Could a newly incorporated auto-repair shop avoid the former operator's New Mexico tax debt by leasing the same shop and equipment through a related company instead of formally buying the old business?

View original ruling (PDF)

Plain-English summary

Potter Endustries was the successor to American Car and Truck Care and was liable for the predecessor's full tax debt. The Administrative Hearings Office found that the same auto-repair business and its property had been transferred through a lease arrangement designed to evade or defeat tax.

The Department's March 2017 notice initially assessed Potter $558,243.36 as a successor: $379,844.35 of tax, $78,586.91 of penalty, and $99,812.10 of interest. By the June 2019 hearing, the updated outstanding tax, penalty, and interest totaled $599,551.86.

The old operation stopped one day and the new one started the next

American Car and Truck Care, LLC stopped operating on January 31, 2017. Potter began operating on February 1 at the same Farmington address. Potter performed the same automotive maintenance and repair work with the same building and equipment.

Potter also:

• paid the LLC $3,700 for its accounts receivable;
• kept the American Car and Truck Care name and building sign;
• took over the website, phone number, and email address;
• retained most of the LLC's employees and hired its owner, Wesley Brown;
• continued the LLC's state General Services Department contract until October 2018; and
• used the predecessor's recognized name and other goodwill.

There was no formal agreement to buy the whole business. Potter instead signed a two-year lease for the shop and equipment at $7,500 per month, a total contractual value of $180,000. But a lease can transfer the right to use business property. The lessor, Furlong Corporation, was controlled by Julie Brown, the predecessor owner's wife and the LLC's registered agent. The AHO therefore rejected the claim that Potter merely leased from an unrelated third party.

Six regulatory factors supported successor status

Regulation 3.1.10.16 listed eight successor factors, and even one could create a presumption. Six favored successor status here: transfer of major business assets, a transfer outside the predecessor's ordinary course, transfer of substantial equipment, uninterrupted continuation of the same business, transfer of goodwill, and Potter's performance of the predecessor's state contract.

Two factors did not apply: Potter did not pay the LLC's unpaid debts, and there was no noncompetition agreement. Those points did not overcome the many other signs that the business changed hands.

The decision emphasized that New Mexico's statute protects taxes with both tangible and intangible property used in a business, whether or not the predecessor technically owned that property. Moving the assets through an intermediary or transferring use by lease did not prevent successor status.

The tax-avoidance finding made the liability unlimited by asset value

Section 7-1-63(C) ordinarily allows a successor to discharge liability by paying the full value of the transferred property. Full predecessor liability may apply, however, when the transaction was made to evade tax, was a de facto merger or mere continuation, or included an agreement to assume the debt.

The AHO found insufficient evidence of common ownership and management to label Potter a “mere continuation.” It nevertheless found tax avoidance. Potter's owner knew the LLC had tax problems, spoke with a federal revenue agent about whether buying the accounts receivable could expose Potter to federal tax liability, and arranged the new corporation and related-party lease at nearly the same time the predecessor stopped operating.

Potter also failed to prove that the transferred property was worth less than the assessment. Its owner's unsupported estimate that goodwill was worth no more than $10,000 did not account for the lease, accounts receivable, name, sign, website, contacts, employees, contract, and other business value.

The other defenses also failed

Potter argued that a Department employee should have warned it about successor liability while helping with its tax-registration form. The employee knew only the incomplete facts Potter supplied, and the AHO also lacked statutory authority to grant equitable estoppel.

The predecessor's unprotested assessments were already final, so Potter had no standing to relitigate them. The successor assessment itself was issued about one month after the transfer. Finally, the AHO rejected the claim that the large assessment was cruel and unusual punishment: the successor statutes were designed to collect unpaid revenue, not punish.

Result: protest DENIED. Potter owed the full updated successor liability of $599,551.86 as of the hearing date.

What this means for you

A lease can transfer a business

Successor exposure is not limited to formal stock or asset purchases. Leasing the operating premises and equipment can transfer the property needed to continue the business.

Look beyond the paperwork to operational continuity

The same location, equipment, trade name, contacts, employees, customers, contracts, and goodwill can establish that a business changed hands even when the parties say no business was sold.

Use New Mexico's clearance process before taking over assets

Sections 7-1-61 and 7-1-62 impose duties on a successor and allow an application for a Department certificate addressing tax due. The decision treated the purchaser as responsible for investigating the predecessor's tax exposure.

Tax-avoidance facts can expand liability to the full debt

Without an avoidance finding, successor liability may be limited to transferred-property value. A transaction structured with knowledge of tax problems to keep the same operation running can expose the successor to the entire predecessor assessment.

Common questions

Q: Did Potter have to buy the old company's shares or sign a business-purchase agreement?
A: No. It acquired accounts receivable and the right to use the same shop, equipment, name, contacts, goodwill, workforce, and contract. The AHO treated that direct and indirect transfer as enough.

Q: Did it matter that another company formally owned the building and equipment?
A: No. New Mexico's rule covered property reasonably necessary for continued operations whether or not the predecessor owned it. The related lessor controlled Potter's use of the same business property.

Q: Why did Potter owe the full debt instead of only $180,000 or $10,000?
A: The AHO found the transfer was made to evade or defeat tax, which triggered full liability under Section 7-1-63(C). Potter also did not substantiate a lower value for everything transferred.

Q: Was Potter found to be a “mere continuation” of the LLC?
A: No. The evidence did not establish enough continuity of ownership and management for that separate theory. Full liability rested on the tax-avoidance finding.

Q: Could the AHO order equitable estoppel because a Department employee gave incomplete guidance?
A: No. The conversation was based on incomplete information from Potter, and the AHO said it lacked statutory authority to award that equitable remedy.

Citations and references

Statutes and regulation:

• NMSA 1978, §§ 7-1-61 through 7-1-63 — transferred-property security, successor duties, tax-clearance certificate, and liability limits
• NMSA 1978, §§ 7-1-17 and 7-1-3(Y) — assessment presumption, civil penalty, and interest
• NMSA 1978, §§ 7-1-18 and 7-1-24(E) — assessment periods and final unprotested assessments
• NMSA 1978, § 9-11-6.2(G) — presumption that Department regulations properly implement the law
• Regulation 3.1.10.16(A), (B), and (F) NMAC — successor factors and definitions of successor, transfer, and business property

Cases:

• Sterling Title Co. of Taos v. Commissioner of Revenue, 1973-NMCA-086 — broad successor liability and business property as security for tax
• Hi-Country Buick GMC, Inc. v. Taxation and Revenue Department, 2016-NMCA-027 — successor status through business-property transfers
• Garcia v. Coe Manufacturing Co., 1997-NMSC-013 — common ownership and management in the “mere continuation” analysis
• Taxation and Revenue Department v. Bien Mur Indian Market, 1989-NMSC-015 — equitable estoppel against the state is disfavored in tax matters
• AA Oilfield Service v. New Mexico State Corporation Commission, 1994-NMSC-085 — administrative bodies cannot grant equitable remedies without statutory authority

Source

• Listing: New Mexico Decisions & Orders
• Decision post: Potter Endustries Inc
• Decision PDF: D&O 19-18

Original ruling text

1 STATE OF NEW MEXICO
2 ADMINISTRATIVE HEARINGS OFFICE
3 TAX ADMINISTRATION ACT

4 IN THE MATTER OF THE PROTEST OF
5 POTTER ENDUSTRIES, INC. DBA AMERICAN CAR & TRUCK CARE
6 TO THE ASSESSMENT ISSUED UNDER
7 LETTER ID NO. L0596711728

8 v. D&O No. 19-18

9 NEW MEXICO TAXATION AND REVENUE DEPARTMENT

10 DECISION AND ORDER

11 On June 20, 2019, Hearing Officer Dee Dee Hoxie, Esq. conducted a hearing on the

12 merits of the protest to the assessment. The Taxation and Revenue Department (Department) was

13 represented by Kenneth Fladager, Staff Attorney. Nicholas Pacheco, Auditor, also appeared on

14 behalf of the Department. Potter Endustries, Inc. DBA American Car and Truck Care

15 (Taxpayer) was represented by its attorney, Thomas Rice. David Gill, owner of the Taxpayer,

16 also appeared for the hearing. Mr. Gill and Mr. Pacheco testified. The Hearing Officer took

17 notice of all documents in the administrative file. The Taxpayer’s exhibits #1 (lease), #2

18 (affidavit), #3 (application), #6 (contract), and #7 (email) were admitted. The Department’s

19 exhibits A (organization), B (contract), C (deed), D (amendment) E (articles of incorporation), H

20 (report), I (homepage), K (payment), L (workforce record), M (workforce record), N (NV

21 record), O (photo), P (NM record), Q (notice), R (officers), T (injunction), U (W-2 comparison),

22 V (WY record), and W (updated liability) were admitted. A more detailed description of

23 exhibits submitted at the hearing is included on the Administrative Exhibit Coversheet.

24 The main issue to be decided is whether the Taxpayer is a successor in business, and, if

25 so, to what extent the Taxpayer is liable. The Hearing Officer considered all of the evidence and

Potter Endustries, Inc. DBA American Car and Truck Care
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1 arguments presented by both parties. The Hearing Officer finds in favor of the Department. IT

2 IS DECIDED AND ORDERED AS FOLLOWS:

3 FINDINGS OF FACT

4 1. On March 3, 2017, the Department assessed the Taxpayer as a successor in

5 business to American Car and Truck Care. The assessment was for $379,844.35 in tax,

6 $78,586.91 in penalty, and $99,812.10 in interest, for a total liability of $558,243.36.

7 [L0596711728]

8 2. On March 27, 2017, the Taxpayer filed a formal protest letter. [Protest]

9 3. On May 18, 2017, the Department filed a Request for Hearing asking that the

10 Taxpayer’s protest be scheduled for a formal administrative hearing. [Request for Hearing]

11 4. The Taxpayer requested a continuance of the initial setting, which was granted.

12 [Administrative file]

13 5. The telephonic scheduling hearing was conducted on June 23, 2017. The first

14 hearing was held within 90 days of the protest. [Administrative file]

15 6. On June 27, 2017, a scheduling order and notice of hearing was issued.

16 [Administrative file]

17 7. On June 20, 2018, the Taxpayer filed a motion for continuance of the hearing.

18 [Administrative file]

19 8. On July 2, 2018, the parties filed the joint prehearing statement. [Joint Prehearing

20 Statement]

21 9. On July 2, 2018, the Taxpayer’s motion was granted, and an amended scheduling

22 order and notice of hearing was issued. [Administrative file]

Potter Endustries, Inc. DBA American Car and Truck Care
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1 10. On May 30, 2019, the Department filed its prehearing statement. [Department’s

2 Prehearing Statement]

3 11. On June 10, 2019, the Taxpayer filed its prehearing statement. [Taxpayer’s

4 Prehearing Statement]

5 12. Mr. Gill owns the Taxpayer, which is a business that performs automotive

6 maintenance and repair. [Testimony of Mr. Gill]

7 13. Mr. Gill incorporated the Taxpayer on January 19, 2017. [Testimony of Mr. Gill,

8 Testimony of Mr. Pacheco, and Exhibit E]

9 14. Mr. Gill is the only person listed on the board of directors, as the incorporator,

10 and as the registered agent of the Taxpayer. [Exhibit E]

11 15. Prior to creating the Taxpayer, Mr. Gill spoke to his friend Wesley Brown about

12 Mr. Brown’s business, which was American Car and Truck Care, LLC (the LLC). [Testimony

13 of Mr. Gill, and Exhibit A]

14 16. The LLC was a business that performed automotive maintenance and repair.

15 [Testimony of Mr. Gill, Testimony of Mr. Pacheco, and Exhibit A]

16 17. The LLC was going out of business, and Mr. Brown knew Mr. Gill was looking

17 for a small business opportunity. [Testimony of Mr. Gill]

18 18. Mr. Gill created the Taxpayer to take advantage of this business opportunity.

19 [Testimony of Mr. Gill]

20 19. Mr. Gill went to the Department’s local office to fill out the paperwork to obtain a

21 tax number for the Taxpayer. [Testimony of Mr. Gill]

Potter Endustries, Inc. DBA American Car and Truck Care
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1 20. Mr. Gill told the Department’s employee that he was starting a new business

2 where the old business was, and that he was keeping the same name to save on expenses.

3 [Testimony of Mr. Gill]

4 21. The employee answered his questions about the form, was familiar with American

5 Care and Truck Care, did not think keeping the same name would be a problem, and did not

6 think that the Taxpayer needed to provide information on the form about the former owner.

7 [Testimony of Mr. Gill, and Exhibit #3]

8 22. The LLC and the Taxpayer did not enter into a formal purchase agreement for the

9 business. [Testimony of Mr. Gill]

10 23. The Taxpayer paid the LLC $3700.00 for the right to the LLC’s accounts

11 receivable. [Joint Prehearing Statement, and Testimony of Mr. Gill]

12 24. The building and equipment used in the Taxpayer’s business are located at 1606

13 E. 20th St. in Farmington, NM. [Testimony of Mr. Gill, and Exhibit #1].

14 25. The building and equipment used in the LLC’s business were located at 1606 E.

15 20th St. in Farmington, NM. [Testimony of Mr. Gill, and Exhibit A]

16 26. The building and equipment located at 1606 E. 20th St in Farmington, NM are

17 currently owned by Nygren Investments. [Testimony of Mr. Gill, and Exhibit #2]

18 27. The building and equipment used in the Taxpayer’s business are the same as the

19 building and equipment used in the LLC’s business. [Testimony of Mr. Gill]

20 28. The Taxpayer leased the building and equipment for the business from the

21 Furlong Corporation on February 1, 2017. [Testimony of Mr. Gill, and Exhibit #1]

22 29. The Taxpayer agreed to pay $7500.00 per month for the use of the business’s

23 building and equipment for two years. [Testimony of Mr. Gill, and Exhibit #1]

Potter Endustries, Inc. DBA American Car and Truck Care
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1 30. The value of the lease agreement based on the monthly payments required for two

2 years is $180,000.00. [Exhibit #1]

3 31. The building and equipment’s purpose was to run an automotive maintenance and

4 repair shop, and the building and equipment are only suitable for that type of business. [Exhibit

5 #2]

6 32. Wesley Brown’s wife is Julie Brown. Mrs. Brown is the daughter of Mr. Gill’s

7 lady friend, who lives with him. [Testimony of Mr. Gill]

8 33. Julie Brown is the only person listed as the president/director, secretary, treasurer,

9 and vice president for the Furlong Corporation. [Exhibit V]

10 34. The Furlong Corporation was created, ostensibly by Julie Brown, on January 18,

11 2017, approximately two weeks before it entered the lease with the Taxpayer and one day before

12 Mr. Gill created the Taxpayer. [Exhibit V, Exhibit #1, and Exhibit E]

13 35. Apparently, Furlong Corporation has the authority to control the building and

14 equipment because Nygren Investment’s representative told Mr. Gill that he would have to talk

15 to Furlong Corporation about a lease, and payments under the lease are all made to Furlong

16 Corporation. [Testimony of Mr. Gill and Exhibit #1]

17 36. Julie Brown was also the registered agent for the LLC. [Exhibit A]

18 37. Mr. Gill has a close personal relationship with the Browns, has known them for

19 several years, and the Browns previously used Mr. Gill’s home address for another business.

20 [Testimony of Mr. Gill, Exhibit Q, and Exhibit R]

21 38. In 2010, the Browns, through their family trust, purchased the building and

22 equipment at 1606 E. 20th St. in Farmington, New Mexico, a business known as American Car

23 and Truck Care. They bought the business from Nygren Investments. [Exhibit B]

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1 39. The purchase price was $800,000.00. [Exhibit B]

2 40. In 2016, they amended the sales contract for the business and amended the terms

3 of payment. [Exhibit D]

4 41. On February 1, 2017, the same date that the Taxpayer contracted the lease of the

5 business with the Furlong Corporation, the Browns filed a special warranty deed that granted the

6 business property back to Nygren Investments. [Exhibit C, and Exhibit #1]

7 42. The LLC ceased operating the business on January 31, 2017, and the Taxpayer

8 commenced operating the business on February 1, 2017. [Testimony of Mr. Gill]

9 43. After the Taxpayer commenced operations, Mr. Brown was still on site and met

10 with a federal revenue agent to deal with the LLC’s business issues regarding outstanding federal

11 tax. [Testimony of Mr. Gill]

12 44. Mr. Gill also spoke to the federal revenue agent and was told that purchasing the

13 LLC’s accounts receivable would not subject the Taxpayer to liability on the federal taxes.

14 [Testimony of Mr. Gill]

15 45. The Taxpayer kept the LLC’s business name and kept the LLC’s sign on the

16 building. As an employee of the Taxpayer, Wesley Brown is aware that the Taxpayer is using

17 the same name and sign. [Testimony of Mr. Gill]

18 46. The Taxpayer kept most of the LLC’s employees and hired Wesley Brown as

19 well. [Testimony of Mr. Gill, Exhibit L, and Exhibit M]

20 47. Mr. Gill is not involved in the day-to-day operations of the Taxpayer. Mr. Gill

21 identified one of the employees as the shop manager. [Testimony of Mr. Gill]

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1 48. Wesley Brown has been the highest paid employee of the Taxpayer for the two

2 years that it has been operating, even though Mr. Gill identified a different employee as the shop

3 manager. [Testimony of Mr. Gill, Testimony of Mr. Pacheco, Exhibit U]

4 49. The Taxpayer took over the LLC’s website, its phone number, and its email

5 address. The only change that the Taxpayer made to the website was to add its corporate name

6 and to drop “LLC” from the business’s name. [Testimony of Mr. Gill, Exhibit #7, and Exhibit I]

7 50. The LLC had a service contract with the State of New Mexico’s General Services

8 Department (GSD). [Testimony of Mr. Gill, Testimony of Nicholas Pacheco, Exhibit #6]

9 51. The Taxpayer honored and agreed to the terms of the LLC’s contract with GSD

10 from February 2017 until October 2018. [Testimony of Mr. Gill, and Exhibit #7]

11 52. After some paperwork issue, the Taxpayer informed GSD that it did not purchase

12 the LLC’s business, and GSD terminated the contract and advised that the Taxpayer would have

13 to bid for its own contract. [Testimony of Mr. Gill, and Exhibit #7]

14 53. The Taxpayer did not explore how much it would cost to develop a webpage or to

15 create a new name and contact points for its business. The Taxpayer kept the LLC’s information

16 to save money. [Testimony of Mr. Gill]

17 54. The Taxpayer did not explore how much the LLC’s goodwill was worth, but Mr.

18 Gill was aware that the LLC’s business name had recognition in the community. [Testimony of

19 Mr. Gill]

20 55. Mr. Gill estimates that the LLC’s goodwill was worth approximately $10,000.00

21 based on the Taxpayer’s sales since it took over the business. [Testimony of Mr. Gill]

22 DISCUSSION

23 Burden of Proof.

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1 Assessments by the Department are presumed to be correct. See NMSA 1978, § 7-1-17

2 (2007). Tax includes, by definition, the amount of tax principal imposed and, unless the context

3 otherwise requires, “the amount of any interest or civil penalty relating thereto.” NMSA 1978, §

4 7-1-3 (Y) (2017). See also El Centro Villa Nursing Ctr. v. Taxation and Revenue Department,

5 1989-NMCA-070, 108 N.M. 795. Therefore, the assessment issued to the Taxpayer is presumed

6 to be correct, and it is the Taxpayer’s burden to present evidence and legal argument to show that

7 it is entitled to an abatement.

8 The presumption.

9 The Taxpayer objected to the presumption of correctness. The Taxpayer argued that the

10 presumption is unconstitutional because it is fundamentally unfair to place the burden of proof

11 on the taxpayers. The Taxpayer argued that the Department should have to prove that taxpayers

12 are liable for the tax assessed. There is a strong presumption that statutes are constitutional. See

13 Ortiz v. Taxation and Revenue Dep’t, 1998-NMCA-027, ¶ 5, 124 N.M. 677. A challenge to a

14 statute’s constitutionality must be proven beyond a reasonable doubt. See City of Farmington v.

15 Fawcett, 1992-NMCA-075, 114 N.M. 537. See also City of Albuquerque ex rel. Albuquerque

16 Police Department v. One 1984 White Chevy, 2002-NMSC-014, ¶ 5.

17 Several cases clearly establish that the burden of proof is on the taxpayers due to the

18 presumption of correctness afforded by the statute. See El Centro Villa Nursing Ctr., 1989-

19 NMCA-070. See Archuleta v. O’Chesky, 1972-NMCA-165, 84 N.M. 428. See Tiffany

20 Construction Co. v. Bureau of Revenue, 1976-NMCA-127, 90 N.M. 16. See N.M. Taxation and

21 Revenue Dep’t v. Casias Trucking, 2014-NMCA-099. See MPC Ltd. v. N.M. Taxation and

22 Revenue Dep’t, 2003-NMCA-021, 133 N.M. 217. See also Chevron U.S.A., Inc. v. State ex rel.

23 Dep’t of Taxation and Revenue, 2006-NMSC-050, ¶ 23, 139 N.M. 498 (rejecting the taxpayer’s

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1 argument that the Department must prove that the value assessed was commensurate with the

2 actual price of similar products because there is a presumption that the assessment is correct and

3 the burden is on the taxpayer). The Taxpayer failed to establish beyond a reasonable doubt that

4 Section 7-1-17 is unconstitutional.

5 Successor in Business Liability.

6 A successor in business is required to pay the tax for which the acquired business was

7 liable. See NMSA 1978, § 7-1-61 (C) (2017). See also NMSA 1978, § 7-1-63 (1997).

8 Moreover, “tangible and intangible property used in any business remains subject to liability for

9 payment of the tax due” even when the business is transferred to a new owner. NMSA 1978, §

10 7-1-61 (B). A successor in business is charged with certain responsibilities in discerning what

11 tax is owed when the business or its assets are acquired. See NMSA 1978, § 7-1-61 (requiring

12 the successor to set aside an amount in trust for payment of tax) and § 7-1-62 (1997) (allowing

13 the successor to apply for a certificate from the Department).

14 Determination of a successor.

15 A successor in business is “any transferee of a business or property of a business, except

16 to the extent it would be materially inconsistent with the rights of secured creditors”. 3.1.10.16

17 (F) (2) NMAC (2001). There are also several factors to be used in determining a successor in

18 business. See 3.1.10.16 (A) NMAC. The first factor in determining whether there is a successor

19 in business is whether there was “a sale and purchase of a major part of the materials, supplies,

20 equipment, merchandise or other inventory…in a single or limited number of transactions”.

21 3.1.10.16 (A) (1) NMAC. The second factor is whether the transfer was not in the ordinary

22 course of the transferor’s business. See 3.1.10.16 (A) (2) NMAC. The third factor is whether “a

23 substantial part of both equipment and inventories” was transferred. 3.1.10.16 (A) (3) NMAC.

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1 The fourth factor is whether a substantial portion of the business conducted by the transferor

2 continued to be conducted by the transferee. See 3.1.10.16 (A) (4) NMAC. The fifth factor is

3 whether “the transferor’s goodwill follow[ed] the transfer of the business properties”. 3.1.10.16

4 (A) (5) NMAC. The sixth factor is whether the sales, service, or lease contracts of the transferor

5 were honored by the transferee. See 3.1.10.16 (A) (6) NMAC. The seventh factor is whether

6 unpaid debts of the transferor were paid by the transferee. See 3.1.10.16 (A) (7) NMAC. The

7 final factor is whether there was an agreement precluding competition. See 3.1.10.16 (A) (8)

8 NMAC. If a single one of these factors are present, there is a presumption that there is a

9 successor in business. See 3.1.10.16 (B) NMAC.

10 The regulation.

11 The Taxpayer objected to Regulation 3.1.10.16. The Taxpayer argued that the regulation

12 is unconstitutional because it requires only one factor to be present to presume that a business is

13 a successor. The Taxpayer argues that the regulation violates due process, is unfair, is

14 unjustifiably in favor the Department, outrageous, and without any rational basis. See

15 Taxpayer’s Prehearing Statement.

16 The Department has the authority to issue regulations to interpret and exemplify the

17 statutes. See NMSA 1978, § 9-11-6.2 (2015). Any regulation issued “is presumed to be a proper

18 implementation of the provisions of the law”. NMSA 1978, § 9-11.6.2 (G). See also Hammack

19 v. N.M. Taxation and Revenue Dep’t, 2017-NMCA-086, ¶ 16 (noting that the purpose of the

20 Department’s regulations is to interpret, exemplify, implement and enforce the tax statutes). The

21 same legal principles apply to determining if a regulation is unconstitutional as apply to

22 determining if a statute is unconstitutional. See Old Abe Co. v. N.M. Mining Comm’n, 1995-

23 NMCA-134, ¶ 25, 121 N.M. 83. A regulation is unconstitutional if it is so vague that one has to

Potter Endustries, Inc. DBA American Car and Truck Care
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1 guess at its meaning and its application would differ. See id. See also City of Albuquerque v.

2 Sanchez, 1992-NMCA-038, ¶ 21, 113 N.M. 721. The regulation is considered in determining if

3 a taxpayer is a successor in business. See Hi-Country Buick GMC, Inc. v. Taxation and Revenue

4 Dep’t of N.M., 2016-NMCA-027, ¶ 12-18.

5 The regulation details a number of factors that can be used to determine if a taxpayer is a

6 successor. See 3.1.10.16 NMAC. It also defines terms used in the statute. See id. See NMSA

7 1978, § 7-1-61. The regulation is rationally related to the statute. The regulation also appears to

8 interpret and exemplify the statute. Therefore, the regulation is a proper implementation of the

9 statute. The regulation is also not so vague that its meaning must be guessed, and its application

10 does not differ. Therefore, the Taxpayer failed to prove that the regulation is unconstitutional.

11 Due process requires an opportunity to be heard in a meaningful time and meaningful

12 manner. See Mathews v. Eldridge, 424 U.S. 319, 47 L.Ed.2d 18 (1976). See also State ex rel.

13 Battershell v. City of Albuquerque, 108 N.M. 658, 777 P.2d 386 (Ct. App. 1989) (holding that in an

14 administrative hearing due process is flexible and should conform to the demands of a particular

15 situation). The essence of due process is the right to be heard at a meaningful time and in a

16 meaningful manner. See Dente v. State, 1997-NMCA-099, 124 N.M. 93, overruled in part on other

17 grounds by State v. Bargas, 2000-NMCA-103, 129 NM 800. The Taxpayer has the opportunity

18 through the hearing process to rebut any presumptions of the statute and of the regulation. See

19 NMSA 1978, § 7-1-24 (2017). Therefore, the Taxpayer’s right to due process is satisfied.

20 Transfer of the business and its property.

21 The Taxpayer argued that it leased the property of the business from a disinterested third

22 party. The Taxpayer argued that no property was transferred from the LLC to the Taxpayer, so the

23 Taxpayer was not liable as a successor. Again, all “tangible and intangible property used in any

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1 business remains subject to liability for payment of the tax due on account of that business…even

2 though the business changes hands.” NMSA 1978, § 7-1-61 (A) (emphasis added). The term

3 “used in any business” means any tangible and intangible property “reasonably necessary for the

4 business’s continued operations, whether or not the property is actually owned by the business.”

5 See 3.1.10.16 (F) (4) (emphasis added). Moreover, the statute imposes liability when the business

6 is transferred, whether or not there is any tangible property. See NMSA 1978, § 7-1-61 and § 7-1-

7 63. Purchasing tangible assets, assuming a lease, keeping one part-time employee, and assuming

8 a note are sufficient to establish one as a successor in business, even when the prior business was

9 defunct. See Sterling Title Co. of Taos v. Comm’r of Revenue, 1973-NMCA-086, ¶ 9-11, 85

10 N.M. 279. A taxpayer may also be liable as a successor when it accepts a transfer from a third

11 party who took over the predecessor business. See Hi-Country Buick GMC, Inc., 2016-NMCA-

12 027, ¶ 16-17 (nothing that the crucial inquiry is whether the party who took over the business

13 and its property intended to retain and operate the business).

14 It was undisputed that the building and equipment used in the Taxpayer’s business are the

15 same building and equipment used in the LLC’s business. In fact, the building and equipment’s

16 sole purpose is to be used in an automotive maintenance and repair business. See Exhibit #2. The

17 Browns transferred ownership of the building and equipment to Nygren Investments on the same

18 day that Julie Brown, through Furlong Corporation, leased the business to the Taxpayer. See

19 Exhibit #1, and Exhibit C. The Taxpayer approached Nygren Investments about the building and

20 equipment, and it was informed that it would have to deal with Furlong Corporation about the

21 business. Even if the building and equipment are currently owned by Nygren Investments, it is

22 apparent that the Furlong Corporation has control of the building and equipment. The Taxpayer’s

23 lease was with the Furlong Corporation, an entity that is apparently entirely controlled by Julie

Potter Endustries, Inc. DBA American Car and Truck Care
Letter ID No. L0596711728
page 12 of 25
1 Brown. See Exhibit V. Julie Brown was also the registered agent of the LLC and is married to the

2 LLC’s owner. See Exhibit A. Therefore, the building and equipment used in the business were

3 leased to the Taxpayer by the same person or persons who controlled the LLC. The building and

4 equipment used in the LLC’s business were transferred to the Taxpayer by lease.

5 Although there was a lease rather than a purchase, there was clearly a transfer when the

6 right to use the building and equipment were granted to the Taxpayer in the lease by a

7 corporation that was entirely controlled by a person who was also the registered agent of the

8 LLC. See Black’s Law Dictionary, page 1636 (9th ed. 2009) (defining a transfer as any method,

9 direct or indirect, of disposing of or parting with property or parting with an interest in property).

10 See also 3.1.10.16 (F) (3) (defining transfer as every method, direct or indirect, conditional or

11 absolute, and voluntary or involuntary of disposing of or parting with the property of a business).

12 See also Williams v. Farrand, 88 Mich. 473 at 487, 50 N.W. 446 (Sup. Ct. Mich.) (November

13 20, 1891) (noting that the goodwill of a business may include the advantage of the location,

14 which can be obtained by lease). See also Burckhardt v. Burckhardt, 42 Ohio St. 474 at 501

15 (Sup. Ct. Ohio) (January 1885) (noting that leasing the furniture and property of a business for a

16 fixed term may be more valuable than if it were sold piecemeal because goodwill is enhanced

17 when everything is kept together to carry on the same business at the same place of business

18 where customers were used to finding it). See also Detroit Hilton Ltd. Partnership v. Dep’t of

19 Treasury, Revenue Div., 422 Mich. 422, 373 N.W.2d 586 (Sup. Ct. Mich.) (September 5, 1985)

20 (holding that a company that leased its building and operating assets from the corporation that

21 owned and previously operated the hotel was a successor in business and that the predecessor

22 hotel was not liable for its successor’s taxes).

Potter Endustries, Inc. DBA American Car and Truck Care
Letter ID No. L0596711728
page 13 of 25
1 The Taxpayer’s argument that it did not purchase or acquire any property from the LLC

2 is without merit. Mr. Gill testified several times that no money or property of any kind was

3 exchanged between the Taxpayer and the LLC. However, his testimony changed when asked to

4 explain the statement previously made in the Joint Prehearing Statement that said the Taxpayer

5 paid $3700 to the LLC for its accounts receivable. Mr. Gill then admitted that the Taxpayer paid

6 $3700 to the LLC for its accounts receivable, but he attempted to discount the worth of the

7 accounts receivable by explaining that the Taxpayer has never collected on those accounts. Mr.

8 Gill also eventually admitted that the Taxpayer took over the LLC’s website and only changed

9 the name on it so that the Taxpayer’s name was added and the “LLC” was dropped from

10 American Car and Truck Care. This testimony demonstrates that the Taxpayer also kept using

11 the phone number and email address that the LLC had used in its business, since that information

12 was also included on the website. See Exhibit I, and Exhibit #7. The term “business changes

13 hands” is meant to be a broad, all-inclusive expression and is used in the statute for the purpose

14 of maintaining the personalty as security for the payment of tax. See Sterling Title, 1973-

15 NMCA-086, ¶ 25. Based upon the totality of the circumstances, the LLC’s business was

16 transferred to the Taxpayer.

17 The Taxpayer is a successor.

18 The first factor in determining whether there is a successor in business is whether there

19 was “a sale and purchase of a major part of the materials, supplies, equipment, merchandise or

20 inventory…in a single or limited number of transactions”. 3.1.10.16 (A) (1) NMAC. The

21 Taxpayer leased all of the physical property of the LLC’s business from a corporation controlled

22 by the LLC’s registered agent. The Taxpayer also purchased the LLC’s accounts receivable and

23 took over its website, phone number, and email address. The Taxpayer has also used the same

Potter Endustries, Inc. DBA American Car and Truck Care
Letter ID No. L0596711728
page 14 of 25
1 name and same sign as the LLC used. This factor weighs in favor of finding that the Taxpayer is

2 a successor in business.

3 The second factor is whether the transfer was not in the ordinary course of the

4 transferor’s business. See 3.1.10.16 (A) (2) NMAC. The LLC was not in the business of

5 transferring its business and property, so the transfer was not done in the ordinary course of

6 business. This factor weighs in favor of finding that the Taxpayer is a successor in business.

7 The third factor is whether “a substantial part of both equipment and inventories” was

8 transferred. 3.1.10.16 (A) (3) NMAC. All of the equipment used in the LLC’s business was

9 leased to the Taxpayer by the same person or persons who controlled the LLC. See also

10 3.1.10.16 (F) (4) (noting that the ownership of the equipment used in the business does not matter).

11 This factor weighs in favor of finding that the Taxpayer is a successor in business.

12 The fourth factor is whether a substantial portion of the business conducted by the

13 transferor continued to be conducted by the transferee. See 3.1.10.16 (A) (4) NMAC. The

14 Taxpayer’s business is exactly the same as the LLC’s was, automotive maintenance and repair.

15 The business also continued uninterrupted because the Taxpayer commenced its operations on

16 the date after the LLC ostensibly ceased its operations. This factor weighs in favor of finding

17 that the Taxpayer is a successor in business.

18 The fifth factor is whether “the transferor’s goodwill follow[ed] the transfer of the

19 business properties”. 3.1.10.16 (A) (5) NMAC. The Taxpayer is operating from the exact same

20 location as the LLC was. The Taxpayer is using the exact same equipment that the LLC used.

21 The Taxpayer is engaged in the exact same business that the LLC was. The Taxpayer continues

22 to employ many of the same employees as the LLC employed. The owner of the LLC is

23 employed by the Taxpayer. After a conversation with a revenue agent while obtaining the

Potter Endustries, Inc. DBA American Car and Truck Care
Letter ID No. L0596711728
page 15 of 25
1 Taxpayer’s tax number, Mr. Gill knew that the LLC’s business name was well-recognized in the

2 community, and the Taxpayer continues to use the LLC’s business name. Consequently, the

3 LLC’s goodwill transferred to the Taxpayer.

4 The sixth factor is whether the business obligations of the transferor were honored by the

5 transferee. See 3.1.10.16 (A) (6) NMAC. The Taxpayer honored the LLC’s contract with GSD

6 from February 2017 until October 2018. This factor weighs in favor of finding that the Taxpayer

7 is a successor in business.

8 The seventh factor is whether unpaid debts of the transferor were paid by the transferee.

9 See 3.1.10.16 (A) (7) NMAC. There was no evidence that the Taxpayer assumed or paid any

10 unpaid debts of the LLC. This factor weighs in favor of finding that the Taxpayer is not a

11 successor in business.

12 The final factor is whether there was an agreement precluding competition. See 3.1.10.16

13 (A) (8) NMAC. There was no evidence of such an agreement between the Taxpayer and the

14 LLC. This factor weighs in favor of finding that the Taxpayer is not a successor.

15 When a business is transferred, or when any of the property used in the business is

16 transferred, the recipient is a successor in business. See NMSA 1978, § 7-1-61 and § 7-1-63.

17 See also 3.1.10.16 NMAC. See also Sterling Title, 1973-NMCA-086. See also Hi-Country

18 Buick GMC, Inc., 2016-NMCA-027. The Taxpayer acquired the right to all of the property,

19 tangible and intangible, used in the LLC’s business. The right to use all of the tangible and

20 intangible property was transferred to the Taxpayer by Furlong Corporation, which is controlled

21 by the same person or persons who controlled the LLC. The Taxpayer continues to operate the

22 same business, in the same location, with many of the same employees. Therefore, the Taxpayer

23 is a successor in business to the LLC.

Potter Endustries, Inc. DBA American Car and Truck Care
Letter ID No. L0596711728
page 16 of 25
1 Extent of liability.

2 “A successor may discharge an assessment made pursuant to this section by paying to the

3 department the full value of the transferred tangible and intangible property.” NMSA 1978, § 7-

4 1-63 (C). The successor may be liable for the full amount of the assessment if the transfer was

5 done to avoid tax, if the transfer amounted “to a de facto merger, consolidation, or mere

6 continuation of the transferor’s business”, or if the successor agreed to assume the liability. Id.

7 The Department argued that the Taxpayer’s business is merely a continuation of the LLC. The

8 Department argued that the owner of the LLC is the highest-paid employee of the Taxpayer. The

9 Department inferred that the former owner of the business is still in charge of the business.

10 A successor in business might be a “mere continuation” of the previous business if they

11 share the same directors, officers, or shareholders. See Garcia v. Coe Mfg.Co., 1997-NMSC-

12 013, ¶ 12-14, 123 N.M. 34 (indicating that a common identity of directors and shareholders as

13 well as a substantial continuity in the business done before and after the assets were acquired is a

14 continuation of the original business). See also Pankey v. Hot Springs Nat’l Bank, 1941-NMSC-

15 060, ¶ 13, 46 N.M. 10. A continuity of management and ownership is a strong indicator that a

16 successor is a “mere continuation” of the previous business. See Garcia, 1997-NMSC-013, ¶ 12-

17 14. Although there are certainly suspicious connections between the LLC and the Taxpayer,

18 there is not sufficient evidence that there is a continuity of management and ownership between

19 the Taxpayer and the LLC. Therefore, the Taxpayer is not a mere continuation of the LLC.

20 The Taxpayer argued that the business was not transferred to evade or defeat the tax. The

21 Taxpayer argued that it was unaware of the LLC’s tax problems. The Taxpayer argued that it

22 was unaware of the potential liability it would face as a successor in business to the LLC and that

23 no one would agree to the scheme that the Department had inferred from the circumstances. Mr.

Potter Endustries, Inc. DBA American Car and Truck Care
Letter ID No. L0596711728
page 17 of 25
1 Gill initially testified that he was not aware of the LLC’s tax liability, that his friend did not tell

2 him about it, and that if he had known he would not have leased and taken over the business.

3 Mr. Gill also initially testified that Mr. Brown was not working for the Taxpayer or involved in

4 the business for some time after the Taxpayer began doing business because Mr. Brown had

5 taken a job in Albuquerque after the LLC went out of business. This testimony is not credible.

6 Mr. Gill later admitted that Mr. Brown was still working on things at the business a few days

7 after the Taxpayer commenced its operations. Mr. Gill also admitted that he knew Mr. Brown

8 was meeting with a federal revenue agent at the business a few days after the Taxpayer

9 commenced its operations, but again denied any knowledge of the details of the LLC’s tax

10 problems. However, Mr. Gill eventually admitted that he had also spoken to the federal revenue

11 agent to confirm that the accounts receivable would not subject the Taxpayer to the LLC’s

12 federal tax liability. Based upon the totality of the evidence, Mr. Gill was aware that the LLC

13 had tax problems, was aware that the Taxpayer had the potential to be liable for the LLC’s taxes,

14 and was actively trying to ensure that the Taxpayer would not have to pay the LLC’s tax

15 obligations. The Taxpayer’s creation and lease also correspond closely in time to the creation of

16 Furlong Corporation. Given this evidence as well as the close personal relationship between Mr.

17 Gill and the Browns, it is reasonable to conclude that the business was transferred in an attempt

18 to evade or defeat the tax. Consequently, the Taxpayer is liable for the full amount of the

19 assessment.

20 The Taxpayer also argued that there was nothing of value transferred. The Taxpayer

21 argued that if there was any value transferred, it was only for the goodwill. The Taxpayer argued

22 that Mr. Gill’s guess that the goodwill’s value was a maximum of $10,000 should control and

23 argued that its liability should be limited to that amount. The Taxpayer’s argument relies largely

Potter Endustries, Inc. DBA American Car and Truck Care
Letter ID No. L0596711728
page 18 of 25
1 upon the testimony that no money or property of any kind was exchanged between the Taxpayer

2 and the LLC. However, as previously discussed, that testimony is not credible. The Taxpayer

3 paid for the accounts receivable, kept the name, kept the sign, and took over the website. The

4 Taxpayer did not explore the costs of creating its own website, but Mr. Gill supposed that the

5 cost would be substantial. Moreover, Mr. Gill’s guess is not sufficient evidence of the value of

6 the goodwill transferred. Even if the Taxpayer’s liability should be limited to the value of the

7 property transferred, the Taxpayer failed to overcome the presumption of correctness as it failed

8 to provide substantial evidence that the value transferred was less than the amount assessed. See

9 NMSA 1978, § 7-1-17.

10 Estoppel.

11 The Taxpayer argued that the Department should be estopped from treating it as a

12 successor in business because Mr. Gill spoke to the Department’s employee at the local office

13 when he obtained a tax number for the Taxpayer. The Taxpayer argued that the Department’s

14 employee did not notify the Taxpayer of any potential successor liability and did not recommend

15 that the Taxpayer seek a tax clearance. The Taxpayer argued that the Department’s employee

16 said that the form did not need to include information about the former owner.

17 Equitable estoppel may be found against the state where there is “a shocking degree of

18 aggravated and overreaching conduct or where right and justice demand it." Wisznia v. State,

19 Human Servs. Dep't, 1998-NMSC-011, ¶ 17, 125 N.M. 140. Equitable estoppel against the state

20 is disfavored, especially in cases involving taxes. See Taxation and Revenue Dep’t v. Bien Mur

21 Indian Market, 1989-NMSC-015, ¶9-10, 108 N.M. 228. Equitable estoppel will not apply

22 against the state when it would be contrary to the requirements of statute or law. See Rainaldi v.

Potter Endustries, Inc. DBA American Car and Truck Care
Letter ID No. L0596711728
page 19 of 25
1 Pub. Employees Ret. Bd., 1993-NMSC-028, ¶ 18-19, 115 N.M. 650. See also In re Kilmer,

2 2004-NMCA-122, ¶ 26, 136 N.M. 440.

3 The Department’s employee was merely assisting Mr. Gill in filling out a form and was

4 only aware of what Mr. Gill was telling her, essentially that the business did not have a former

5 owner because he was starting a new business. If the Taxpayer was misled by the conversation,

6 the error occurred because the Taxpayer was not providing full and accurate information, not

7 because the Department was engaged in aggravated and overreaching conduct.

8 The Taxpayer also argued that the Department should be estopped because another state

9 agency, the GSD, has already determined that the Taxpayer is not a successor in business to the

10 LLC. The Taxpayer argued that when GSD terminated the LLC’s contract, which the Taxpayer

11 operated under for over a year, it served as a determination of the Taxpayer’s status. For more

12 than a year, GSD treated the Taxpayer as a successor to the LLC. Only after the Taxpayer

13 asserted that it had not purchased the LLC or its assets did GSD cancel the contract. See Exhibit

14 #7. Again, even if GSD previously determined that the Taxpayer was not a successor who could

15 take over the contract, it was only because of the erroneous information that the Taxpayer

16 provided. As previously discussed, the Taxpayer’s assertion was not true as it did purchase

17 assets from the LLC, such as the accounts receivable. Therefore, the state did not engage in

18 aggravated or overreaching conduct. However, the issue of equitable estoppel is moot in the

19 context of this protest because the Administrative Hearings Office has not been granted statutory

20 authority to exercise an equitable judicial remedy. See AA Oilfield Serv. v. N.M. State Corp.

21 Comm’n, 1994-NMSC-085, ¶ 18, 118 N.M. 273 (holding that the quasi-judicial powers of an

22 administrative body did not empower it to grant equitable relief, such as estoppel, because the

23 authority is limited to making factual and legal determinations as authorized by the statute). See

Potter Endustries, Inc. DBA American Car and Truck Care
Letter ID No. L0596711728
page 20 of 25
1 Gzaskow v. Pub. Employees Ret. Bd., 2017-NMCA-064, ¶35 (recognizing AA Oilfield Serv. for

2 the proposition that an agency with quasi-judicial powers did not have authority to grant an

3 equitable remedy). See also NMSA 1978, § 7-1B-1, et seq.

4 Jurisdiction.

5 The Taxpayer argued that there was not jurisdiction to decide the protest because the

6 Department did not provide the Taxpayer with the assessments that were made to the LLC,

7 despite the Taxpayer’s repeated requests for them. The Taxpayer argued that the Department

8 failed to prove that the LLC was assessed within the statute of limitations, which divested

9 jurisdiction for the protest and the assessment against any successors in business.

10 The Administrative Hearings Office has jurisdiction to hear all protests against actions

11 taken under the Tax Administration Act. See NMSA 1978, § 7-1B-6. The Taxpayer’s protest

12 was taken against an assessment under the Tax Administration Act. See NMSA 1978, § 7-1-63

13 and § 7-1-24. “If, after any business is transferred to a successor, any tax from the operating the

14 business for which the former owner is liable remains due, the successor shall pay the amount

15 due within thirty days.” NMSA 1978, § 7-1-63 (A) (emphasis added). A successor is liable for

16 any amount of tax still owed, and there is no requirement that the predecessor business be

17 assessed. See id.

18 In this case, the Department provided sufficient evidence to show that the LLC was

19 assessed and did not protest the assessment. See Exhibit T. The LLC admitted its liability when

20 it agreed to a payment plan. See Exhibit T. The Taxpayer has no standing to protest the

21 assessment made to the LLC. See NMSA, 1978, § 7-1-24 (E) (when an assessment is not timely

22 protested, the assessment is final and the Department may take collection action). See also Hi-

23 Buick Country GMC, Inc., 2016-NMCA-027, ¶ 11 (holding that the assessment to the successor

Potter Endustries, Inc. DBA American Car and Truck Care
Letter ID No. L0596711728
page 21 of 25
1 was sufficient to give proper notice of the nature and amount of tax liability as a successor in

2 business). The Taxpayer became a successor in February 2017, and the Taxpayer was assessed

3 in March 2017. Therefore, the assessment to the Taxpayer was made within the statute of

4 limitations. See NMSA 1978, § NMSA 1978, § 7-1-18 (generally requiring assessments to be

5 within three years of the year in which the tax became due). See NMSA 1978, § 7-1-63

6 (requiring successors to pay tax due within 30 days of the transfer of the business). The lack of

7 copies of the assessments to the LLC does not divest jurisdiction to the Taxpayer’s protest.

8 Cruel and unusual punishment.

9 The Taxpayer argued that the assessment is tantamount to cruel and unusual punishment

10 under the federal and state constitutions. The Taxpayer argued that the amount due in the

11 assessment, because it is more than $500,000, is out of proportion to the Taxpayer’s conduct and

12 is so excessive that it will effectively ruin Mr. Gill’s life and force the Taxpayer out of business

13 and into bankruptcy.

14 “Excessive bail shall not be required, nor excessive fines imposed, nor cruel and unusual

15 punishments inflicted.” U.S. Const. amend VIII. See also N.M. Const. Art. II, § 13. Generally,

16 taxes are not considered to be penalties. See State ex rel. Foy v. Austin Capital Mgmt., 2013-

17 NMCA-043, ¶ 13 (noting the holding of a federal case). Most of the cases dealing with whether

18 a tax should be treated as a punishment or not deal with double jeopardy issues rather than cruel

19 and unusual punishment or excessive fines. See State v. Kirby, 2003-NMCA-074, 133 N.M. 782.

20 See N.M. Taxation and Revenue Dep’t v. Whitener, 1993-NMCA-161, 117 N.M. 130. See State

21 ex rel. Schwartz v. Kennedy, 1995-NMSC-069, 120 N.M. 619. However, the cases are

22 instructive in this issue. Just because the taxpayer perceives the tax as a punishment does not

23 render the tax to be a punishment. See Schwartz, 1995-NMSC-069, ¶ 32. See Kirby, 2003-

Potter Endustries, Inc. DBA American Car and Truck Care
Letter ID No. L0596711728
page 22 of 25
1 NMCA-074, ¶22. See also City of Albuquerque ex rel. Albuquerque Police Dep’t, 2002-NMSC-

2 014, ¶ 11. A high tax is not necessarily a punishment. See Schwartz, 1995-NMSC-069, ¶ 39.

3 The critical inquiry is the legislative purpose of the statute imposing the tax, whether it is meant

4 to be a punishment or if it is meant to raise revenue. See Schwartz, 1995-NMSC-069, ¶ 27 and

5 38. See Kirby, 2003-NMCA-074, ¶ 37. See Whitener, 1993-NMCA-161, ¶ 20. The purpose of

6 the successor in business statute is to ensure that a business’s unpaid taxes are paid and cannot be

7 avoided by transferring the business to another party. See NMSA 1978, §§ 7-1-61 thru 7-1-63.

8 See also Sterling Title, 1973-NMCA-086, ¶ 25. It is not meant to be punitive and does not

9 violate the constitutional principles against excessive fines or cruel and unusual punishment.

10 CONCLUSIONS OF LAW

11 A. The Taxpayer filed a timely written protest to the assessment issued under Letter ID

12 number 0596711728, and jurisdiction lies over the parties and the subject matter of this protest. See

13 NMSA, § 7-1B-6.

14 B. The first hearing was timely set and held within 90 days of protest. See NMSA

15 1978, § 7-1B-8 (2015). See 22.600.3.8 NMAC (2018).

16 C. The Taxpayer is a successor in business to the LLC. See NMSA 1978, §§ 7-1-61

17 thru 7-1-63. See 3.1.10.16 NMAC. See Sterling Title, 1973-NMCA-086. See also Hi-Country

18 Buick GMC, Inc., 2016-NMCA-027.

19 D. The business was transferred to evade or defeat the tax, and the Taxpayer is liable

20 for the full amount of the assessment. See NMSA 1978, § 7-1-63 (C).

21 E. The Taxpayer failed to overcome the presumption that the assessment of tax was

22 correct. See NMSA 1978, § 7-1-17, and § 7-1-63.

Potter Endustries, Inc. DBA American Car and Truck Care
Letter ID No. L0596711728
page 23 of 25
1 F. The Department was not estopped from assessing the Taxpayer as a successor in

2 business. See Wisznia, 1998-NMSC-011. See Bien Mur Indian Market, 1989-NMSC-015. See

3 Rainaldi, 1993-NMSC-028. See also In re Kilmer, 2004-NMCA-122, ¶ 26, 136 N.M. 440.

4 G. The Taxpayer did not have standing to protest the assessments made the LLC as

5 they were already final. See NMSA 1978, § 7-1-24. See Exhibit T.

6 H. The assessment against the Taxpayer does not constitute cruel and unusual

7 punishment. See State ex rel. Foy v. Austin Capital Mgmt., 2013-NMCA-043. See Kirby, 2003-

8 NMCA-074. See Whitener, 1993-NMCA-161{check cite}. See Schwartz, 1995-NMSC-069.

9 For the foregoing reasons, the Taxpayer’s protest IS DENIED. IT IS ORDERED that

10 Taxpayer is liable for, as of the date of the hearing, a total outstanding liability for tax, penalty,

11 and interest of $599,551.86. See Exhibit W.

12 DATED: July 17, 2019.

13 Dee Dee Hoxie
14 Dee Dee Hoxie
15 Hearing Officer
16 Administrative Hearings Office
17 P.O. Box 6400
18 Santa Fe, NM 87502

19 NOTICE OF RIGHT TO APPEAL

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

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

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

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

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

Potter Endustries, Inc. DBA American Car and Truck Care
Letter ID No. L0596711728
page 24 of 25
1 Either party filing an appeal shall file a courtesy copy of the appeal with the Administrative

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

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

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

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

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

7 CERTIFICATE OF SERVICE

8 On July 17, 2019, a copy of the foregoing Decision and Order was submitted to the parties

9 listed below in the following manner:

10 First Class Mail Interdepartmental Mail

11 INTENTIONALLY BLANK
12
13 John Griego
14 Legal Assistant
15 Administrative Hearings Office
16 P.O. Box 6400
17 Santa Fe, NM 87502

Potter Endustries, Inc. DBA American Car and Truck Care
Letter ID No. L0596711728
page 25 of 25