Could Bed Bath & Beyond refile a penalty-refund claim after the Department mailed its first denial to the wrong internal department, and did its electronic-payment mistake justify a refund?

Plain-English summary

Bed Bath & Beyond was allowed to refile its penalty-refund claim because the Department's first denial was mailed to the wrong internal department after the company had already corrected the address. But the AHO still denied the refund: an incorrect identifying or routing number caused electronic gross-receipts-tax payments to fail, and the resulting honest mistake was negligent.

Bed Bath began electronic CRS filing and gross-receipts-tax payment in September and October 2011. It entered payment information incorrectly, the payments did not go through, and it corrected and resubmitted them after the due dates.

The Department assessed penalty and interest. Bed Bath paid and sought a refund of the penalty.

The first denial was not effectively addressed

Before the first refund denial, Bed Bath told the Department in writing that notices addressed “ATTN Payro” were being routed toward its outside payroll provider and were not reaching the company's Tax Department. Its registration materials and refund application identified the proper department or a specific contact instead.

The Department nevertheless mailed the July 2, 2012 denial to “ATTN Payro.” Bed Bath did not receive it and learned of the denial only after checking on the claim.

A written refund denial normally cannot be refiled and instead must be protested within 90 days. But notice is effective only when sent by a method reasonably calculated to reach the party, and a taxpayer can rebut the presumption that a properly addressed mailed letter was received.

Here the letter was not properly addressed. The Department knew the internal routing was wrong, had been told that earlier notices were not received, and had no explanation for continuing to use Payroll. The July 2012 denial therefore did not bar a new claim filed within the limitation period.

Refiling did not establish a right to the refund

The merits turned on why the September and October 2011 payments were late. Bed Bath described the electronic setup problem as an honest mistake.

Sections 7-1-13.1 and 7-1-13.4 placed responsibility for payment on the taxpayer. If an electronic payment failed and tax was paid late, penalty and interest applied.

Regulation 3.1.11.10(C) included inadvertence within negligence. The AHO therefore treated the incorrect payment information as negligent even without bad intent.

Result: protest DENIED. Bed Bath was procedurally permitted to refile the claim, but the Department correctly denied the requested penalty refund. The decision did not state the penalty amount.

What this means for you

Businesses using electronic tax payments

Verify account, routing, taxpayer-identification, tax-period, and payment-status information. Confirmation that a return was filed does not prove the related payment settled.

Tax departments in multi-office organizations

Keep registrations and refund applications current with both the street address and internal addressee. Notify the agency in writing when mail is being misrouted and retain delivery proof.

Taxpayers receiving a refund denial

Calendar the protest deadline immediately. If the denial was not received, collect the claim, address instructions, envelope, internal routing records, and prior written corrections before arguing that notice was ineffective.

Common questions

Q: Why could Bed Bath refile instead of protesting within 90 days?
A: The initial denial was ineffective because it was sent to Payroll after the Department had written notice that the addressee was wrong.

Q: Was the street address itself wrong?
A: No. The problem was the internal “ATTN Payro” routing at a multi-office location.

Q: What caused the late payments?
A: An identifying or routing number was entered incorrectly when electronic payments were set up.

Q: Did correcting and resubmitting the payments remove penalty?
A: No. The payments were still late.

Q: Why did an honest mistake count as negligence?
A: The cited regulation expressly included inadvertence in the negligence definition.

Q: How much penalty was at issue?
A: The decision did not state the amount of the requested penalty refund.

Citations and references

Statutes and regulations:

• NMSA 1978, §§ 7-1-9 and 7-1-26(B) — mailed notice and treatment of denied or unacted-upon refund claims
• NMSA 1978, §§ 7-1-13.1 and 7-1-13.4 — electronic payment responsibility and failed payments
• NMSA 1978, § 7-1-69 — mandatory civil negligence penalty
• Regulations 3.1.11.8 and 3.1.11.10(C) NMAC — penalty presumption and inadvertence as negligence

Cases cited:

• Garmond v. Kinney, 1978-NMSC-043 — receipt presumption for a properly addressed mailed letter
• Maso v. State, 2004-NMSC-028 — notice reasonably calculated to apprise the party
• State Farm Fire & Casualty Co. v. Price, 1984-NMCA-036 — rebutting the presumption of mailed notice
• Marbob Energy Corp. v. New Mexico Oil Conservation Commission, 2009-NMSC-013 — mandatory penalty language

Source

• Listing: New Mexico Decisions & Orders
• Decision post: Bed Bath & Beyond, Inc.
• Decision PDF: D&O 15-26

Original ruling text

STATE OF NEW MEXICO
ADMINISTRATIVE HEARINGS OFFICE
TAX ADMINISTRATION ACT

IN THE MATTER OF THE PROTEST OF
BED BATH & BEYOND, INC., No. 15-26
TO THE DENIAL OF REFUND ISSUED UNDER
LETTER ID NO. L0575362000

DECISION AND ORDER

A formal hearing on the above-referenced protest was held June 18, 2014, before Hearing

Officer Dee Dee Hoxie. The Taxation and Revenue Department (Department) was represented by Ms.

Melinda Wolinsky, Staff Attorney. Ms. Mary Griego, Auditor, also appeared on behalf of the

Department. Mr. Steven Taplits, Vice President of Tax for Bed Bath & Beyond, Inc. (Taxpayer)

appeared for the hearing and represented 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

1. On November 26, 2013, the Taxpayer filed a claim for refund of penalty paid on gross

receipts taxes from September 2011 and October 2011.

2. On June 20, 2014, the Department denied the claim for refund.

3. On July 8, 2014, the Taxpayer filed a formal protest letter.

4. On August 20, 2014, the Department filed a Request for Hearing asking that the Taxpayer’s

protest be scheduled for a formal administrative hearing.

5. On August 21, 2014, the Hearings Office issued a notice of hearing. The hearing date was

set within ninety days of the protest.

6. On September 2, 2014, the Department requested that the hearing date be utilized as a

telephonic scheduling conference, and the Taxpayer concurred. The request was granted.

7. On September 18, 2014, a scheduling hearing was conducted. The order and notice of

hearing was issued on September 19, 2014.

8. On January 14, 2015, the Department filed a motion to continue the hearing, and the

Taxpayer concurred.

9. On February 23, 2015, the request was granted and amended notices of hearing were sent.

10. The Taxpayer began filing its CRS returns electronically in September and October 2011.

The Taxpayer also began to pay its gross receipts taxes electronically at that time.

11. The Taxpayer made a mistake in setting up its electronic payments for September 2011 and

October 2011. An identifying number or a routing number was entered incorrectly. Due to

this mistake, the payments failed to go through during those months.

12. The Taxpayer became aware of the problem, corrected it, and successfully submitted the

payments for September 2011 and October 2011, although they were late.

13. The Department assessed the Taxpayer for penalty and interest for the late payments for

September and October 2011.

14. On May 31, 2012, the Taxpayer sent a letter to the Department regarding the delinquency for

September and October 2011. The Taxpayer expressed its frustration with the process and

advised the Department that it was receiving documents from the Department by fax that it

had not received previously.

15. Those documents showed that they were mailed to the Taxpayer at “Bed Bath and Beyond

Inc, 650 Liberty Ave ATTN Payro, Union, NJ 07083”. The parties stipulated that “Payro”

referred to Payroll.

16. The Taxpayer advised the Department that those documents were apparently being sent to its

payroll department, which was incorrect. The Taxpayer advised that the Department should

Bed, Bath, & Beyond, Inc.
Letter ID No. L0575362000
page 2 of 6
be corresponding with its Tax Department and that it was not receiving letters that were

erroneously sent to Payroll.

17. The Taxpayer paid the assessment.

18. On June 25, 2012, the Taxpayer requested a refund of the payments regarding penalty for

September and October 2011. The Taxpayer’s application for refund included its address and

the name of a contact person. Nowhere on that application does it refer to or list Payroll as a

contact for the Taxpayer.

19. On July 2, 2012, the Department issued a denial of refund to the Taxpayer by mailing it to

“Bed Bath and Beyond Inc, 650 Liberty Ave ATTN Payro, Union, NJ 07083”, which was the

same address as on the documents that the Taxpayer referenced as being incorrectly

addressed in its May 31, 2012 letter.

20. The Taxpayer did not receive the denial letter.

21. After some time, the Taxpayer began checking on its claim for refund. When it learned of

the denial, the Taxpayer filed a letter protesting the denial. The letter was dated October 10,

2013.

22. On October 28, 2013, the Department issued a denial of the protest as untimely since it was

made more than a maximum of 90 days from the date of the denial on July 2, 2012.

23. The Taxpayer refiled its claim for refund on November 26, 2013.

24. The claim was denied on June 20, 2014.

DISCUSSION

The issues to be decided are whether the Department’s denial of refund issued on July 2,

2012 was effective and barred the Taxpayer’s subsequent refiling of the claim, and if the denial was

not effective, whether the Taxpayer’s claim for refund properly denied.

Bar to refiling a claim for refund.

Bed, Bath, & Beyond, Inc.
Letter ID No. L0575362000
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If a claim for refund is denied in writing, that claim may not be refiled, but may be protested

within 90 days. See NMSA 1978, § 7-1-26 (B) (2013). If the Department takes no action on claim

for refund, the claim may be refiled within the statute of limitations or the inaction may be protested.

See id. Generally, notice is effective if it is mailed to the correct last known address. See NMSA

1978, § 7-1-9. Generally, actual notice is not required and notice is presumed when it was given by

means reasonably calculated to apprise the parties. See Maso v. State, 2004-NMSC-028, ¶ 10, 136

N.M. 161. See also Cordova v. State, 2005-NMCA-009, 136 N.M. 713. However, a party may rebut

the presumption that notice sent in a properly addressed letter was received. See State Farm Fire and

Casualty Co. v. Price, 1984, NMCA-036, ¶ 24, 101 N.M. 438.

The Taxpayer argued that the denial issued on July 2, 2012 was not properly addressed as it

was sent to Payroll. The Taxpayer also explained that items addressed to Payroll are forwarded to an

outside company that provides its payroll services. The Department argued that the street address

was correct, so the notice was valid. The Taxpayer argued that notice sent to the proper street

address is not sufficient when the address is multi-office building and when the Department had

multiple notices that the items should not be mailed to Payroll. The Taxpayer pointed out that its

registration with the Department did not indicate that notices should be sent to Payroll. At least one

registration document specified that the notices should be sent to the Tax Department. The Taxpayer

also pointed out that its claim for refund had a specific contact person named, and did not include

Payroll. The Taxpayer had also notified the Department in writing in its letter of May 31, 2012, that

the Department was incorrectly addressing items to Payroll and that those items were not being

received by the Taxpayer. The Department offered no explanation for why items were ever

addressed to Payroll. The Department offered no explanation for why it persisted in addressing items

to Payroll after the Taxpayer notified it in writing that doing so was incorrect.

Bed, Bath, & Beyond, Inc.
Letter ID No. L0575362000
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“A properly addressed letter that is mailed is presumed to be received.” Garmond v. Kinney,

1978-NMSC-043, ¶6, 91 N.M. 646. In this case, the denial of refund was not properly addressed as

it was erroneously sent to Payroll after the Department was notified in writing that items were not to

be sent to Payroll. The Department was also notified that items purportedly sent to Payroll were not

reaching the Taxpayer and that items should be addressed to the Tax Department. Given the facts

and circumstances of this case, the denial of refund issued on July 2, 2012 was not effective and did

not bar the Taxpayer from refiling its claim for refund within the statute of limitations.

Denial of claim for refund.

The basis of the claim for refund was that the Taxpayer made an honest mistake in setting up

its electronic payments. That mistake resulted in payments for September and October 2011 being

made late. The Taxpayer argued that it was not negligent based on an honest mistake. The

Department argued that an honest mistake is negligence.

Penalty “shall be added to the amount assessed” when a tax is not paid on time due to

negligence. See NMSA 1978, § 7-1-69 (2007) (emphasis added). The word “shall” indicates that the

assessment of penalty is mandatory, not discretionary. See Marbob Energy Corp. v. N.M. Oil

Conservation Comm’n., 2009-NMSC-013, ¶ 22, 146 N.M. 24. Assessments of penalty are presumed

to be correct and it is a taxpayer’s burden to show that the assessment was not correct. See 3.1.11.8

NMAC (2001). See NMSA 1978, § 7-1-17. See also El Centro Villa Nursing Ctr. v. Taxation and

Revenue Department, 1989-NMCA-070, 108 N.M. 795. It is a taxpayer’s responsibility to make

payments, whether they are done electronically or in another fashion. See NMSA 1978, § 7-1-13.1

(2005). If the payment fails to go through, and the tax is paid late, the payment is subject to penalty

and interest. See id. See also NMSA 1978, § 7-1-13.4 (2000). Negligence includes inadvertence.

See 3.1.11.10 (C) (2001). Under the statute and regulations, an honest mistake is tantamount to

inadvertence, and is subject to penalty. See id. Because the tax was not paid when it was due and the

Bed, Bath, & Beyond, Inc.
Letter ID No. L0575362000
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Taxpayer made an inadvertent mistake in arranging its electronic payment, penalty was owed on the

late payments. Therefore, the request for refund was properly denied.

CONCLUSIONS OF LAW

A. The Taxpayer filed a timely written protest to the Denial of Refund for penalty paid on

September 2011 and October 2011 issued under Letter ID number L0575362000, and jurisdiction lies

over the parties and the subject matter of this protest.

B. The Taxpayer was not barred from refiling its claim for refund as the Department’s

initial denial letter was not properly addressed. See NMSA 1978, §§ 7-1-9 and 7-1-26.

C. The Department properly denied the claim for refund as the penalty applied due to the

Taxpayer’s negligence in setting up its electronic payments. See NMSA 1978, §§ 7-1-13.1, 7-1-13.4,

and 7-1-69.

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

DATED: July 20, 2015.

Dee Dee Hoxie
DEE DEE HOXIE
Hearing Officer
Administrative Hearings Office
Post Office Box 6400
Santa Fe, NM 87502

Bed, Bath, & Beyond, Inc.
Letter ID No. L0575362000
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