2008 on the
Notice of Limited Scope Audit.

In the Matter of Sharon Ray
page 5 of 14
2011 for her commissions. Taxpayer argued that she did not receive commissions. In addition

Taxpayer requested that the penalty be forgiven because she was unaware.

Burden of Proof and Standard of Review.

Section 7-1-17(C) provides that any assessment of taxes made by the Department is

presumed to be correct. NMSA 1978, §7-1-17(C) (2007). Accordingly, it is Taxpayer’s burden to

present evidence and legal argument to show that she is entitled to an abatement, in full or in part,

of the assessment issued against her. See, Carlsberg Management Co. v. State, Taxation and

Revenue Dep’t., 1993-NMCA-121, 116 N.M. 247. In addition, all receipts of a person engaging in

business are presumed to be subject to the gross receipts tax pursuant to NMSA 1978, Section 7-9-

5(A) (2002).

Gross Receipts.

Generally speaking, goods sold or services performed within the State of New Mexico are

taxable. The term“gross receipts”is broadly defined in Section 7-9-3.5(A)(1):

(1) “gross receipts” means the total amount of money or the value of other
consideration received from selling property in New Mexico, from leasing
or licensing property employed in New Mexico, from granting a right to
use a franchise employed in New Mexico, from selling services performed
outside New Mexico, the product of which is initially used in New Mexico,
or from performing services in New Mexico. In an exchange in which the
money or other consideration received does not represent the value of the
property or services exchanged, “gross receipts” means the reasonable
value of the property or services exchanged;”

NMSA 1978, §7-9-3.5(A)(1) (2007). The Gross Receipts and Compensating Tax Act, specifically

Section 7-9-3(M), defines “service” as “all activities ... which activities involve predominately the

performance of a service as distinguished from selling or leasing property.” NMSA 1978, §7-9-

3(M) (2007).

In the Matter of Sharon Ray
page 6 of 14
There are also two applicable regulations that provide that commissions are gross receipts.

They are Regulation 3.2.1.14(HH)(4) NMAC which provides that:

Commissions and other consideration received by an independent
contractor from performing a sales service in New Mexico with respect to a
service to be performed by other persons are gross receipts whether or not
the other person reports and pays gross receipts tax with respect to the
receipts from the performance of the underlying service. This situation
involves two transactions. The first is the performance of the underlying
service by the other person for the customer and the second is the
performance of the sales service by the independent contractor for the
performer of the underlying service. The receipts from the performance of
the underlying service for the customer are gross receipts of the person
performing that service. Receipts, whether in the form of commissions or
other remuneration, of the person performing the sales service are gross
receipts of the person performing the sales service.

In addition Regulation 3.2.105.10 NMAC provides that “receipts from commissions paid to such

salesperson for selling property in New Mexico are subject to the gross receipts tax.” The

Department stated that Regulation 3.2.1.14(HH) (3) applies to the case at hand which provides that

independent contractors for a multi-level sales company with presence in New Mexico who

receive commissions, that those commissions are gross receipts. However, there is no evidence of

whether Usana has presence in New Mexico.

During the tax years at issue, Taxpayer was an associate for Usana, a “down the line” sales

organization. Usana Health Sciences, Inc., Annual Report-Form 10-K, at 11 (January 2015).2

Usana manufactures and sells nutritional and personal care products. Usana Health Sciences, Inc.,

Annual Report-Form 10-K, at 3 (January 2015). Taxpayer offered Usana products to New Mexico

customers through a process Usana calls “direct selling.” Usana Health Sciences (April 2015)

2
The Hearing Officer takes administrative notice of Usana’s Annual Report, which is a public document, pursuant to
Regulation 3.1.8.10(C).

In the Matter of Sharon Ray
page 7 of 14
https://www.usana.com/dotCom/opportunity/directselling.3 “Direct selling,” according to Usana’s

website is the “distribution method employed … where products are sold person-to-person, away

from a fixed retail location.” Usana Health Sciences (April 2015)

https://www.usana.com/dotCom/opportunity/directselling. According to Usana’s website, an

associate is a “distributor.” Usana Health Sciences (April 2015)

https://www.usana.com/dotCom/opportunity/directselling. Taxpayer testified that she was

paid when she recruited New Mexico customers and if the customers purchased products. After

the customer was recruited, the New Mexico customer would place their order on-line and provide

Taxpayer’s associate’s identification number on the order form. [03-31-15 CD 13:05-13:41].

Taxpayer testified that she would receive 10% of the product amount. [03-31-15 CD 10:50-11:45,

13:02-13:45]. The Usana products were shipped directly to the customer in New Mexico. [03-31-

15 CD 13:54-14:12].

According to Usana’s Annual Report, associates earned compensation in four ways

(commissions, bonuses, retail mark-ups, and contests and promotions) from Usana. Usana Health

Sciences, Inc., Annual Report-Form 10-K, at 3 (January 2015). According to Usana’s Annual

Report, associates received “commissions.” Usana Health Sciences, Inc., Annual Report-Form

10-K, at 3 (January 2015). The Annual Report states that, “The primary way an Associate is

compensated is through earning commissions. Associates earn commissions through generating

sales volume points, which are a measure of the product sales of their down-line sales

organization. Sales volume points are assigned to each of our products and comprise a certain

percent of the product price in U.S. dollars. To be eligible to earn commissions, an Associate

must sell a certain amount of product each month ("Qualifying Sales"). Qualifying Sales may

3
The Hearing Officer takes administrative notice of Usana’s website, pursuant to Regulation 3.1.8.10(C).

In the Matter of Sharon Ray
page 8 of 14
include product that the Associates use personally or that they resell to consumers. Associates do

not earn commissions on these Qualifying Sales. Associates may earn commissions on their sale

of products above the Qualifying Sales as well as the sale of products by Associates in their down-

line organization and to Preferred Customers. Additionally, Associates do not earn commissions

for simply recruiting and enrolling others in their down-line organization. Commissions are paid

only when products are sold. We pay Associate commissions on a weekly basis.”

Taxpayer performed a service for Usana in New Mexico; namely recruiting and enrolling

customers and selling the customers Usana products. Taxpayer argued that the products were

delivered from outside New Mexico. It is not relevant that the products were delivered from

outside of New Mexico. Taxpayer earned a commission on the sales volume points which were

created when Taxpayer recruited and enrolled New Mexico customers and the customers

purchased Usana products. Therefore, the commissions received by Taxpayer from Usana are

gross receipts and taxable. Again, since Taxpayer did not protest the gross receipts tax on the

$4,703.00 income, this amount is also taxable.

Civil Penalty.

Civil penalty is imposed when a taxpayer is “negligent” or disregards the Department’s

rules and regulations in not filing a return or paying tax when it is due. Section 7-1-69(A)(1)

states that:

(e)xcept as provided in Subsection C of this section, in the case of failure due to
negligence or disregard of department rules and regulations, but without intent
to evade or defeat a tax, to pay when due the amount of tax required to be paid,
to pay in accordance with the provisions of Section 7-1-13.1 NMSA 1978 when
required to do so or to file by the date required a return regardless of whether a
tax is due, there shall be added to the amount assessed a penalty in an amount
equal to the greater of:

(1) two percent per month or any fraction of a month from the date the tax

In the Matter of Sharon Ray
page 9 of 14
was due multiplied by the amount of tax due but not paid, not to exceed twenty
percent of the tax due but not paid;

(Emphasis added). NMSA 1978, Section 7-1-69(A)(1) (2007). The Department’s regulation

provides that, “negligence” includes “failure to exercise that degree of ordinary business care and

prudence which reasonable taxpayers would exercise under like circumstances; inaction by

taxpayers where action is required; inadvertence, indifference, thoughtlessness, carelessness,

erroneous belief or inattention” for either failing to file a return on time or failing to make a

payment on time. Regulation 3.1.11.10 NMAC. Inadvertent error is defined as “negligence.” See

El Centro Villa Nursing Center v. Taxation & Revenue Department, 1989-NMCA-070, ¶14, 108

N.M. 795.

Taxpayer testified that at the time she was performing services for Usana, she was unaware

that she was required to register and file gross receipts returns. [03-31-15 CD 14:15-15:00].

Taxpayer employed Julia C. Adams as her certified public accountant. [03-31-15 CD 09:22].

Taxpayer testified that Ms. Adams did not advise her to register and file gross receipts returns.

[03-31-15 CD 14:15-15:00].

The regulations provide exceptions to the negligence definition. After reviewing the

exceptions or indications of nonnegligence found in regulation 3.1.11.11 NMAC (1/15/01), the

only possible applicable regulation that might apply to Taxpayer is found in that paragraph D of

the regulation applied. Regulation 3.1.11.11(D) provides that:

(t)he taxpayer proves that the failure to pay tax or to file a return
was caused by reasonable reliance on the advice of competent tax
counsel or accountant as to the taxpayer’s liability after full
disclosure of all relevant facts; failure to make a timely filing of a
tax return, however, is not excused by taxpayer’s reliance on an
agent;

In the Matter of Sharon Ray
page 10 of 14
To meet this regulation, it requires Taxpayer to prove that she reasonably relied on the

advice of a competent accountant and that the competent accountant provided incorrect tax advice.

The term “reasonable reliance” is a factual determination made by the Hearing Officer. It requires

evidence that the taxpayer acted reasonably or acted in a “(f)air, proper or moderate under the

circumstances” and the person exercised reliance or a “(d)ependence or trust” on the advice of a

competent accountant. Black’s Law Dictionary, 1379, 1404 (9th ed. 2009). This indication, as

with the other indications of nonnegligence, are in keeping with the holding in El Centro Villa

Nursing Center v. Taxation & Revenue Dep’t., where the court stated that “(u)nder the statutory

definition of negligence, it is inappropriate to impose a penalty where the taxpayer acted reasonably

in failing to report income or to pay taxes.” Id. at ¶6. The court also held that a taxpayer is not

relieved of his or her duty to ascertain the possible tax consequences of his action or inaction by

abdicating this responsibility by merely appointing an accountant to act as an agent in tax matters.

Id. at ¶14. Thus, in reading the regulation and El Centro Villa, the hiring of an accountant by itself

is insufficient to prove that a taxpayer is nonnegligent. The taxpayer must act reasonably and he or

she must have relied on the accountant’s incorrect tax advice.

The Hearings Bureau has ruled in numerous cases that reasonable reliance on a CPA may be

a reason for abatement of penalty especially when it seems clear from the evidence that the

accountant provided “incorrect tax advice.” See, Carlos Chavez Formerly dba Mayan

Construction, Decision and Order No. 12-09 (the accountant failed to review the work of Taxpayer’s

employee and failed to properly advise Taxpayer of time deadlines); Jesus Hernandez, Decision and

Order No. 11-16 (the accountant stated in a letter that he had provided taxpayer with incorrect

advice); Wal-Mart, Decision and Order No. 06-07 (taxpayer relied on in-house tax accountants to

form a subsidiary company to reduce state tax liability); Children’s Orchard, Decision and Order

In the Matter of Sharon Ray
page 11 of 14
No. 01-05 (taxpayer hired an accountant to give them advice to assist them in making sure their

taxes were properly paid); and Eileen P. Cahoon, Decision and Order No. 98-38 (taxpayer relied on

her accountant’s advice in not providing a timely NTTC). But see, Marilyn Stock, Decision and

Order 05-04 (taxpayer was not granted a refund of the penalty amount she paid even though she had

relied on her CPA who used the wrong tax table in determining her tax liability). In this case, it is

not clear what advice was given to Taxpayer by Ms. Adams. Taxpayer’s actions were based on her

erroneous belief or inattention which is by definition negligent and subject to civil penalty.

Therefore, Taxpayer owes the penalty amount.

Interest.

New Mexico law is very clear on the imposition of interest when the principal

amount of tax is unpaid when due, even if the payment is received one day late. Section

7-1-67(A) (2007) states that 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) (2007). The word “shall” is

interpreted to mean that the Department does not have discretion and must assess interest

if principal tax is due and owing. Marbob Energy Corporation v. NM Oil Conservation

Commission, 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 principal amount of tax was not paid when it was due, interest was

properly assessed on the principal amount until the date it was paid. Therefore, Taxpayer

owes the interest amount calculated through date of payment of the principal.

CONCLUSIONS OF LAW

A. Taxpayer filed a timely written protest to the Notice of Assessments Letter Id. Nos.

L1882541008, L0137710544, L1211452368 and L0674581456 for gross receipts tax principal,

In the Matter of Sharon Ray
page 12 of 14
penalty and interest for the tax years ending 2008, 2009, 2010 and 2011.

B. Jurisdiction lies over the parties and the subject matter of this protest.

C. The hearing was timely set as required by NMSA 1978, Section 7-1-24.1(A)

(2013).

D. Pursuant to NMSA 1978, Section 7-1-17(C) (2007), the Department’s assessment

is presumed to be correct, and it is Taxpayer’s burden to come forward with evidence and legal

argument to establish that it was entitled to an abatement.

E. Taxpayer provided services in New Mexico to Usana; specifically, Taxpayer

generated sales volume points, which are a measure of the product sales of the down-line sales.

F. The sales volume points were created when Taxpayer recruited and enrolled New

Mexico customers and the customers purchased Usana products.

G. Taxpayer received commissions from Usana based on the sales volume points.

H. Taxpayer was negligent in not filing her gross receipts returns when due for the tax

years 2008, 2009, 2010 and 2011; accordingly, she owes penalty.

I. The total amount due for tax year 2008 is $532.75 in principal, $106.55 in penalty,

and $110.53 in interest; for the tax year 2009, the amount due is $188.15 in principal, $37.63 in

penalty, and $30.43 in interest; for the tax year 2010, the amount due is $172.20 in tax, $34.44 in

penalty, and $21.00 in interest; and for the tax year of January 2011, the amount due is $71.96 in

principal, $14.40 in penalty, and $6.19 in interest.

J. Interest continues to accrue until the principal is paid in full and should be applied

to the principal amount of tax due in accordance with NMSA 1978, Section 7-1-67 (2007).

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

DATED: April 30, 2015

In the Matter of Sharon Ray
page 13 of 14
Monica Ontiveros
Monica Ontiveros
Hearing Officer
Taxation & Revenue Department
Post Office Box 630
Santa Fe, NM 87504-0630

In the Matter of Sharon Ray
page 14 of 14