Was a court reporter personally liable for a sole proprietorship's gross receipts tax after forming an LLC but failing to update the New Mexico tax registration?

View original ruling (PDF)

Plain-English summary

Ana Koeblitz remained personally liable for New Mexico Depo's $16,700.24 gross receipts tax assessment because the business never timely replaced its sole-proprietorship tax registration with an LLC registration. Forming and publicly using New Mexico Depo, LLC did not retroactively make the unregistered LLC the taxpayer on the Department's records.

The official decision identifies the business as New Mexico Depo, without a final “t.” The Department's post title says “New Mexico Depot,” which caused the initial stub to use the wrong name. The decision consolidated that protest with a separate assessment issued to Ana Koeblitz under the name Haute Mountain Girl.

The sole proprietorship stayed registered as the taxpayer

Koeblitz began a court-reporting business called New Mexico Depo and registered it as a sole proprietorship in January 2009. She and her husband organized New Mexico Depo, LLC on January 17, 2012.

After that date, the business used the LLC designation on W-9s, 1099s, nontaxable transaction certificates, invoices, bank documents, and other records. The IRS assigned an employer identification number and treated it as a single-member disregarded entity for federal purposes.

But the business did not submit a new New Mexico tax registration for the LLC during the assessment period. The Department's system continued to identify the sole proprietorship as the taxpayer on the existing CRS account. The LLC was not separately registered until June 2018, after the business had ceased operating and the protest was already pending.

The Department had internally changed the existing account's client-type field to “Ltd. Liability Company” in May 2014. The AHO did not decide the possible effect of that update on later periods because the remaining assessment covered only 2012.

LLC protection did not transfer the existing tax obligation

An LLC is a separate legal entity, and its members ordinarily are not personally liable merely because they are members. A sole proprietorship is different: there is no separate legal identity between the business and its owner.

The AHO held that registration was the Department's necessary method for identifying which person was engaging in business and responsible for reporting and paying tax. New Mexico Depo's mandatory registration was never updated during the relevant period to substitute the LLC for the sole proprietorship.

There was also no novation—a mutual agreement among the affected parties replacing one debtor with another. The Department had not agreed to release the sole proprietor and accept the LLC as the taxpayer. Registering the LLC years later had no demonstrated retroactive effect.

The sole proprietorship therefore remained liable, making Koeblitz personally responsible for:

• $12,251.02 gross receipts tax;
• $2,450.20 penalty; and
• $1,999.02 interest.

Total: $16,700.24 for January through December 2012.

The separate Haute Mountain Girl assessment was already abated

The Department had assessed Haute Mountain Girl $29,009.95 for 2010 through 2013, then determined that Haute Mountain Girl had generated no business receipts and fully abated that assessment.

The auditor believed those receipts belonged to New Mexico Depo and should be reassessed there. But no formal notice of assessment accomplishing that transfer appeared in the record. Verbal statements and a pleading footnote were not statutory notices of assessment, and the AHO could not simply add abated amounts from one taxpayer to another taxpayer's assessment.

Only the $16,700.24 New Mexico Depo assessment was properly before the AHO.

Reliance on a non-tax lawyer did not remove the penalty

Koeblitz relied heavily on her husband, a litigation attorney, for business and legal matters. He testified about undocumented Department inquiries and interpreted an FYI-105 answer about incorporation as implying that an LLC did not need a new registration.

The AHO gave the undocumented inquiries minimal weight and found the FYI-105 inference unreasonable. The publication answered a question about corporations; its silence about LLCs did not create an exception for them. IRS communications concerned federal treatment and did not control New Mexico gross receipts tax.

Regulation 3.1.11.11(D) allowed relief for reasonable reliance on competent tax counsel or an accountant after full disclosure. Koeblitz's husband candidly did not practice tax law, and the record did not show the required informed reliance. Failure to register the LLC and pay the tax was civil negligence.

Result: New Mexico Depo's protest DENIED. The $16,700.24 assessment remained. Haute Mountain Girl's separate assessment had already been fully abated and was not shifted to New Mexico Depo in this proceeding.

What this means for you

Sole proprietors forming an LLC

Creating the entity with the Secretary of State is not the same as updating tax registration. Close or update the old account and register the new entity with the tax agency when required.

Single-member LLC owners

Federal disregarded-entity treatment does not determine who is registered for New Mexico gross receipts tax. State registration and the identity under which the business reports remain important.

Businesses changing legal form

Keep written proof of registration changes, effective dates, new account numbers, and agency confirmations. External contracts and invoices using the new entity name may not correct the tax authority's records retroactively.

Taxpayers relying on professional advice

Penalty relief based on adviser reliance requires competence in the relevant tax field, full disclosure, and reasonable reliance. General legal experience may not be enough.

Common questions

Q: Did New Mexico Depo actually form an LLC in 2012?
A: Yes. The LLC was organized on January 17, 2012 and used publicly in business records afterward.

Q: Why was the sole proprietor still liable?
A: The Department's account remained registered to the sole proprietorship during the assessment period, and no timely registration substituted the LLC as the taxpayer.

Q: Did the IRS's disregarded-entity treatment control?
A: No. Those communications concerned federal tax treatment, not New Mexico gross receipts tax registration and liability.

Q: Did the Department's 2014 internal update help?
A: Not for this case. The assessment at issue covered 2012, and the AHO declined to decide what effect the May 2014 update might have on later periods.

Q: What happened to Haute Mountain Girl's $29,009.95 assessment?
A: The Department fully abated it after determining that Haute Mountain Girl had no business receipts. No formal reassessment to New Mexico Depo was in the record.

Q: Why was the negligence penalty upheld?
A: The LLC was not timely registered, the tax was unpaid, and reliance on a spouse who did not practice tax law did not satisfy the competent-tax-adviser exception.

Q: What amount remained against New Mexico Depo?
A: $16,700.24, consisting of $12,251.02 tax, $2,450.20 penalty, and $1,999.02 interest.

Citations and references

Statutes and regulations:

• NMSA 1978, § 7-1-12(A) — mandatory business tax registration
• NMSA 1978, § 7-1-17(B)(2) and (C) — formal notice of assessment and presumption of correctness
• NMSA 1978, § 7-1-69(A) and (B) — civil negligence penalty and mistake-of-law exception
• NMSA 1978, §§ 53-19-10(A) and 53-19-13 — LLC separate existence and liability rules
• NMSA 1978, §§ 9-11-6 and 7-1-4.2 — Department administration and taxpayer identification
• Regulation 3.1.1.15 NMAC — registration requirement
• Regulations 3.1.11.10 and 3.1.11.11(D) NMAC — negligence and competent-adviser reliance
• Regulation 3.1.6.13 NMAC — assessment presumption for penalty and interest

Cases cited:

• Casias v. New Mexico Taxation and Revenue Department, No. A-1-CA-36489 — sole proprietor remained liable where the LLC did not replace the registered taxpayer
• Beebe v. Fouse, 27 N.M. 194 (1921) — novation requires mutual agreement to substitute an obligation or debtor
• Tiffany Construction Co. v. Bureau of Revenue, 1976-NMCA-127 — duty to determine tax consequences in a self-reporting system
• El Centro Villa Nursing Center v. Taxation and Revenue Department, 1989-NMCA-070 — taxpayer cannot abdicate responsibility to an agent

Source

• Listing: New Mexico Decisions & Orders
• Decision post: New Mexico Depot (official post title)
• Decision PDF: D&O 18-37

Original ruling text

STATE OF NEW MEXICO
ADMINISTRATIVE HEARINGS OFFICE
TAX ADMINISTRATION ACT

IN THE MATTER OF THE PROTEST OF D&O No. 18-37
NEW MEXICO DEPO
TO ASSESSMENT ISSUED UNDER
LETTER ID NO. L1017684784 Case Number 18.02-037A

and

IN THE MATTER OF THE PROTEST OF
ANA KOEBLITZ
HAUTE MOUNTAIN GIRL
TO ASSESSMENT ISSUED UNDER
LETTER ID NO. L0179872560 Case Number 18.02-038A

DECISION AND ORDER

A hearing in the above-referenced protest was held September 27, 2018, before Chris

Romero, Hearing Officer, in Santa Fe, New Mexico. The Taxation and Revenue Department

(Department) was represented by Ms. Regina Ryanczak, Esq. who was accompanied by Mr. Juan

Trujillo and Ms. Laura Gage who testified on behalf of the Department. Mr. Anthony Jeffries,

Esq. appeared on behalf of New Mexico Depo 1 and Haute Mountain Girl, and was accompanied

by his assistant, Mr. Ryan Bromberg. Mr. Robert Koeblitz and Ms. Ana Koeblitz both appeared

and testified by telephone for New Mexico Depo.

The primary issue in this protest was whether Ms. Koeblitz, as New Mexico Depo’s sole

proprietor, should be personally liable for gross receipts tax liabilities incurred during the time it

operated as a sole proprietorship, and subsequent to its organization as a limited liability

company because it did not update its business tax registration with the Department. Taxpayer

Exhibits 1 – 7, 9 – 18, and Department Exhibits A – E were admitted, and the Hearing Officer

1
Unless otherwise indicated, a reference to “New Mexico Depo” shall be intended as a reference to the sole
proprietorship of which Ms. Koeblitz is sole proprietor.
took notice of all documents in the administrative file. Based on the evidence and arguments

presented, the Hearing Officer finds that the protest should be DENIED.

IT IS DECIDED AND ORDERED AS FOLLOWS:

FINDINGS OF FACT

Procedural History

1. On October 12, 2017, the Department issued a Notice of Assessment of Taxes and

Demand for Payment under Letter ID No. L0179872560 to Ana Koeblitz, Haute Mountain Girl,

in the amount of $21,728.64 in gross receipts tax, $4,345.73 in gross receipts tax penalty, and

$2,935.58 in gross receipts tax interest for a total assessment of $29,009.95. The assessment was

for the periods from January 1, 2010 through December 31, 2013. [See Administrative File;

Taxpayer Exhibit 2-2].

2. On October 12, 2017, the Department issued a Notice of Assessment of Taxes and

Demand for Payment under Letter ID No. L1017684784 to New Mexico Depo, in the amount of

$12,251.02 in gross receipts tax, $2,450.20 in gross receipts tax penalty, and $1,999.02 in gross

receipts tax interest for a total assessment of $16,700.24. The assessment was for the periods

from January 1, 2012 through December 31, 2012. [See Administrative File; Taxpayer Exhibit 1-

2].

3. On January 9, 2018, Haute Mountain Girl filed a protest of the assessment issued

under Letter ID No. L0179872560, and New Mexico Depo filed a protest of the assessment

issued under Letter ID No. L1017684784. [See Administrative File; See Taxpayer Exhibits 1 and

2].

In the Matter of the Consolidated Protests of New Mexico Depo
and Haute Mountain Girl
Page 2 of 29

4. On January 18, 2018, the Department acknowledged the protest of Haute

Mountain Girl under Letter ID No. L0902624048, and New Mexico Depo under Letter ID No.

L2113628976. [See Administrative File].

5. On February 16, 2018, the Department submitted two Hearing Requests which

separately requested scheduling hearings in reference to the protests of Haute Mountain Girl and

New Mexico Depo. [See Administrative File].

6. On February 19, 2018, the Administrative Hearings Office entered separate

Notices of Telephonic Scheduling Hearing in reference to the protests of Haute Mountain Girl

and New Mexico Depo. Scheduling hearings were set for March 16, 2018. [See Administrative

File].

7. On March 16, 2018, a telephonic scheduling occurred in which the parties agreed

that the protests should be consolidated due to the commonality of issues and parties. [See

Record of Hearing, 3/16/18].

8. On March 19, 2018, the Administrative Hearings Office entered a Consolidation

Order and Notice of Status Hearing which in addition to setting a status hearing also

consolidated the previously separate protests of Haute Mountain Girl and New Mexico Depo.

[See Administrative File].

9. On April 27, 2018, counsel of record for Haute Mountain Girl and New Mexico

Depo provided notice of his unavailability. [See Administrative File].

10. On April 27, 2018, the Administrative Hearings Office entered a Scheduling

Order and Notice of Administrative Hearing which set a hearing on the merits of the

consolidated protests for September 27, 2018. [See Administrative File].

In the Matter of the Consolidated Protests of New Mexico Depo
and Haute Mountain Girl
Page 3 of 29

11. On July 20, 2018, counsel of record for Haute Mountain Girl and New Mexico

Depo provided notice of his unavailability. [See Administrative File].

12. On August 14, 2018, Haute Mountain Girl and New Mexico Depo filed

Protestant’s Motion for Summary Judgment and Memorandum in Support of Protestants’ Motion

for Summary Judgment. [See Administrative File].

13. On August 28, 2018, the Department filed a Stipulated Motion for Extension of

Time to respond to Protestant’s Motion for Summary Judgment. [See Administrative File].

14. On August 29, 2018, the Department filed Department’s Response to Protestant’s

Motion for Summary Judgment. [See Administrative File].

15. On September 11, 2018, Haute Mountain Girl and New Mexico Depo filed their

Request for Hearing and Decision Regarding Motion for Summary Judgment in Advance of

Merits Hearing, and Motion for Continuance to Allow Preparation for Merits Hearing. [See

Administrative File].

16. On September 17, 2018, Haute Mountain Girl and New Mexico Depo filed

Taxpayer Prehearing Statement. [See Administrative File].

17. On September 17, 2018, the Department filed Department’s Prehearing

Statement. [See Administrative File].

18. On September 17, 2018, Haute Mountain Girl and New Mexico Depo filed

Taxpayer Renewal of Request for Hearing and Decision Regarding Motion for Summary

Judgment in Advance of Merits Hearing, and Request for Leave to Appear by Telephone. [See

Administrative File].

In the Matter of the Consolidated Protests of New Mexico Depo
and Haute Mountain Girl
Page 4 of 29

19. On September 18, 2018, the Administrative Hearings Office entered an Order

Denying Summary Judgment, Denying Motions for Continuance, and Addressing Remainder of

Outstanding Motions and Notices. The order provided the following:

a. The Administrative Hearings Office accepted for filing, as of September

11, 2018, the reply of Haute Mountain Girl and New Mexico Depo to Department’s Response to

Protestant’s Motion for Summary Judgment.

b. Protestant’s Motion for Summary Judgment was denied.

c. The request of Haute Mountain Girl and New Mexico Depo to continue

the hearing on the merits of the protest was denied.

d. The request to extend the period of time in which to file prehearing

statements was granted.

e. The request of Haute Mountain Girl and New Mexico Depo for

confirmation that the scope of the hearing set for September 27, 2018 would be limited to

argument on Protestant’s Motion for Summary Judgment was denied.

f. To the extent any requested relief was not directly addressed, it was

denied.

[See Administrative File].

20. On September 18, 2018, Haute Mountain Girl and New Mexico Depo filed a

Motion for Abatement or for Continuance. [See Administrative File].

21. In view of the previous rulings contained in the Order Denying Summary

Judgment, Denying Motions for Continuance, and Addressing Remainder of Outstanding

In the Matter of the Consolidated Protests of New Mexico Depo
and Haute Mountain Girl
Page 5 of 29
Motions and Notices, the Hearing Officer found it unnecessary to specifically address the Motion

for Abatement or for Continuance which was subsequently filed the same day.

22. On September 24, 2018, Haute Mountain Girl and New Mexico Depo filed a

Motion for Leave to Testify by Telephone. The Department took no position on the relief

requested. [See Administrative File].

23. On September 25, 2018, the Administrative Hearings Office entered an Order

Permitting Telephonic Appearance and Testimony. [See Administrative File].

Facts Relating to the Merits

24. Mr. Robert Koeblitz and Ms. Ana Maria Gallegos de Koeblitz are married.

25. During all years relevant to the consolidated protests, Ms. Koeblitz was engaged

in the business of providing court reporting services. [Testimony of Ms. Koeblitz].

26. Ms. Koeblitz was initially licensed in New Mexico in 1989, but moved out of

state shortly thereafter. She returned to Santa Fe, New Mexico in 2009 and resumed providing

court reporting services. [Testimony of Ms. Koeblitz].

27. Although she initially provided services as a freelancer, after a few months, she

established her own service which she called New Mexico Depo. [Testimony of Ms. Koeblitz].

28. Ms. Koeblitz had no specific recollection of registering her court reporting

business with the Department or obtaining a CRS number. [Testimony of Ms. Koeblitz].

29. Regardless of Ms. Koeblitz’ inability to recall, New Mexico Depo was registered

with the Department as a sole proprietorship on or about January 23, 2009 at which time it was

assigned CRS No. 03-152861-00-9. [Testimony of Mr. Trujillo; See Department Exhibit A-1].

In the Matter of the Consolidated Protests of New Mexico Depo
and Haute Mountain Girl
Page 6 of 29

30. Mr. Koeblitz is an attorney specializing in litigation. He has practiced in

California and New Mexico since 1992. However, he does not practice in tax or tax litigation.

[Testimony of Mr. Koeblitz].

31. On January 17, 2012, approximately three years after commencing business as

New Mexico Depo, Ms. Koeblitz with the assistance of her spouse, organized a limited liability

company called New Mexico Depo, LLC. [Testimony of Mr. Koeblitz; See Taxpayer Exhibit 3].

32. Mr. Koeblitz assisted Ms. Koeblitz in organizing the limited liability company

after determining that a limited liability company would provide advantages over a sole

proprietorship. [Testimony of Mr. Koeblitz].

33. Ms. Koeblitz admitted that she had minimal knowledge regarding those aspects of

the business which were not directly related to court reporting services. For example, her

involvement and knowledge of taxation and other business matters was minimal. She

concentrated on court reporting and relied on Mr. Koeblitz for everything else. [Testimony of

Ms. Koeblitz].

34. For the stated reason, Mr. Koeblitz assumed responsibility for legal matters

concerning the business and Ms. Koeblitz would usually sign documents as he requested with a

minimal amount of inquiry. [Testimony of Ms. Koeblitz].

35. Mr. Koeblitz made unwritten inquiries to the Department in reference to whether

a change in the legal entity through which a business operates also required a change to the

business’ state tax registration. Mr. Koeblitz’ understanding was that the Department did not

require any update to the business’ tax registration. [Testimony of Mr. Koeblitz].

In the Matter of the Consolidated Protests of New Mexico Depo
and Haute Mountain Girl
Page 7 of 29

36. Mr. Koeblitz first inquiry was at the Department’s Albuquerque field office. The

second inquiry was made during a Department-sponsored seminar. [Testimony of Mr. Koeblitz].

37. Mr. Koeblitz also relied on his understanding of a portion of FYI-105, addressing

common questions and answers, in which the following question and answer is provided:

If I currently have an identification number from the Taxation and
Revenue Department as a registered proprietorship (i.e. sole
owner) and later decide to incorporate, may I continue to use this
number?

No. You must cancel the identification number issued to you as a
proprietorship and apply for a new identification number as a
corporation. The incorporation of a business qualifies as a change
in form of ownership. Upon applying for your identification
number, you should indicate your date of incorporation as the
“start business date” on the Application for Business Tax
Identification Number (Form ACD-31015) for the new number.

[Testimony of Mr. Koeblitz; See Taxpayer Exhibit 17-2; FYI-105,
Rev. 11/2011 (Emphasis Added)]

38. Mr. Koeblitz interpreted the discussion contained in FYI-105 as providing an

exception for limited liability companies because the discussion specifically referenced

corporations only, and was silent in reference to limited liability companies. [Testimony of Mr.

Koeblitz].

39. Mr. Koeblitz also made inquiries of the Internal Revenue Service regarding the

change in business entity from sole proprietor to limited liability company. [Testimony of Mr.

Koeblitz].

40. On or about February 13, 2012, the Internal Revenue Service assigned New

Mexico Depo, LLC a Federal Employer Identification Number XX-XXXX672. [Taxpayer

Exhibit 5-3].

In the Matter of the Consolidated Protests of New Mexico Depo
and Haute Mountain Girl
Page 8 of 29

41. On or about June 8, 2012, the Internal Revenue Service acknowledged that the

LLC was classified as a single member disregarded entity and was not required to file Form 1065

(U.S. Return of Partnership Income). [See Taxpayer Exhibit 5-2].

42. From January 17, 2012, Ms. Koeblitz continued to engage in the business of

providing court reporting services, and held her business out publicly as New Mexico Depo,

LLC. [Testimony of Mr. Koeblitz].

43. However, there would be no change to the business tax registration associated

with CRS No. 03-152861-00-9 to reflect a transformation in business entity until May 9, 2014.

[Testimony of Mr. Trujillo; Testimony of Ms. Gage; See Department Exhibit A-7].

44. At some point prior to May 9, 2014, the Department was alerted to a potential

Schedule C mismatch. Ms. Laura Gage was assigned to review the issue. [Testimony of Ms.

Gage].

45. During her examination, Ms. Gage discovered that New Mexico Depo had a

Federal Employer Identification Number. Because Ms. Gage perceived that as unusual,

especially in situations where an individual was engaging in business as a sole proprietor, she

conducted additional research. [Testimony of Ms. Gage].

46. Through a review of such records on file with the New Mexico secretary of state,

Ms. Gage discovered the existence of New Mexico Depo, LLC. [Testimony of Ms. Gage].

47. Ms. Gage conferred with her supervisor who subsequently authorized her to

update the Department’s record for CRS No. 03-152861-00-9 to reflect that New Mexico Depo

was engaging in business as a limited liability company as of May 9, 2014. [Testimony of Ms.

Gage; See Department Exhibit A-7].

In the Matter of the Consolidated Protests of New Mexico Depo
and Haute Mountain Girl
Page 9 of 29

48. Accordingly, on May 9, 2014, Ms. Gage updated the “Client Type” field in the

Department’s computerized record associated with CRS No. 03-152861-00-9 to reflect “Ltd.

Liability Company”. [Testimony of Ms. Gage; See Taxpayer Exhibit A-7].

49. The change in the Department’s records associated with CRS No. 03-152861-00-

9 did not result from the submission of a Business Tax Registration Update. [Testimony of Mr.

Trujillo; Testimony of Ms. Gage].

50. On or about April 8, 2016, Mr. Koeblitz submitted a Business Tax Registration

Update for CRS No. 03-152861-00-9 indicating that New Mexico Depo had closed and therefore

ceased engaging in business effective February 29, 2016. [See Taxpayer Exhibit 6-1].

51. The Department rejected the Business Tax Registration Update because it

determined that Mr. Koeblitz did not have proper authority to make changes to the referenced

account. [See Taxpayer Exhibit 6-2].

52. Mr. Koeblitz re-submitted the Business Tax Registration Update for CRS No. 03-

152861-00-9 with a Tax Information Authorization on or about May 3, 2016. [Testimony of Mr.

Koeblitz; See Taxpayer Exhibit 6-3].

53. On or about June 18, 2018, Mr. Koeblitz registered New Mexico Depo, LLC

(although the registration confirmation omitted “LLC” from the business’ name) with the

Department. The Department assigned NM Depo LLC CRS No. 03-408019-00-8. [Testimony of

Mr. Koeblitz; See Taxpayer Exhibit 4].

54. Ms. Koeblitz had no specific recollection of preparing, signing, or submitting any

forms for the purpose of updating her business registration prior to 2018. [Testimony of Ms.

Koeblitz].

In the Matter of the Consolidated Protests of New Mexico Depo
and Haute Mountain Girl
Page 10 of 29

55. A sample of records demonstrates that New Mexico Depo held itself out as a

limited liability company after January 17, 2012. Examples include:

a. New Mexico Depo utilized the LLC designation on various Form W-9s on

February 13, 2012, June 25, 2013, and November 20, 2014. [See Taxpayer Exhibit 9].

b. New Mexico Depo issued various Form 1099-MISCs utilizing the LLC

designation in 2014. [See Taxpayer Exhibit 10-1 to 10-2].

c. New Mexico Depo issued non-taxable transaction certificates utilizing the

LLC designation. [See Taxpayer Exhibit 10-3].

d. Ms. Koeblitz reported profits and losses from the New Mexico Depo on

Schedule C in which she utilized the LLC designation. [See Taxpayer Exhibit 11].

e. New Mexico Depo submitted a Substitute W-9 to the New Mexico

department of finance and administration which utilized the LLC designation. [See Taxpayer

Exhibit 12].

f. New Mexico Depo received payments tendered to New Mexico Depo

LLC. [See Taxpayer Exhibit 13].

g. New Mexico Depo made payment to its employees and contractors on an

account utilizing the LLC designation. [See Taxpayer Exhibits 14 and 15].

h. Correspondence addressed to Ms. Koeblitz from the New Mexico

department of workforce solutions indicated that it was in reference to “N[M] Depo, LLC”. [See

Taxpayer Exhibit 14-3 to 14-4].

i. New Mexico Depo’s statements for services provided utilized the LLC

designation. [See Taxpayer Exhibit 16].

In the Matter of the Consolidated Protests of New Mexico Depo
and Haute Mountain Girl
Page 11 of 29
j. Ms. Koeblitz executed a Limited Liability Company Statement for Bank

of the West in which she provided information in reference to the limited liability company,

including its legal name, street address, Federal Employer Identification Number, and the names

of members and managers. She was identified as the single member. [See Taxpayer Exhibit 18].

56. Mr. Juan Trujillo was the protest auditor assigned to the consolidated protests.

[Testimony of Mr. Trujillo].

57. Mr. Trujillo determined that Haute Mountain Girl never generated income from

engaging in business in New Mexico and that income originally attributed to Haute Mountain

Girl was generated by New Mexico Depo. [Testimony of Mr. Trujillo].

58. Mr. Trujillo determined that tax assessed against Haute Mountain Girl should be

abated, but that the amount of tax abated should be re-assessed to New Mexico Depo.

[Testimony of Mr. Trujillo].

59. There is no indication from the record in this matter to establish that any liability

originally assessed to Haute Mountain Girl, and subsequently abated, was thereafter re-assessed

to New Mexico Depo. [Testimony of Mr. Trujillo].

DISCUSSION

The primary issue in this protest is whether New Mexico Depo’s sole proprietor, Ms.

Koeblitz, is personally liable for gross receipts tax liabilities incurred during the time she

operated as a sole proprietorship, and after organizing a limited liability company because she

failed to update her business tax registration with the Department. New Mexico Depo did not

present evidence to dispute the correctness of the amounts assessed, but only disputed whether

the sole proprietor was ultimately liable for the assessment.

In the Matter of the Consolidated Protests of New Mexico Depo
and Haute Mountain Girl
Page 12 of 29
This observation is significant because under NMSA 1978, Section 7-1-17 (C) (2007), an

assessment of tax is presumed correct. Unless otherwise specified, for the purposes of the Tax

Administration Act, “tax” is defined to include interest and civil penalty. See NMSA 1978, Section

7-1-3 (X) (2013).

Furthermore, Regulation 3.1.6.13 NMAC provides that the presumption of correctness

afforded by Section 7-1-17 (C) should extend to the Department’s assessment of penalty and

interest. See Chevron U.S.A., Inc. v. State ex rel. Dep't of Taxation & Revenue, 2006-NMCA-50,

¶16, 139 N.M. 498, 503 (agency regulations interpreting a statute are presumed proper and are to be

given substantial weight). Therefore, taxpayers have the burden of overcoming assessments. See

Archuleta v. O'Cheskey, 1972-NMCA-165, ¶11, 84 N.M. 428, 431.

Since Ms. Koeblitz and New Mexico Depo did not expressly contest the correctness of

the assessed amounts of tax, penalty, or interest for the periods between January 1, 2012 and

December 31, 2012, the central issue shifts to the consequence of the undisputed facts: Ms.

Koeblitz organized New Mexico Depo, LLC on January 17, 2012 but did not register it to

conduct business with the Department until June 13, 2018, after this protest was already pending,

after it had ceased operating in 2016, and after the Department determined the liability.

Preliminary Issue Regarding
Haute Mountain Girl

Although not directly raised by the parties, the Hearing Officer perceived an issue

regarding the assessment and subsequent abatement of tax to Haute Mountain Girl. This

preliminary issue may affect the amount claimed to be owed by New Mexico Depo.

The Department conceded that Haute Mountain Girl did not generate any receipts from

engaging in business, and for that reason, it fully abated the assessment under Letter ID No.

In the Matter of the Consolidated Protests of New Mexico Depo
and Haute Mountain Girl
Page 13 of 29
L0179872560. However, the Department also concluded that the receipts initially attributed to

Haute Mountain Girl were actually generated by New Mexico Depo and for that reason, the

amounts abated as to Haute Mountain Girl should be re-assessed to New Mexico Depo.

Yet, the record fails to establish that the Department re-assessed any taxes to New

Mexico Depo, which were previously assessed to Haute Mountain Girl, and subsequently abated.

This observation is significant because the Department may only pursue an alleged tax liability

through its authority to assess under NMSA 1978, Section 7-1-17. That section provides three

methods for assessing taxes allegedly due, for which only the second applies under the facts of

this protest. That method provides that an assessment of tax is effective “when a document

denominated ‘notice of assessment of taxes’, issued in the name of the secretary, is mailed or

delivered in person to the taxpayer against whom the liability for tax is asserted, stating the

nature and amount of the taxes assertedly owed by the taxpayer to the state, demanding of the

taxpayer the immediate payment of the taxes and briefly informing the taxpayer of the remedies

available to the taxpayer[.]” See NMSA 1978, Section 7-1-17 B (2).

In this protest, Mr. Trujillo and counsel for the Department made verbal reference to a re-

assessment of taxes, and even referenced the same in a footnote to the Department’s Prehearing

Statement. However, that is insufficient under the law because neither a verbal statement nor a

footnote in a pleading constitutes a formal “notice of assessment of taxes” under Section 7-1-17.

Otherwise, there is nothing on the record in this protest to establish that any amounts originally

assessed to Haute Mountain Girl, and subsequently abated, were thereafter re-assessed to New

Mexico Depo as required by Section 7-1-17.

In the Matter of the Consolidated Protests of New Mexico Depo
and Haute Mountain Girl
Page 14 of 29
Since the mere intention to re-assess a previously-abated tax is not a “notice of

assessment of taxes”, and because unassessed tax liabilities are not protestable, previously-

abated taxes claimed to be due, but not actually assessed, are not properly before this tribunal.

Although the Department does not suggest this approach, the Hearing Officer is not at

liberty to merely add to one assessment an amount of tax that the Department abated from

another. The authority to assess taxes lies solely with the Department.

Therefore, by virtue of the fact that the Department abated all amounts allegedly due

under the notice of assessment to Haute Mountain Girl, the only assessment now at issue is that

addressed to New Mexico Depo under Letter ID No. L1017684784.

Personal Liability for Taxes Owed by New Mexico Depo

Ms. Koeblitz asserted that New Mexico Depo, the sole proprietorship, should not be

liable for any tax liability incurred subsequent to the organization of New Mexico Depo, LLC on

January 17, 2012. Instead, Ms. Koeblitz argued that liability rests squarely on the limited liability

company in which she was the single member.

Although there may be various benefits to operating a business through a limited liability

company, one of the most desirable benefits may derive from NMSA 1978, Sec. 53-19-13. It

provides that “[e]xcept as otherwise provided in the Limited Liability Company Act, the debts,

obligations and liabilities of a limited liability company, whether arising in contract, tort or

otherwise, shall be solely the debts, obligations and liabilities of the limited liability company.”

It goes on to provide that “[n]o member or manager of a limited liability company … shall be

obligated personally for any debt, obligation or liability of the limited liability company solely

by reason of being a member or manager of the limited liability company[.]”

In the Matter of the Consolidated Protests of New Mexico Depo
and Haute Mountain Girl
Page 15 of 29
In contrast, a sole proprietor is exclusively liable for the debts of the business because

there is no legal distinction between the sole proprietorship and its owner. “The universal rule is

that the sole proprietor is personally responsible for the activities of the business.” See

Georgantas v. Country Mut. Ins. Co., 570 N.E.2d 870, 873 (Ill.App. 1991); See also Sec’y v.

Carter, 2012 N.M. App. Unpub. LEXIS 95, 2012 WL 868895 (N.M. Ct. App. February 16,

2012) (non-precedential).

The consequence in this matter is that if the limited liability company is liable for the tax

liability, then the liability rests exclusively with the company, and not its single member, Ms.

Koeblitz. In contrast, if the sole proprietorship is liable, then Ms. Koeblitz is personally

responsible for the activities of the business.

In this case, Ms. Koeblitz with her husband’s assistance, organized New Mexico Depo,

LLC in 2012. From the date of organization onward, she intended for it to supplant her sole

proprietorship in both ownership and operation of New Mexico Depo. However, not until 2018,

while this protest was already pending, did she or her spouse register the limited liability

company with the Department. This was well after the principal liability at issue in this protest

had been incurred and assessed.

Taxpayer’s counsel argued that this was inconsequential because from the inception of

the limited liability company until it ceased its operations, it was that entity engaging in business

in New Mexico, not the sole proprietorship, and its registration should be given retroactive

effect. For the reasons that follow, the Hearing Officer is not persuaded.

The Department’s mission requires that it be able to follow and distinguish numerous

taxpayers in order to fairly, properly, and accurately administer the tax laws of this state. See

In the Matter of the Consolidated Protests of New Mexico Depo
and Haute Mountain Girl
Page 16 of 29
NMSA 1978, Section 9-11-6; Section 7-1-4.2. In order to facilitate its mission, the Legislature

enacted NMSA 1978, Section 7-1-12 A which provides “[t]he secretary by regulation shall

establish a system for the registration and identification of taxpayers and shall require taxpayers

to comply therewith.” (Emphases Added).

In compliance with Section 7-1-12 A, the Department established Regulation 3.1.1.15

(A) (1) NMAC requiring the secretary of the Department to develop and maintain systems “for

the registration and identification of taxpayers who are subject to taxes and tax acts listed in

Section 7-1-2 NMSA 1978 and taxpayers shall comply therewith.” (Emphases added). The use

of the word “shall” as provided in the statute and regulation indicates that the provision is

mandatory. See Marbob Energy Corp. v. N.M. Oil Conservation Comm’n, 2009-NMSC-013, ¶22,

146 N.M. 24, 32 (use of the word “shall” in a statute indicates provision is mandatory absent clear

indication to the contrary).

In this protest, New Mexico Depo, the limited liability company failed to comply with

that procedure which left New Mexico Depo, the sole proprietorship, obligated for reporting and

paying taxes. Although one might be inclined to characterize the failure to register as placing

form over substance, the result is more significant. Registration is the Department’s primary

method for identifying taxpayers, and therefore assuring their compliance with the tax laws of

New Mexico. Had the Legislature not imposed a mandatory duty to self-register, then the

incredible, and perhaps impossible, task of seeking out and identifying every taxpayer engaging

in business in New Mexico would have descended on the Department, allowing some taxpayers

to elude their tax obligations by remaining slightly out of its sight. This is clearly what the

Legislature intended to avoid.

In the Matter of the Consolidated Protests of New Mexico Depo
and Haute Mountain Girl
Page 17 of 29
In this protest, New Mexico Depo claimed that the limited liability company was

obligated for the assessed taxes even though neither Mr. Koeblitz nor Ms. Koeblitz notified the

Department, though the mandatory procedure, that the identity of the taxpayer in this protest had

changed. This is significant because although both entities were engaged in the same business,

had nearly identical names, and were owned and operated by Ms. Koeblitz, they were distinct

and separate entities from one another. See NMSA 1978, Section 53-19-10 A (“A limited

liability company formed pursuant to the Limited Liability Company Act is a separate legal

entity.”). Yet, they were so similar in other ways, that it would be unreasonable to presume that

the Department would be on notice of the change without some affirmative steps by the taxpayer.

From its standpoint, the sole proprietorship was the taxpayer during the periods of time relevant

to the assessment.

In contrast, New Mexico Depo’s position places the Department in the untenable position

of not being able to rely on the accuracy of its registration and identification system for

managing hundreds of thousands, or perhaps millions of taxpayer accounts. The effect would

encourage some taxpayers to exploit that vulnerability through something akin to business-

structure shapeshifting, in which a taxpayer might attempt to circumvent personal obligation for

a mounting tax liability by discreetly shifting from one form of entity to another, and then deflect

an assessed liability to an insolvent entity that the Department never even knew existed.

The Hearing Officer does not intend to imply or suggest that this was the intention of Mr.

or Ms. Koeblitz, but this illustration exemplifies the absurdity that results from their construction

of the law, which the Legislature did not intend in any of the enactments thus far referenced. See

Regents of the Univ. of N.M. v. N.M. Fed’n of Teachers, 1998-NMSC-020, ¶28, 125 N.M. 401, 962

In the Matter of the Consolidated Protests of New Mexico Depo
and Haute Mountain Girl
Page 18 of 29
P.2d 1236 (it is a canon of statutory construction to the plain wording of a statute except if there

is ambiguity, error, absurdity, or a conflict among statutory provisions).

The scenario presented in this protest is analogous to The Matter of the Protest of Louie

Casias, Decision and Order No. 17-25 (non-precedential). Although counsel for New Mexico

Depo asserted that the analysis in Casias was incorrect, at least with respect for how it would apply

in this protest, the New Mexico Court of Appeals summarily affirmed that Decision and Order on

October 29, 2018. See Casias v. N.M. Taxation and Revenue Dep’t, No. A-1-CA-36489.

In the Notice of Proposed Summary Disposition entered on September 13, 2018, and

subsequently affirmed on October 29, 2018, Chief Judge Vanzi recognized that NMSA 1978,

Section 53-19-13 (1993) stated “[e]xcept as otherwise provided in the Limited Liability

Company Act, the debts, obligations and liabilities of a limited liability company, whether

arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the

limited liability company.” Chief Judge Vanzi went on to further note, as the hearing officer

similarly did in that protest, that the section concludes with the following language: “Nothing in

this section shall be construed to immunize any person from liability for the consequences of his

own acts or omissions for which he otherwise may be liable.”

Consequently, Chief Judge Vanzi wrote: “It appears that, in this case, Casias incurred the

tax liability of Casias Trucking as a sole proprietorship. Therefore, we are not convinced that

Casias has demonstrated that the hearing officer erred below.” See Casias v. N.M. Taxation and

Revenue Dep’t, No. A-1-CA-36489 (Notice of Proposed Summary Disposition entered September

13, 2018 and affirmed October 29, 2018). The same logic applies in the present matter as well.

In the Matter of the Consolidated Protests of New Mexico Depo
and Haute Mountain Girl
Page 19 of 29
New Mexico Depo has failed to establish that the tax obligation at issue in this protest was

that of New Mexico Depo, LLC. Rather, New Mexico Depo, the sole proprietorship, incurred the

obligation to report and pay taxes in New Mexico when it registered on or about January 23,

2009, and there was never any update to the Taxpayer’s registration that would have essentially

substituted the limited liability company for the sole proprietorship during any period of time

relevant to the assessment.

As similarly discussed in Casias, the Hearing Officer finds the concept of novation to be

informative and instructive. The New Mexico Supreme Court in Beebe v. Fouse, 27 N.M. 194,

196 (1921) explained that “[a] novation … as understood in modern law, is a mutual agreement,

between all parties concerned, for the discharge of a valid existing obligation by the substitution

of a new valid obligation on the part of the debtor or another, or a like agreement for the

discharge of a debtor to his creditor by the substitution of a new creditor.”

Ms. Koeblitz, by registering to engage in business as a sole proprietor agreed that she

would be personally liable for the tax obligations of her sole proprietorship. In turn, the

Department issued a unique CRS number through which returns and payments would be

submitted. New Mexico Depo, LLC was not a party to that arrangement because it did not yet

exist, similar to the facts in Casias.

New Mexico Depo essentially asserts that a novation occurred because New Mexico

Depo, LLC substituted for New Mexico Depo, the sole proprietorship. However, novation

requires the mutual agreement, between all parties concerned, for the discharge of a valid

existing obligation by the substitution of a new valid obligation on the part of the debtor or

another. Mutual agreement may be accomplished with mere compliance with the Department’s

In the Matter of the Consolidated Protests of New Mexico Depo
and Haute Mountain Girl
Page 20 of 29
mandatory registration and identification procedure, but that did not occur in this protest, at least

during the relevant period of time.

New Mexico Depo proffered evidence which if afforded any weight, might tend to

mitigate its failure to update its registration for the sole proprietorship or initially register the

limited liability company. However, the Hearing Officer found that evidence to be unreliable.

The Hearing Officer afforded minimal weight to Mr. Koeblitz’ testimony that

Department employees advised him that he was required to do nothing with regard for

registering the limited liability company with the Department, or taking other steps in reference

to closing out the sole proprietorship. Mr. Koeblitz presented as a sophisticated individual; a

litigation attorney with more than 25 years of experience. However, he was unable to recall the

names of any individuals with whom he allegedly spoke, and documented nothing in writing in

reference to his interactions with those employees.

Although it was evident that Mr. Koeblitz communicated with the Internal Revenue

Service in reference to various questions and concerns relating to the limited liability company,

the IRS does not administer New Mexico tax law. Moreover, communications with the IRS

demonstrated that Mr. Koeblitz’ inquiries were directed primarily toward income tax under

federal law, which is dissimilar from the New Mexico gross receipts tax. This caused the

Hearing Officer to have some reservation regarding whether inquiries to the Department were

actually in reference to income tax, instead of gross receipts tax, because income tax seemed to

be a major area of concern during the first half of 2012.

Mr. Koeblitz also asserted reliance on a portion of FYI-105 (Gross Receipts &

Compensating Taxes: An Overview), Rev. 7/2014, for the proposition that New Mexico Depo,

In the Matter of the Consolidated Protests of New Mexico Depo
and Haute Mountain Girl
Page 21 of 29
the sole proprietorship, was not required to update its business tax registration, and the limited

liability company was not required to submit a new registration, citing to a question and answer

appearing on page 48 2. See Taxpayer Exhibit 17-2.

Although New Mexico Depo tendered the 2014 version of the publication, Mr. Koeblitz

testified that he relied on the version that would have been in effect during the early portion of

2012, and testified that the 2014 version was substantially similar to the version he recalled from

2012. The Hearing Officer therefore took administrative notice of FYI-105, Rev. 7/20/2011,

effective July 1, 2011 to June 30, 2012.

The particular question and answer Mr. Koeblitz referenced was contained in the section

entitled Responses to Common Questions and Concerns of CRS Taxpayers. See id., Page 43 –

46. On Page 45, it states as follows:

If I currently have an identification number from the Taxation
and Revenue Department as a registered proprietorship (i.e.
sole owner) and later decide to incorporate, may I continue to
use this number?

No. You must cancel the identification number issued to you as a
proprietorship and apply for a new identification number as a
corporation. The incorporation of a business qualifies as a change
in form of ownership. Upon applying for your identification
number, you should indicate your date of incorporation as the
"start business date" on the Application for Business Tax
Identification Number (ACD-31015) for the new number.

Mr. Koeblitz asserted that because the above-quoted answer specifically discussed

corporations only, it was reasonable for him to infer that limited liability companies, and perhaps

every other type of business entity not specifically discussed, were not be required to register and

2
New Mexico Depo proffered pages 45 and 48 of the referenced 2014 version of FYI-105. However, the Hearing
Officer took administrative notice of the 2011-2012 version in its entirety.

In the Matter of the Consolidated Protests of New Mexico Depo
and Haute Mountain Girl
Page 22 of 29
obtain a new CRS number. However, Mr. Koeblitz’ interpretation was misplaced and

unreasonable. The above-quoted answer was drafted for the purpose answering a common

question specific to corporations. Its silence regarding limited liability companies is attributable

only to the fact that the question did not refer to limited liability companies.

New Mexico Depo also argued that the limited liability company’s registration on June

13, 2018 should be retroactive to its inception. However, it offers no legal authority for that

proposition. Although Ms. Gage discussed scenarios where the Department might identify the

existence of a non-filing taxpayer, and thereafter establish a CRS account and number retroactive

to the period when a non-filing taxpayer incurred liability, that scenario is not applicable in this

protest. The sole proprietorship was registered and therefore subsequently assessed. Registering

the limited liability company in June of 2018, well after the liability was incurred, and after the

hearing in this matter was already scheduled for a hearing, was clearly an afterthought.

It is also undisputed that Ms. Gage modified New Mexico Depo’s registration on or about

May 9, 2014 to indicate that it was a “Ltd. Liability Company”. In review, New Mexico Depo,

the sole proprietorship, registered with the Department on or about January 23, 2009. The

Department assigned a CRS number and New Mexico Depo proceeded to engage in business

until it ceased operations in 2016, and closed its account. In the interim, Ms. Gage determined

while investigating an alleged Schedule C mismatch, that a limited liability company, New

Mexico Depo, LLC, had been organized, and updated its records to recognize that New Mexico

Depo, the sole proprietorship assigned CRS No. 03-152861-00-9, was now operating as a limited

liability company.

In the Matter of the Consolidated Protests of New Mexico Depo
and Haute Mountain Girl
Page 23 of 29
Although the update could perhaps affect tax liabilities incurred after May 9, 2014,

neither the New Mexico Depo assessment nor the fully abated Haute Mountain Girl assessment

concern that period of time. Therefore, the Hearing Officer will not opine on the potential

significance of the 2014 update to the facts of this protest.

Based on the foregoing, New Mexico Depo, the sole proprietorship, should be liable for

the amounts due under the assessment.

Penalty.

As stated previously, New Mexico Depo did not present evidence to dispute the amounts

contained in the assessment. Its primary argument was directed to which person, or entity, should

bear ultimate responsibility for the liability, Ms. Koeblitz, as the sole proprietor, or the limited

liability company. However, Ms. Koeblitz also claimed that she significantly relied on the advice

of her spouse, a litigation attorney with more than 25 years of experience in the practice of law.

For this reason, it might appear that Ms. Koeblitz is seeking abatement of penalty even

though she does not appear to dispute that the underlying tax was not paid. The Hearing Officer

will nevertheless briefly address the issue of whether Ms. Koeblitz’ reliance on her husband

might provide some ground for the abatement of penalty.

When a taxpayer fails to pay taxes due to the State because of negligence or disregard of

rules and regulations, but without intent to evade or defeat a tax, NMSA 1978 Section 7-1-69

(2007) requires that

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 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)

In the Matter of the Consolidated Protests of New Mexico Depo
and Haute Mountain Girl
Page 24 of 29
As discussed above, the statute’s use of the word “shall” makes the imposition of penalty

mandatory in all instances where a taxpayer’s actions or inactions meet the legal definition of

“negligence” even if a taxpayers actions or inactions were unintentional.

Regulation 3.1.11.10 NMAC defines negligence in three separate ways: (A) “failure to

exercise that degree of ordinary business care and prudence which reasonable taxpayers would

exercise under like circumstances;” (B) “inaction by taxpayer where action is required”; or (C)

“inadvertence, indifference, thoughtlessness, carelessness, erroneous belief or inattention.” In this

case, New Mexico Depo was negligent under Regulation 3.1.11.10 (A), (B) & (C) NMAC because

it failed to take appropriate steps to close the sole proprietor’s CRS account and register the limited

liability company as a new business, not to mention the failure to pay the underlying amount of tax

due.

However, in instances where a taxpayer might otherwise fall under the definition of civil

negligence generally subject to penalty, as New Mexico Depo does in the present matter, Section

7-1-69 (B) provides a limited exception: “[n]o penalty shall be assessed against a taxpayer if the

failure to pay an amount of tax when due results from a mistake of law made in good faith and

on reasonable grounds.” Regulation 3.1.11.11 (D) NMAC which implements Section 7-1-69 (B)

goes on to permit an abatement of penalty when “the 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 the taxpayer’s reliance on an agent[.]”

However, Mr. Koeblitz candidly admitted that he did not practice tax law, and never

claimed that he had any specialized knowledge or expertise in state taxation. For this reason,

In the Matter of the Consolidated Protests of New Mexico Depo
and Haute Mountain Girl
Page 25 of 29
there was no evidence that Mr. Koeblitz was competent tax counsel as that term is utilized in

Regulation 3.1.11.11 (D) NMAC. This observation in no way reflects on Mr. Koeblitz’

experience as an attorney, but taxation was simply not within his field of expertise.

Moreover, there was no evidence to suggest that Ms. Koeblitz reasonably relied on her

spouse’s advice after full disclosure of all relevant facts. Ms. Koeblitz candidly admitted that her

focus was on the work of court reporting, and that she had no understanding and minimal

involvement with other aspects of operating her business.

Although the Hearing Officer finds no fault with Ms. Koeblitz relying on her spouse for

assistance in operating her business, her hands-off approach stands in opposition to the duties of

those engaging in business in New Mexico. In a self-reporting tax system, “every person is

charged with the reasonable duty to ascertain the possible tax consequences” of his or her

actions. See Tiffany Construction Co. v. Bureau of Revenue, 1976-NMCA-127, ¶5, 90 N.M. 16.

Generally, a taxpayer cannot “abdicate this responsibility merely by appointing an accountant as

its agent in tax matters.” See El Centro Villa Nursing Center v. Taxation and Revenue

Department, 1989-NMCA-070, ¶14, 108 N.M. 795. Civil negligence penalty is appropriate in

these circumstances and Regulation 3.1.11.11 (D) NMAC does not provide grounds for

abatement of the penalty in this case.

CONCLUSIONS OF LAW

1. New Mexico Depo filed a timely written protest to the assessment issued under

Letter ID No. L1017684784, and jurisdiction lies over the parties and the subject matter of this

protest.

2. A hearing was timely held in accordance with NMSA 1978, Sec. 7-1B-8 (A).

In the Matter of the Consolidated Protests of New Mexico Depo
and Haute Mountain Girl
Page 26 of 29

3. New Mexico Depo, the sole proprietorship, is obligated for the liability subject of

the assessment issued under Letter ID No. L1017684784 since that was the identity of the

taxpayer engaging in business in New Mexico. See NMSA 1978, Section 7-1-12 A; Georgantas

v. Country Mut. Ins. Co., 570 N.E.2d 870, 873 (Ill.App. 1991); Sec’y v. Carter, 2012 N.M. App.

Unpub. LEXIS 95, 2012 WL 868895 (N.M. Ct. App. February 16, 2012) (non-precedential); See

Casias v. N.M. Taxation and Revenue Dep’t, No. A-1-CA-36489 (Notice of Proposed Summary

Disposition entered September 13, 2018 and affirmed October 29, 2018) (non-precedential).

4. New Mexico Depo is not entitled to abatement of penalty under NMSA 1978

Section 7-1-69 (2007).

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

DATED: November 20, 2018

Chris Romero
Hearing Officer
Administrative Hearings Office
P.O. Box 6400
Santa Fe, NM 87502

In the Matter of the Consolidated Protests of New Mexico Depo
and Haute Mountain Girl
Page 27 of 29
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 Consolidated Protests of New Mexico Depo
and Haute Mountain Girl
Page 28 of 29
CERTIFICATE OF SERVICE

On November 20, 2018, a copy of the foregoing Decision and Order was submitted to the

parties listed below in the following manner:

First Class Mail Interagency Mail

INTENTIONALLY BLANK

---

John D. Griego
Legal Assistant
Administrative Hearings Office
Post Office Box 6400
Santa Fe, NM 87502
PH: (505)827-0466, FX: (505)827-9732

In the Matter of the Consolidated Protests of New Mexico Depo
and Haute Mountain Girl
Page 29 of 29