Did Ronald Jaynes preserve his gross receipts tax protest by calling officials and trying to resolve the audit before submitting anything in writing after the deadline?

Plain-English summary

Ronald Jaynes's calls, emails, and informal contacts with government officials did not substitute for a written protest filed within 90 days. The AHO upheld the Department's refusal to hear the merits of his gross receipts tax assessment.

Jaynes provided construction services to New Mexico's film industry. After a limited-scope audit process, the Department mailed an assessment on April 11, 2016 for $12,383.81 in gross receipts tax, penalty, and interest covering 2009 through 2012.

Jaynes and his spouse tried to discuss and resolve the matter through:

• calls and emails to Department personnel;
• communications with the Governor's office; and
• a conversation with the State Auditor that had occurred before the assessment.

None of those efforts produced a written protest before the deadline.

The deadline was July 11, 2016

The mailed assessment became effective on April 11. Ninety days later was Sunday, July 10, so the deadline moved to Monday, July 11.

Jaynes admitted that he did not pay, file a protest, or submit documentation showing error within that period.

A June 28 statement of account invited him to call with questions or disagreement. He continued trying to resolve the balance informally and retained CPA Crystal Mayville after June 28, but no formal filing occurred by July 11.

The July 21 letter was late either way

Mayville sent a letter to the Department's Audit and Compliance Division on July 21. She initially described it as an official protest but later testified that it was an effort to work out the issue before resorting to protest.

The letter was not shown to have been sent to the Protest Office. More importantly, it came at least ten days after the jurisdictional deadline.

The Department's denial later referenced another protest postmarked September 14. The record did not identify that letter precisely, but it too was necessarily late.

Good-faith efforts did not create jurisdiction

The AHO recognized Jaynes's attempts to address the matter. But the discussions focused on the assessment's merits, not the statutory mechanics and deadline for a formal protest.

Section 7-1-24(C) required a written filing within 90 days, and Regulation 3.1.7.11 made that period jurisdictional. Oral contacts, inquiries, and escalation to other officials could not extend it.

Result: protest DENIED. The Department properly rejected the underlying protest as untimely. As of January 6, 2017, the balance had grown to $9,040.69 tax, $1,810.12 penalty, and $1,786.25 interest, totaling $12,637.06.

Text note: The official caption and findings identify the taxpayer as Ronald O. Jaynes, while the appearance paragraph calls him Randal O. Jaynes. This page follows the caption and decision post.

What this means for you

Taxpayers trying to resolve an audit informally

Continue discussions if useful, but file a timely written protest to preserve rights. Calls and negotiations do not pause the statutory deadline.

Taxpayers sending a protest inside the Department

Use the designated Protest Office and clearly state that the writing is a formal protest. A letter sent elsewhere as a pre-protest resolution attempt creates avoidable jurisdiction risk.

Taxpayers relying on a statement-of-account phone number

An invitation to call about a balance does not replace the protest instructions or extend the deadline running from the assessment mailing.

Common questions

Q: When was the assessment mailed?
A: April 11, 2016.

Q: When was the written protest due?
A: July 11, 2016, because the 90th day fell on a Sunday.

Q: Did calls to the Department preserve the protest?
A: No. The statute required a written protest.

Q: Was the July 21 CPA letter sufficient?
A: No. It was late, went to Audit and Compliance rather than the Protest Office, and was described as an effort to resolve the matter before protesting.

Q: Did the AHO decide whether the assessment was correct?
A: No. It lacked jurisdiction to reach the merits.

Q: What amount remained outstanding?
A: $12,637.06 as of January 6, 2017.

Citations and references

Statutes and regulations:

• NMSA 1978, § 7-1-17(B) and (C) — effective assessment and presumption of correctness
• NMSA 1978, § 7-1-24(C) — 90-day written protest deadline
• Regulation 3.1.6.11(A) NMAC — effective notice of assessment
• Regulation 3.1.7.11 NMAC — jurisdictional protest period

Cases cited:

• Associated Petroleum Transport v. Shepard, 1949-NMSC-002 — failure to follow protest procedure deprived the tribunal of jurisdiction
• Lopez v. New Mexico Department of Taxation & Revenue, 1997-NMCA-115 — mandatory tax protest timing
• Chan v. Montoya, 2011-NMCA-072 — dismissal under statutory tax deadlines
• New Mexico Taxation & Revenue Department v. Casias Trucking, 2014-NMCA-099 — taxpayer's burden to counter an assessment

Source

• Listing: New Mexico Decisions & Orders
• Decision post: Ronald O. Jaynes
• Decision PDF: D&O 17-08

Original ruling text

STATE OF NEW MEXICO
ADMINISTRATIVE HEARINGS OFFICE
TAX ADMINISTRATION ACT

IN THE MATTER OF THE PROTEST OF
RONALD O. JAYNES No. 17-08
TO DENIAL OF PROTEST
ISSUED UNDER LETTER
ID NO. L1537539632

DECISION AND ORDER

A hearing occurred in the above-captioned protest on January 11, 2017 before Chris

Romero, Esq., Hearing Officer, in Santa Fe, New Mexico. At the hearing, Randal O. Jaynes

(“Taxpayer”) appeared in person and with his authorized representative, Crystal R. Mayville,

C.P.A. Diana Jaynes, Taxpayer’s spouse, also appeared as a witness for the Taxpayer. Staff

Attorney David Mittle appeared representing the State of New Mexico Taxation and Revenue

Department (“Department”). Protest Auditor Tom Dillon appeared as a witness for the

Department. Department Exhibits A – C and Taxpayer Exhibits 1 – 7 were admitted into the

evidentiary record without objection. Based on the evidence and arguments presented, IT IS

DECIDED AND ORDERED AS FOLLOWS:

FINDINGS OF FACT

1. On October 24, 2016, under Letter ID No. L1537539632, the Department denied

Taxpayer’s submission of a protest letter postmarked September 14, 2016 as untimely.

2. On November 3, 2016, the Department received Taxpayer’s formal protest of the

Department’s denial of protest.

3. On November 9, 2016, the Department acknowledged receipt of a valid protest to

its denial of protest.

4. On November 9, 2016, the Department filed a request for hearing in this matter

with the Administrative Hearings Office, a separate agency from the Department.

5. On November 10, 2016, the Administrative Hearings Office sent Notice of

Administrative Hearing, setting this matter for a merits hearing on January 6, 2017.

6. On January 6, 2017, Taxpayer’s request for a continuance was granted and a

Continuance Order and Amended Notice of Administrative Hearing was entered which set a

hearing on the merits for January 11, 2017 at 3 p.m.

7. The January 11, 2017 hearing occurred within 90-days of the Department’s

acknowledgement of receipt of a valid protest.

8. Ronald Jaynes and Diana Jaynes are married.

9. Taxpayer provides construction services to the film industry in New Mexico.

[Taxpayer Ex. No. 3].

10. Taxpayer received a Notice of Limited Scope Audit Commencement dated

January 1, 2016 (hereinafter “Notice”) [Taxpayer Ex. No. 4.3] and a Reminder Notice of

Limited Scope Audit dated February 10, 2016 [Taxpayer Ex. 4.1] (hereinafter “Reminder”).

11. Taxpayer made undocumented attempts to contact the Department employee

identified in the Notice [Taxpayer Ex. No. 4.3] and the Reminder [Taxpayer Ex. 4.1]. Contact

efforts were made by telephone and email. [Testimony of Ms. Jaynes].

12. Taxpayer initiated efforts to better understand his tax obligations by talking to

various individuals, including at least one individual at the Department who generally discussed

the subject of gross receipts taxes. [Testimony of Ms. Jaynes].

13. Taxpayer’s efforts to address the subject of the Notice and the Reminder also

included communications with the Office of the Governor and the State Auditor of the State of

New Mexico. [Testimony of Ms. Jaynes; Testimony of Ms. Mayville].

In the Matter of the Protest of Ronald O. Jaynes
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14. The Taxpayer had a conversation with Tim Keller, State Auditor, regarding

Taxpayer’s tax liability in November of 2015. It was the Taxpayer’s conclusion following that

meeting that Taxpayer should not pay any tax owed. The date of the conversation with Mr.

Keller predated the Notice, Reminder, and Assessment issued in this case. [Testimony of Mr.

Jaynes; Taxpayer Ex. 3].

15. Taxpayer’s efforts to discuss, address, or resolve the matter subject of the Notice

and the Reminder were unsuccessful. [Testimony of Ms. Jaynes].

16. On April 11, 2016, through Letter ID No. L1195096624, the Department assessed

Taxpayer for outstanding gross receipts tax, penalty and interest totaling $12,383.81 for the CRS

reporting periods from January 1, 2009 through December 31, 2012 (hereinafter “Assessment”).

[Dept. Ex. A].

17. The Department printed the underlying Assessment on April 9, 2016 as part of a

batch of documents. [Dept. Ex. B; Testimony of Mr. Dillon].

18. The Department mailed the batch of printed documents containing the underlying

Assessment via first class U.S. mail on April 11, 2016. [Dept. Ex. B; Testimony of Mr. Dillon].

19. The Assessment was mailed to Taxpayer at the same address appearing on the

face of the Assessment. [Testimony of Mr. Dillon].

20. Ninety (90) days from April 11, 2016, the date upon which the Department

mailed the Assessment was Sunday, July 10, 2016. The deadline was extended to the next

business day, Monday, July 11, 2016.

21. Taxpayer admitted that the address provided on the Assessment is Taxpayer’s

correct address [Dept. Ex. A; Testimony of Ms. Jaynes] and matched the address provided on

the Notice and the Reminder.

In the Matter of the Protest of Ronald O. Jaynes
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22. In reference to the Taxpayer options as provided in the Assessment, Taxpayer

admitted that Taxpayer did not pay the amount indicated to be due in the Assessment. Taxpayer

admitted that a protest was not filed within 90 days of the Notice of Assessment of Taxes and

Demand for Payment. Taxpayer admitted that Taxpayer did not provide documentation to show

that the assessment was in error. [Testimony of Ms. Jaynes].

23. Taxpayer continued to make follow up inquiries as provided in the provision

contained in the Statement of Account dated June 28, 2016 which provided “If you have

questions or disagree with the balance due: Call (505) 841-6352 in Albuquerque or toll free 1-

866-285-2996 to speak with a department representative who can explain the balance or assist

with your account.” [Testimony of Ms. Jaynes].

24. As of June 28, 2016, the date of the Statement of Account, the protest period had

not yet expired. [Taxpayer No. 5]

25. The mailing address contained on the Statement of Account is the same as the

address provide on the Assessment.

26. The Taxpayer decided that a protest was necessary after receiving the

correspondence of June 28, 2016. [Taxpayer No. 5; Testimony of Ms. Mayville].

27. Taxpayer retained Ms. Mayville’s assistance at an undetermined date between

June 28, 2016 and July 21, 2016. Although Ms. Mayville was aware of the Assessment dated

April 11, 2016, there was also a belief by her and the Taxpayer that the Taxpayer was still within

the protest period. Ms. Mayville estimated that the Taxpayer contacted her about one week after

the protest period expired. [Testimony of Ms. Mayville].

28. On July 21, 2016, Ms. Mayville submitted, correspondence to the Audit and

Compliance Division of the Department which she initially characterized during direct

examination as an “official protest.” On cross-examination, Ms. Mayville admitted that the

In the Matter of the Protest of Ronald O. Jaynes
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correspondence was intended to respond to the Department’s Statement of Account dated June

28, 2016 and represented as an ongoing effort to “work it out before going to protest.”

[Taxpayer Ex. No. 6; Testimony of Ms. Mayville].

29. The correspondence of July 21, 2016 was submitted to the Department’s Audit

and Compliance Division, but not to the Department’s Protest Office. [Taxpayer Ex. No. 6;

Testimony of Ms. Mayville].

30. As of January 6, 2017, Taxpayer owned $9,040.69 in gross receipts tax, $1,810.12

in civil penalty, and $1,786.25 in interest for a total outstanding liability of $12,637.06. [Dept.

Ex. C; Testimony of Mr. Dillon].

DISCUSSION

This case involves the straightforward issue of whether Taxpayer timely protested the

underlying assessment and whether the Department has jurisdiction to entertain a protest not

timely received.

While the Department receives a statutory presumption of correctness to its assessments

under NMSA 1978, § 7-1-17 (2007), conceptually such a presumption of correctness can only

attach upon a mailed or personally delivered legally effective Notice of Assessment. See NMSA

1978, § 7-1-17 (B) & (C) (2007) and Regulation 3.1.6.11(A) NMAC. See also Torridge Corp. v.

Commissioner of Revenue, 172-NMCA-171, ¶13, 84 N.M. 610 (“after…notice of assessment of

taxes is delivered to a taxpayer, taxpayer must carry burden of proof in order to negate the

presumption of correctness.”). The Department’s Assessment in this case was dated and mailed

on April 11, 2016. Consequently, the evidence established that it became effective on April 11,

2016 under Section 7-1-17 (B) (2) (Notice of Assessment effective when it “is mailed or delivered

in person.”). The evidence also established that the Assessment was mailed to the Taxpayer at the

appropriate address.

In the Matter of the Protest of Ronald O. Jaynes
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Once the Department properly mailed the assessment on April 11, 2016, under Section 7-

1-17 (C) that assessment is presumed correct. Consequently, Taxpayer has the burden to

overcome the assessment. See Archuleta v. O'Cheskey, 1972-NMCA-165, ¶11, 84 N.M. 428.

Accordingly, it is Taxpayer’s burden to present some countervailing evidence or legal argument

to show that Taxpayer is entitled to an abatement, in full or in part, of the assessments issued

against him. See N.M. Taxation & Revenue Dep't v. Casias Trucking, 2014-NMCA-099, ¶8.

“Unsubstantiated statements that the assessment is incorrect cannot overcome the presumption of

correctness." See MPC Ltd. v. N.M. Taxation & Revenue Dep't, 2003 NMCA 21, ¶13, 133 N.M.

217; See also Regulation 3.1.6.12 NMAC.

In order to challenge the Assessment, Taxpayer needed to file a written protest with the

Department. See NMSA 1978, Section 7-1-24 (2015). In pertinent part under Section 7-1-24 (C)

(emphasis added), such protest “shall be filed within ninety days of the date of the mailing to or

service upon the taxpayer by the department…” Regarding interpreting the “or” provision of this

section, this section must be read in conjunction with Section 7-1-17 (B) (2), which defines the

assessment as effective upon mailing or delivery in person. See State v. Trujillo, 2009-NMSC-012,

¶22, 146 NM 14 and Hayes v. Hagemeier, 1963-NMSC-095, ¶9, 75 N.M. 70 (Statutes are to be

read in harmony with other provisions of the law dealing with the same subject matter). In

conjunction with the two options the Department has to issue an effective assessment under

Section 7-1-17 (B), Section 7-1-24 (C) requires a taxpayer to file their protest within 90-days of

the Department’s mailing if that is the method of service the Department used or within 90-days

of the Department’s personal delivery if the Department used that method. In either case, Section

7-1-24 (C)’s use of the word “shall” makes it an absolute requirement that a taxpayer file a

protest within 90-days. See Marbob Energy Corp. v. N.M. Oil Conservation Comm'n, 2009-

NMSC-013, ¶22, 146 N.M. 24 (use of the word “shall” in a statute indicates provision is mandatory

In the Matter of the Protest of Ronald O. Jaynes
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absent clear indication to the contrary). Accordingly, Department Regulation 3.1.7.11 NMAC

finds that the 90-day protest period is jurisdictional. Department regulations interpreting a statute

are presumed proper and are to be given substantial weight. See Chevron U.S.A., Inc. v. State ex rel.

Dep't of Taxation & Revenue, 2006-NMCA-50, ¶16, 139 N.M. 498.

Case law further affirms this approach. In Associated Petroleum Transp. v. Shepard,

1949-NMSC-002, ¶6 & ¶11, 53 N.M. 52, the New Mexico Supreme Court noted that a

taxpayer’s inability to timely follow the then-in-place designated protest procedure deprived the

State Tax Commission of jurisdiction over the protest. More recently, the New Mexico Court of

Appeals ordered the dismissal of a property taxpayer’s complaints for refund when such

complaints were not timely filed in compliance with the Legislature’s statutorily imposed

deadlines. See Chan v. Montoya, 2011-NMCA-72, 150 N.M. 44. In Lopez v. New Mexico Dep't

of Taxation & Revenue, 1997-NMCA-115, 124 N.M. 270, the Court of Appeals had opportunity

to consider whether a taxpayer timely and properly filed a protest against the Department’s

notice of audit. At the administrative tax protest hearing, the tax hearing officer found that the

Lopez taxpayer had failed to timely protest the Department’s audit under Section 7-1-24 (which

then required a protest within 30-days rather than 90-days under the current statute). See id., ¶6.

The Court of Appeals in Lopez noted that Section 7-1-24 imposed a 30-day time restriction on a

protest. See id., ¶6. The Court of Appeals in Lopez affirmed that hearing officer’s conclusion that

the Lopez taxpayer did not timely protest the Department’s audit. See id., ¶9.

In this case, applying this 90-day period to protest, Taxpayer had until July 11, 2016 to

file a formal written protest. However, the evidence established that the Taxpayer’s attention was

consumed by efforts to discuss the issue with various people ranging from Department

employees, to the State Auditor, to the Governor of the State of New Mexico. [Testimony of

Mr. Jaynes; Testimony of Ms. Jaynes; Testimony of Ms. Mayville]. Despite those efforts, the

In the Matter of the Protest of Ronald O. Jaynes
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Taxpayer never submitted anything in writing to the Department prior to July 11, 2016 that could

be construed as a formal protest.

The first communication from the Taxpayer that could arguably be construed as a protest

was correspondence from Ms. Mayville to the Audit and Compliance Division dated July 21,

2016. However, upon cross examination, Ms. Mayville acknowledged that the letter, which she

previously characterized as an “official protest” actually represented an ongoing effort to resolve

the issue without the need to file a formal protest. [Testimony of Ms. Mayville]. Furthermore,

despite Ms. Mayville’s initial characterization of her letter of July 21, 2016, there is not any

evidence to establish it was submitted to the Department’s Protest Office.

Regardless of how the letter was characterized, its intended purpose, or where it was sent

within the Department, the uncontested fact is that it was not submitted to the Department before

the protest period expired. The letter was dated July 21, 2016 and the protest period expired on

July 11, 2016. Therefore, even if the correspondence of July 21, 2016 represented a formal

written protest of the underlying Assessment, and even if it was submitted to the Department’s

Protest Office, it was still untimely by at least ten days.

The Hearing Officer notes that the Department’s letter denying the timeliness of the

protest [Letter ID. No. L1537539632] references a “letter postmarked September 14, 2016 in

which you state a desire to protest the issuance of the assessments identified above.” It is unclear

from the record which specific letter is being referenced. Ms. Mayville testified that she sent

numerous items of correspondence. However, the evidence established that Ms. Mayville’s

earliest correspondence to the Department was dated July 21, 2016 [Testimony of Ms.

Mayville] and the Taxpayer did not submit a formal protest before July 11, 2016 [Testimony of

Ms. Jaynes]. Any protest submitted after July 11, 2016, including any protest postmarked

September 14, 2016, would still be untimely.

In the Matter of the Protest of Ronald O. Jaynes
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Taxpayer argued that he acted in good faith and attempted to address the subject matter

of the Notice, Reminder, and Assessment with the urgency it deserved. Taxpayer attempted to

discuss the matter with Department employees, the State Auditor, and even the Governor. Except

for hearsay testimony about what the State Auditor may have said five months prior to the

underlying Assessment being issued, there was no evidence presented to establish what specific

information the Taxpayer may have relied upon, if anything, with concern for filing of a protest.

Rather, all testimony suggested that discussions were directed toward the merits of the

underlying assessment, not toward the procedural aspects of how or when to file a formal protest

of that Assessment. The result was that Taxpayer regrettably sat on his right of protest until it

expired.

Because a written formal protest was not submitted until after the 90-day period for

protest under Section 7-1-24 (C) had lapsed on July 11, 2016, the Department lacked jurisdiction

to entertain the protest. See Regulation 3.1.7.11 NMAC. In light of Section 7-1-24 (C)’s

mandatory 90-day requirement, Regulation 3.1.7.11 NMAC, Associated Petroleum Transp and

Lopez, Taxpayer’s protest filed with the Department after the 90-day deadline cannot be accepted

as a valid protest in this case.

Based on the foregoing, the Taxpayer’s protest of the denial of his protest should be

denied.

CONCLUSIONS OF LAW

A. Taxpayer filed a timely, written protest to the Department’s denial of protest, and

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

B. The hearing was timely set and held within 90-days of the Department’s

acknowledgment of receipt of a valid protest under NMSA 1978, Section 7-1B-8 (2015).

In the Matter of the Protest of Ronald O. Jaynes
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C. Taxpayer’s failure to timely submit a protest letter by July 11, 2016, within the 90-

day jurisdictional limit articulated under NMSA 1978, Section 7-1-24 (C) (2015), deprived the

Department of authority to consider Taxpayer’s July 21, 2016 submission or any other subsequent

submissions intended to protest the Assessment dated and mailed April 11, 2016. See Associated

Petroleum Transp. v. Shepard, 1949-NMSC-002, ¶6 & ¶11, 53 N.M. 52; See also Chan v.

Montoya, 2011-NMCA-72, 150 N.M. 44; See also Lopez v. New Mexico Dep't of Taxation &

Revenue, 1997-NMCA-115, 124 N.M. 270.

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

denied Taxpayer’s protest of the underlying assessment as untimely.

DATED: February 10, 2017

Chris Romero
Hearing Officer
Administrative Hearings Office
Post Office Box 6400
Santa Fe, NM 87502

In the Matter of the Protest of Ronald O. Jaynes
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NOTICE OF RIGHT TO APPEAL

Pursuant to NMSA 1978, Section 7-1-25 (2015), the parties have the right to appeal this

decision by filing a notice of appeal with the New Mexico Court of Appeals within 30 days of the

date shown above. If an appeal is not timely filed with the Court of Appeals within 30 days, this

Decision and Order will become final. Rule of Appellate Procedure 12-601 NMRA articulates

the requirements of perfecting an appeal of an administrative decision with the Court of Appeals.

Either party filing an appeal shall file a courtesy copy of the appeal with the Administrative

Hearings Office contemporaneous with the Court of Appeals filing so that the Administrative

Hearings Office may begin preparing the record proper. The parties will each be provided with a

copy of the record proper at the time of the filing of the record proper with the Court of Appeals,

which occurs within 14-days of the Administrative Hearings Office receipt of the docketing

statement from the appealing party. See Rule 12-209 NMRA.

In the Matter of the Protest of Ronald O. Jaynes
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