Could Family Workshop deduct Medicaid counseling payments because an insurer subsidiary acted like a managed-care organization, and were older assessments time-barred?

Plain-English summary

Family Workshop's Medicaid counseling payments were taxable gross receipts because Section 7-9-93 expressly excluded health services provided to Medicaid patients. The AHO upheld $167,934.43 of gross receipts tax and mandatory interest but abated the $33,560.31 gross-receipts penalty because the provider had exercised ordinary business care.

Family Workshop provided behavioral and mental health counseling through employees and independent contractors at Albuquerque and Rio Rancho locations. It received lump-sum payments from insurers and a subsidiary administering Medicaid payments.

The business had deducted the Medicaid receipts after an accountant advised that HMO or managed-care payments could qualify and a Department employee said HMO payments were probably deductible. It also reported receipts from both locations at Albuquerque's lower tax rate.

Medicaid status controlled, not the payer's organizational label

Section 7-9-93 allowed certain managed-care or insurer payments for commercial contract services. But its definition of commercial contract services expressly excluded health services provided to Medicaid patients under Titles 19 or 21 of the Social Security Act.

Family Workshop conceded that the subsidiary's payments were for Medicaid services. Whether that subsidiary itself qualified as a managed-care organization or third-party administrator therefore was not decisive: the patient-service category was excluded by the statute.

Regulation 3.2.241.12's denial of a Medicaid deduction was consistent with that express language.

Zero-liability returns triggered the six-year period

The normal assessment period was three years, but Section 7-1-18 allowed six years when a return understated tax liability by more than 25%.

For months filed in 2010 and 2011, Family Workshop reported zero tax liability. The actual liability therefore was understated by 100%, making the 2015 assessment timely for those older periods. The 2012-2014 periods were within three years anyway.

Informal conversations did not create estoppel

Statutory estoppel required a qualifying regulation or a formal written Secretary ruling reviewed and signed as required by law. Verbal statements that HMO payments were “probably deductible” did not meet that standard.

Equitable estoppel against the state was also disfavored, could not override an express statute, and in any event was not a remedy the administrative hearing officer could grant.

Reasonable efforts still removed penalty

Although the tax position was wrong, Family Workshop had consulted an accountant and several Department employees about the deduction. Considering the totality of the evidence, the AHO found ordinary business care and no negligence.

Interest remained mandatory. The business presented no evidence or argument against the separate workers' compensation and withholding assessments, so those portions remained presumed correct.

Result: protest GRANTED IN PART AND DENIED IN PART. Gross receipts tax and interest remained; the $33,560.31 gross-receipts penalty was abated; the unchallenged other-tax assessments remained.

What this means for you

Behavioral and mental health providers

Trace the patient program behind each payment. A managed-care intermediary does not necessarily convert Medicaid-funded services into deductible commercial-contract receipts.

Multi-location service businesses

Allocate receipts to the location where services are rendered and apply the correct local rate. Lump-sum payer deposits should be reconciled to patients, services, and locations.

Taxpayers evaluating older audit periods

Measure the understatement of tax liability shown on each return, not merely the omitted receipts. A zero-liability return can create a 100% understatement and a longer assessment window.

Taxpayers relying on Department conversations

Informal oral advice may support a penalty argument without creating statutory estoppel. For binding treatment, follow the formal written-ruling process.

Common questions

Q: Why were the Medicaid payments taxable?
A: Section 7-9-93 excluded services to Medicaid patients from the deductible commercial-contract category.

Q: Did it matter whether the payer was an MCO?
A: No. The statutory Medicaid exclusion resolved the deduction issue.

Q: Why could the Department assess 2010 and 2011 in 2015?
A: Filed returns showed zero liability, understating actual tax by 100% and triggering the six-year period.

Q: Why was penalty abated?
A: Family Workshop consulted an accountant and Department employees, demonstrating ordinary business care under the evidence.

Q: What happened to withholding and workers' compensation issues?
A: They were effectively abandoned because no supporting evidence or argument was presented.

Citations and references

Statutes and regulations:

• NMSA 1978, § 7-9-93 — managed-care deduction and express Medicaid-patient exclusion
• NMSA 1978, §§ 7-1-17, 7-1-18, 7-1-67, and 7-1-69 — assessment presumption, six-year period, interest, and penalty
• NMSA 1978, §§ 7-1-60 and 9-11-6.2 — statutory estoppel and formal Secretary rulings
• Regulations 3.2.241.12 and 3.2.241.9 NMAC — Medicaid and third-party administrator payment rules

Cases cited:

• Security Escrow Corp. v. State Taxation and Revenue Department, 1988-NMCA-068 — strict proof of a deduction
• Rainaldi v. Public Employees Retirement Board, 1993-NMSC-028 — legal opinions and estoppel against the state
• AA Oilfield Service v. New Mexico State Corporation Commission, 1994-NMSC-085 — administrative agency could not grant equitable estoppel
• Marbob Energy Corp. v. New Mexico Oil Conservation Commission, 2009-NMSC-013 — mandatory interest language

Source

• Listing: New Mexico Decisions & Orders
• Decision post: Family Workshop LLC / Jeffrey Burrows
• Decision PDF: D&O 15-37

Original ruling text

STATE OF NEW MEXICO
ADMINISTRATIVE HEARINGS OFFICE
TAX ADMINISTRATION ACT

IN THE MATTER OF THE PROTEST OF
FAMILY WORKSHOP LLC
JEFFREY BURROWS, No. 15-37
TO ASSESSMENTS ISSUED UNDER
LETTER ID NOS. L0029171664, L0283733968
AND TO STATEMENT OF ACCOUNT
LETTER ID NO. L0425586640

DECISION AND ORDER

A formal hearing on the above-referenced protest was held on November 12 and 13, 2015

before Hearing Officer Dee Dee Hoxie. The Taxation and Revenue Department (Department)

was represented by Ms. Cordelia Friedman, Staff Attorney. Ms. Simone Mehta-Campbell,

Auditor, Ms. Alicia Muniz, Auditor, and Mr. Tom Dillon, Auditor, also appeared on behalf of

the Department. Mr. Jeffrey Burrows, owner and director of Family Workshop LLC,

(collectively Taxpayer) appeared for the hearing with his attorney, Mr. Wayne Chew. His CPA,

Mr. Robert DePasquale, was also present on the first day of the hearing.

Halfway through the hearing, upon recommencement on November 13, 2015, the

Taxpayer advised that he was dismissing his attorney and wished to proceed by representing

himself. The Taxpayer then requested a continuance of the hearing, which was denied. The

Taxpayer asked his attorney to remain for the limited purpose of cross-examining the

Department’s witness. The Taxpayer later advised that he was reinstating his attorney and that

the written decision should be sent to his attorney. 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 March 17, 2015, the Department assessed the Taxpayer for workman’s compensation

tax, penalty, and interest for the tax periods from September 30, 2010 through December

31, 2013. The assessment was for tax of $275.20 tax, penalty of $55.74, and interest of

$25.49. [L0283733968]

2. On March 18, 2015, the Department assessed the Taxpayer for gross receipts tax,

withholding tax, penalty, and interest for the tax periods from July 31, 2010 through

January 31, 2014. The assessment was for gross receipts tax of $167,934.43, penalty of

$33,560.31, and interest of $13,122.79, and for withholding tax of $(25.34), penalty of

$21.53, and interest of $3.48. [L0029171664]

3. On March 18, 2015, the Department sent the Taxpayer a Statement of Account, reflecting

the outstanding taxes owed by the Taxpayer for tax periods from July 31, 2010 through

January 31, 2014. Each tax period was listed separately and listed each period’s

respective tax, penalty, and interest. [L0425586640]

4. On May 12, 2015, the Taxpayer filed a formal protest letter.

5. On June 8, 2015, the Department filed a Request for Hearing asking that the Taxpayer’s

protest be scheduled for a formal administrative hearing.

6. On June 9, 2015, the Hearings Office issued a notice of telephonic scheduling hearing.

The hearing date was set within ninety days of the protest.

7. On July 6, 2015, a telephonic scheduling hearing was conducted. The scheduling order

and notice of hearing on the merits was filed July 14, 2015.

8. The Taxpayer filed his witness list and request for subpoenas on August 28, 2015.

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9. On September 2, 2015, a second notice of telephonic scheduling hearing was sent to the

parties to discuss the increase in the number of witnesses and to determine if the hearing

could be held in the amount of time previously allotted for it.

10. On September 4, 2015, a second telephonic scheduling hearing was held. The Taxpayer

requested that the hearing on the merits be rescheduled to a date when additional time

could be given to it. The Department opposed the request. The request was granted.

11. On September 8, 2015, a second scheduling order and amended notice of hearing on the

merits was issued, and the previous setting of September 18, 2015 was vacated.

12. The Taxpayer does business in New Mexico as a provider of behavioral and mental

health counseling services. The Taxpayer primarily deals with family issues, and has

several licensed therapists working as employees or as independent contractors.

13. The Taxpayer has two locations, one in Albuquerque and one in Rio Rancho.

14. The Taxpayer has contracts with several insurance companies and their subsidiaries for

providing counseling services to their customers. The Taxpayer is paid primarily by

these insurance companies.

15. The Taxpayer typically receives a lump sum payment from the parent insurance

companies, and typically did not keep track of what payments were for what services to

which patients.

16. One of the insurance companies had a subsidiary that was responsible for making

payments for the provision of health services under the state’s Medicaid Program

(Medicaid payments).

17. The contract with the subsidiary for making the Medicaid payments required separate

approval and signatures. The contract also detailed several quality control provisions.

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18. The Taxpayer knew that several changes to deductions regarding payments for health

care services occurred from 2005 through 2007. The Taxpayer consulted with an

accountant about the changes. The accountant advised the Taxpayer that payments made

by a health management organization (HMO) or by a managed care organization (MCO)

could be deducted from gross receipts.

19. In 2011, some of the Taxpayer’s independently contracted therapists were selected for

audit. They brought the issue to the Taxpayer, and the Taxpayer spoke with several

Department employees about his therapists’ gross receipts and about his gross receipts.

20. The Taxpayer indicated that some of the employees did not give him an answer about his

gross receipts, but one employee definitely told him that payments from a HMO were

probably deductible.

21. The Taxpayer understood the subsidiary making Medicaid payments to be a HMO or a

MCO. Therefore, the Taxpayer was deducting the Medicaid payments from his gross

receipts.

22. The Taxpayer reported all of his gross receipts at one tax rate, for the Albuquerque

location, even though some of the gross receipts were for services rendered at the Rio

Rancho location, which had a higher tax rate than Albuquerque.

23. Ms. Mehta-Campbell conducted an audit of the Taxpayer, which was completed in early

24. Ms. Mehta-Campbell discovered that the Taxpayer had two locations and was

reporting gross receipts only at the lower tax rate of one location.

24. Ms. Mehta-Campbell worked with the Taxpayer to determine what gross receipts were

attributable to which location and what gross receipts were derived from Medicaid

payments.

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25. Ms. Mehta-Campbell determined that all of the receipts from the subsidiary were for

Medicaid payments.

26. The Department assessed the Taxpayer for the gross receipts tax attributable to the gross

receipts of the Medicaid payments and adjusted the tax rate according the location where

the services were rendered.

27. The Taxpayer did not present any evidence or argument regarding the assessments of

workman’s compensation tax and withholding tax or their respective penalties and

interest.

DISCUSSION

The issue to be decided is whether the Taxpayer is liable for gross receipts tax,

workman’s compensation tax, withholding tax, penalty, and interest as assessed. The Taxpayer

argued that the payments from the subsidiary were deductible under the statute as the subsidiary

functions as a managed health care service company, or as a HMO or a MCO. The Taxpayer

argued that even if the subsidiary was not a HMO or MCO that the Department should be

estopped from collecting the tax from him based on his conversations with the Department

employees. The Taxpayer argued that he should not be expected to understand the provisions of

the Tax Act when a professional accountant and the Department’s own employees did not. The

Taxpayer also argued that the Department improperly assessed him for taxes by going back more

than three years.

The Department argued that the Medicaid payments should be treated as a sale of service

to the government that is not deductible under statute. The Department argued that the Medicaid

payments were also not deductible under the regulation. The Department argued that the

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Taxpayer had underreported his gross receipts by more than 25% and that the assessment of

taxes could go back as far as six years.

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,

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 providing behavioral and mental health counseling. There was no dispute that the

Taxpayer’s services are subject to gross receipts tax. The Taxpayer argued that he was entitled

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to deduct the amounts assessed from his gross receipts under Section 7-9-93 as they were

payments made by a MCO. The Department argued that the subsidiary was not a MCO for

various reasons and that the payments from Medicaid funds were excluded from the deduction

by Regulation 3.2.241.12.

Health care service payments.

A health care service provider may deduct payments made for providing “commercial

contract services or medicare part C services” when those payments are made by a “managed

health care provider or health care insurer”. NMSA 1978, § 7-9-93 (A) (2007). The Taxpayer’s

health care services would be commercial contract services. See Exhibit E. Medicaid payments

are not deductible. See 3.2.241.12 NMAC (2006). The Department argued that the Taxpayer

was selling a service to the government, which is not deductible under Section 7-9-54. The

Taxpayer was not selling a service to the government; he was selling a service to his patients.

The payments for those services were coming from the government by way of a third-party

administrator of funds. The Taxpayer conceded that the subsidiary was making Medicaid

payments.

The Taxpayer argued that the statute did not prohibit the deduction of Medicaid payments

and argued that the deduction was allowed if the entity distributing payments was a MCO or a

managed health care provider. The Taxpayer argued that the regulations were also not clear as

one says that payments from a third party administrator are deductible under the statute and

another says that Medicaid payments are not deductible. See 3.2.241.9 NMAC and 3.2.241.12,

respectively. The Department argued that the subsidiary was really a third-party administrator

and did not meet the criteria to be considered a MCO. The Department also argued that the

regulation made it clear that Medicaid payments are not deductible. See 3.2.241.12 NMAC.

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The parties focused their arguments on whether the subsidiary was a MCO, or a

“managed health care provider” as it is called in the statute. NMSA 1978, § 7-9-93. However, a

closer reading of the statute reveals that the status of the subsidiary is not the critical issue. See

id. The statute itself excludes from deduction payments that are made for providing health care

services to Medicaid patients. See NMSA 1978, § 7-9-93. The statute allows for deductions for

“payments by a managed health care provider…for commercial contract services”. NMSA 1978,

§ 7-9-93 (A). However, the statute goes on to define “commercial contract services” as

health care services performed by a health care practitioner pursuant to a contract with a
managed health care provider or health care insurer other than those health services
provided for medicare patients pursuant to Title 18 of the federal Social Security Act or
for medicaid patients pursuant to Title 19 or Title 21 of the federal Social Security Act[.]
NMSA 1978, § 7-9-93 (B) (emphasis added).

The statute itself excludes payments for services to Medicaid patients from the deduction. See

id. The gross receipts at issue in this case are payments for services to Medicaid patients.

Therefore, those payments are not deductible and are subject to gross receipts tax.

Again, the right to a deduction must be clear and unambiguously granted by the statute,

and the right to take the deduction must be clearly established by the Taxpayer. See Sec. Escrow

Corp., 1988-NMCA-068, ¶ 8. The statutory definition of “commercial contract services”

expressly excludes Medicaid payments from the deduction. See NMSA 1978, § 7-9-93 (B).

Regulation 3.2.241.12, which says that Medicaid payments are not deductible, is consistent with

the statute. See NMSA 1978, § 7-9-93 and 3.2.241.12 NMAC. See also Chevron U.S.A. Inc. v.

State ex rel. Taxation and Revenue Dep’t, 2006-NMCA-050, ¶ 16, 139 N.M. 498 (holding that

agency regulations that interpret a statute are presumed to be proper). Consequently, the

Taxpayer failed to establish that he was entitled to deduct the Medicaid payments from his gross

receipts.

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Timeliness of the Gross Receipts Tax Assessment.

The Taxpayer argued that the assessment was not timely since it occurred more than three

years after the 2010 and 2011 tax years. Generally, assessments must be made within three years

of the end of the calendar year in which the tax was due. See NMSA 1978, § 7-1-18. The

Taxpayer’s gross receipts taxes were due monthly. Under the general rule, the Department

would have had until the end of 2013 and 2014 to assess for 2010 and 2011, respectively. See id.

Subsequent tax years in the assessment fall within the general three-year period and were clearly

timely.

When a taxpayer underreports the tax liability by more than 25%, the Department has six

years to assess. See NMSA 1978, § 7-1-18. Both parties made several arguments on whether the

Taxpayer had underreported his gross receipts by more than 25%. However, these arguments

mischaracterize the provision of the statute; the inquiry is whether the Taxpayer “in a return

understate[d] by more than twenty-five percent the amount of liability for any tax for the period”.

Id. (emphasis added). For example, a taxpayer could make a typographical error on a return and

report only $10 of gross receipt, when the true amount was $100. Assuming a 10% tax rate, that

taxpayer could then also incorrectly report his gross receipts tax liability to be $9, rather than

$10, which would be underreporting the tax liability by 10%. In that hypothetical situation, the

Department would only have three years to assess since the taxpayer did not underreport the tax

liability by more than 25%, even though the taxpayer underreported the gross receipts by more

than 25%. Therefore, the timeliness of the assessment hinges on whether the Taxpayer

underreported his gross receipts tax liability by more than 25%.

Mr. Dillon testified that his understanding was that the Taxpayer was filing returns and

reporting zero gross receipts tax liability. The audit report, Exhibit A, contains a history of the

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Taxpayer’s filing and lists returns that were filed by the month and year and what gross receipts

tax liability was reported on each return. The list in Exhibit A coincides by month and year to

the list contained in the Statement of Account, L0425586640. The list in Exhibit A shows that

the Taxpayer was not filing every month in 2010 and 2011. However, in every month that was

filed for those two years, zero tax liability was reported. Therefore, the Taxpayer underreported

his tax liability by 100%. The list in Exhibit A also shows that the Taxpayer was still filing

sporadically in 2012 and filed regularly in 2013, and that the Taxpayer was reporting some gross

receipts tax liability during those months. However, the percentage does not matter for years

after 2011 since those years fall within the general three-year limit. As the Taxpayer was

underreporting his tax liability by 100% in 2010 and 2011, the Department had six years to

assess. The assessment occurred in 2015 and was, therefore, timely.

Estoppel.

The Taxpayer argued that the Department should be estopped from assessing him based

on his conversations with the Department’s employees and their representations that payments

from a HMO were probably deductible. The Department can be estopped from taking action

against a taxpayer when the party’s action or inaction was due to a regulation in effect at the time

or a ruling addressed to the party personally in writing by the secretary that was in effect at the

time that the liability arose. See NMSA 1978, § 7-1-60 (1993). Rulings must meet certain

criteria. See id. See also NMSA 1978, § 9-11-6.2 (1995). To be effective, a ruling must be

reviewed by the attorney general or other legal counsel of the Department and the ruling must

reflect that such review was done. See NMSA 1978, § 9-11-6.2 (C). A ruling must be signed by

the secretary and by counsel to show that such a review took place. See 3.1.2.8 NMAC (2000).

Rulings are also required to be written statements that interpret specific statutes. See NMSA

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1978, § 9-11-6.2 (B) (2). A verbal conversation is not sufficient to estop the Department from

taking action. See NMSA 1978, § 7-1-60.

Equitable 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. 140. Generally, statements of opinion on

matters of law do not give rise to estoppel when the facts are known to both parties. See

Rainaldi v. Pub. Employees Ret. Bd., 1993-NMSC-028, ¶ 16, 115 N.M. 650. Equitable estoppel

against the state is disfavored, especially in cases involving taxes. See Taxation and Revenue

Dep’t v. Bien Mur Indian Market, 1989-NMSC-015, ¶9-10, 108 N.M. 228. Equitable estoppel

will not apply against the state when it would be contrary to the requirements of statute. See

Rainaldi, 1993-NMSC-028, ¶ 18-19. See also In re Kilmer, 2004-NMCA-122, ¶ 26, 136 N.M.

440. Moreover, the statements by the Department’s employees to the Taxpayer were not

definitive as they said that payments from a HMO were probably deductible. 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).

Workman’s Compensation and Withholding.

The Taxpayer did not present any evidence to refute the assessments of workman’s

compensation tax, withholding tax, and their respective penalties and interest. Therefore, the

assessments of those taxes are presumed to be correct. See NMSA 1978, § 7-1-17.

Assessment of Penalty on Gross Receipts Tax.

The Taxpayer argued that the Department initially told him that it would not assess

penalty. The Taxpayer was then asked to provide a letter from his accountant detailing what

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advice he was given on this issue. The Taxpayer was not able to obtain such a letter, and the

Department assessed penalty. The Taxpayer felt that he took appropriate action and tried to

discern what payments were subject to gross receipts by consulting with an accountant and by

speaking to the Department’s employees.

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

that establish that the taxpayer was not negligent. See 3.1.11.11 NMAC (2001). Moreover,

negligence is defined as “failure to exercise that degree of ordinary business care and prudence

which reasonable taxpayers would exercise under like circumstances”. 3.1.11.10 NMAC. The

Taxpayer consulted an accountant and spoke to Department employees about the issue. Based

upon the totality of the evidence, the Taxpayer was not negligent. Therefore, penalty assessed on

the gross receipts tax is hereby abated.

Assessment of Interest.

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). 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 Notices of Assessment of

workman’s compensation taxes, withholding taxes, and gross receipts taxes issued under Letter ID

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numbers L0029171664 and L0283733968 and to the Statement of Account issued under Letter ID

number L0425586640, and jurisdiction lies over the parties and the subject matter of this protest.

B. The Taxpayer was not entitled to deduct payments for services to Medicaid patients

from its gross receipts, so the gross receipts tax was properly assessed. See NMSA 1978, § 7-9-93

(B). See also 3.2.241.12 NMAC.

C. The Taxpayer was not negligent on his gross receipts taxes because he exercised

ordinary business care. See NMSA 1978, § 7-1-69. See also 3.1.11.10 and 3.1.11.11 NMAC.

Penalty on the gross receipts taxes, the amount of $33,560.31, is HEREBY ABATED.

D. The Taxpayer was properly assessed for interest. See NMSA 1978, § 7-1-67 (A).

E. The assessments for 2010 and 2011 were timely as they occurred within six years

and the Taxpayer was underreporting his tax liability by more than 25%. The assessments for 2012,

2013, and 2014 were timely as they occurred within three years. See NMSA 1978, § 7-1-18.

F. Statutory estoppel does not apply. See NMSA 1978, § 7-1-60.

G. The Taxpayer effectively abandoned his protest as to the workman’s

compensation tax and the withholding tax, and their respective penalties and interest, and their

assessments are presumed correct. See NMSA 1978, § 7-1-17.

For the foregoing reasons, the Taxpayer's protest is GRANTED IN PART and DENIED

IN PART.

DATED: December 8, 2015.

Dee Dee Hoxie
DEE DEE HOXIE
Hearing Officer
Administrative Hearings Office
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Letter ID Nos. L0029171664, L0283733968, and L0425586640
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Post Office Box 6400
Santa Fe, NM 87502

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