Can a customary one-way hauler claim New Mexico's reduced weight distance tax rate when its logs show total trip miles but not separate empty and loaded miles?

Plain-English summary

Star Paving did not qualify for New Mexico's reduced one-way-hauler weight distance tax rate because its records did not separately show empty and loaded miles. The Administrative Hearings Office upheld the Department's denial of the company's refund claim.

Star Paving hauled materials, paved roads and parking lots, performed earthwork and demolition, and operated heavy trucks weighing more than 26,000 pounds. Its normal pattern was to drive empty from its yard to a supplier, carry material to a job site, and then return empty either to the supplier or the yard.

New Mexico's one-way-hauler provision reduced the ordinary weight distance tax to two-thirds of the full rate when three conditions were met. Among them, at least 45% of the vehicle's annual mileage had to be traveled “empty of all load,” and the operator had to provide the information the Department required to confirm eligibility.

Total mileage did not prove the empty-mile percentage

Star Paving's driver time cards included the vehicle, driver, starting and ending odometer readings, supplier, and job site. Its fuel logs also carried odometer readings. But none of those records separated the miles driven empty from the miles driven loaded.

Regulation 3.12.6.11 NMAC required vehicle-specific records reflecting total empty miles and total loaded miles, along with trip origins, destinations, and routes. The decision rejected Star Paving's argument that the word “and” meant the two categories could be combined into one total. Separate totals were necessary to test whether the statutory 45% empty-mile threshold had actually been met.

The Department had audited Star Paving's weight distance tax reporting in 2010 and explained that empty and loaded miles needed separate records. The auditor suggested adding odometer columns at the points where a truck was loaded and unloaded. During the later audit, however, the company still had only beginning-and-ending trip readings and did not reconstruct the separate mileage from route distances.

The Department sought alternatives, but the missing fact remained missing

Star Paving argued that Regulation 3.1.5.8 required the Department to use an alternative calculation when a taxpayer's books were inadequate. The Department first reviewed spreadsheets, then requested source material, fuel logs, driver logs, and time sheets. None identified which miles were empty.

The decision treated the two-thirds one-way-haul rate as comparable to a deduction or exemption from the full rate. Star Paving therefore had to clearly establish its eligibility. Even if the Department had a duty to seek another method, its requests for additional records satisfied that duty; the Department was not required to create the missing empty-mile calculation on the taxpayer's behalf.

Payment followed by a refund claim did not shift the burden

The July 2018 assessment covered reporting periods from March 31, 2012 through June 30, 2017 and totaled $23,155.27: $17,382.09 of tax, $3,578.41 of penalty, and $2,194.77 of interest. Star Paving paid it to stop further penalty and interest, then applied for a refund.

The assessment and its penalty and interest were presumed correct under Sections 7-1-17(C) and 7-1-3(Y). At the hearing, Star Paving offered no exhibits, summaries, maps, or later calculations separating loaded and empty miles. It therefore did not prove either factual entitlement to the reduced rate or legal error in the Department's denial.

Result: protest DENIED. The refund denial was proper, and no refund was due.

What this means for you

Record empty and loaded miles separately by vehicle

A one-way business model alone does not establish the reduced rate. Logs must show the miles each truck traveled completely empty and the miles it traveled loaded.

Capture odometer readings at loading changes

Beginning and ending daily readings show total mileage, but they do not identify where the truck became loaded or empty. Record the odometer or another accurate mileage measure at the supplier, delivery point, and other load-status changes.

Preserve trip origins, destinations, and routes

Vehicle-specific logbooks, accurate map mileage, or hubometer and odometer readings can support the calculation, but the records must allow the empty and loaded portions to be verified.

Do not expect the auditor to reconstruct a reduced rate

The Department may use alternative methods to determine tax when records are inadequate. That does not transfer the taxpayer's burden to prove eligibility for a favorable reduced rate.

Common questions

Q: Was Star Paving actually a one-way-hauling business?
A: Yes. The Department acknowledged that its vehicles were customarily used for one-way hauls. The company still had to prove that at least 45% of the relevant annual mileage was traveled empty of all load.

Q: Why weren't starting and ending odometer readings enough?
A: They established total trip miles but did not show which portion was empty and which was loaded. The reduced rate depended on that distinction.

Q: What records did the rule allow?
A: Regulation 3.12.6.11 listed accurate map mileage for each trip, hubometer or odometer readings, or vehicle-specific logbooks, plus itineraries with origins, destinations, and routes. Whatever format is used must separately support empty and loaded mileage.

Q: Did the Department have to estimate the empty miles itself?
A: No. The Department requested additional source records, fuel logs, driver logs, and time sheets. Because none supplied the missing load-status mileage, the decision held that Star Paving had not proved the reduced-rate claim.

Q: How much refund did Star Paving seek?
A: It challenged a paid assessment of $23,155.27, consisting of $17,382.09 of tax, $3,578.41 of penalty, and $2,194.77 of interest. The order held that no refund was due.

Citations and references

Statutes and regulations:

• NMSA 1978, §§ 7-15A-3 and 7-15A-6(A)-(B) — weight distance tax and the two-thirds one-way-haul rate
• NMSA 1978, §§ 7-15A-8(A) and 7-15A-9(D) — mileage tax base and four-year record retention
• NMSA 1978, §§ 7-1-10, 7-1-17(C), and 7-1-3(Y) — taxpayer records and the assessment presumption
• Regulations 3.12.6.7 through 3.12.6.11 NMAC — empty-mile definition, qualification, disqualification, and required one-way-hauler records
• Regulations 3.1.5.8 and 3.1.6.13 NMAC — record sufficiency, alternative methods, and assessment proof

Cases:

• New Mexico Taxation and Revenue Department v. Casias Trucking, 2014-NMCA-099 — one-way haulers must keep empty and loaded miles by truck number
• Security Escrow Corp. v. State Taxation and Revenue Department, 1988-NMCA-068 — a taxpayer must clearly establish a claimed exemption or deduction
• MPC Ltd. v. New Mexico Taxation and Revenue Department, 2003-NMCA-021 — burden shifting after evidence rebuts an assessment
• City of Eunice v. State Taxation and Revenue Department, 2014-NMCA-085 — tax statutes should not be read to produce an absurd result

Source

• Listing: New Mexico Decisions & Orders
• Decision post: Star Paving Co
• Decision PDF: D&O 20-01

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 STAR PAVING CO.
6 TO DENIAL OF REFUND ISSUED UNDER
7 LETTER ID NO. L083345937
8 Case Number 19.09-165R
9 v. Decision and Order No. 20-01
10 NEW MEXICO TAXATION AND REVENUE DEPARTMENT

11 DECISION AND ORDER

12 On December 5, 2019, Hearing Officer Ignacio V. Gallegos, Esq., conducted a merits

13 administrative hearing in the matter of the tax protest of Star Paving Co. (Taxpayer) pursuant to

14 the Tax Administration Act and the Administrative Hearings Office Act. At the hearing,

15 Attorney Christopher Jaramillo appeared representing Taxpayer. Mr. Michael Zamora,

16 Controller, appeared in person as the Taxpayer’s sole witness. Staff Attorney Kenneth Fladager

17 appeared, representing the opposing party in the protest, the Taxation and Revenue Department

18 (Department). Department protest auditor Angelica Rodriguez and Weight Distance Tax auditor

19 supervisor Mayra Cabrera appeared as witnesses for the Department. Department observer Alma

20 Lucero was also present. Taxpayer offered no exhibits, Department Exhibits A and B were

21 admitted into the record over the Taxpayer’s objection, since equal leeway was granted Taxpayer

22 and the Department as to their failure to file witness and exhibit lists.

23 In quick summary, this protest involves Taxpayer’s Weight Distance Tax (WDT) returns

24 and the adequacy of records supplied upon audit to support a one-way hauler reduced mill rate.

25 Following the audit assessment, Taxpayer paid the assessment to arrest the accumulation of penalty

26 and interest and timely submitted a request for refund. The Department denied the refund request.

27 Taxpayer protested the denial of refund, arguing that although the records requested by the

In the Matter of the Protest of Star Paving Co., page 1 of 17.
1 Department in the audit were not considered sufficient, statutory construction favors the

2 Taxpayer’s position that the records it provided should satisfy the Department’s record-keeping

3 regulations and the Department was under an obligation to use an alternative method of

4 computing the tax. Ultimately, after making findings of fact and discussing the issue in more detail

5 throughout this decision, the hearing officer finds that Taxpayer’s protest must be denied. IT IS

6 DECIDED AND ORDERED AS FOLLOWS:

7 FINDINGS OF FACT

8 Procedural Findings

9 1. On July 27, 2018, under Letter Id. No. L0499195696, the Department issued a

10 Notice of Assessment of Taxes and Demand for Payment to Taxpayer, indicating that Taxpayer

11 owed tax of $17,382.09, penalty of $3,578.41, and interest of $2,194.77, for a total assessment of

12 $23,155.27 for tax reporting periods from March 31, 2012 to June 30, 2017. [Administrative

13 File].

14 2. On December 14, 2018, Taxpayer, through controller Michael Zamora, submitted

15 an Application for Refund, alleging that the Taxpayer had paid the audit assessment, which

16 assessment it challenged. [Administrative File].

17 3. On May 16, 2019, under Letter Id. No. L083345937 1 the Department issued a

18 letter informing the Taxpayer that their refund application had been denied. [Administrative

19 File].

1
Ordinarily, letters issued by the Department contain an identifying number beginning with the letter L and
followed by a ten-digit number. In this instance, although the parties were aware that several documents had been
cut off in the process of a party’s copying, neither the Department nor the Taxpayer supplemented the record with a
complete copy. In the absence of a correction, for consistency, the Hearing Officer continues to use the truncated
identifying number(s).

In the Matter of the Protest of Star Paving Co., page 2 of 17.
1 4. On June 26, 2019, Taxpayer, through Attorney Christopher Jaramillo, submitted a

2 Formal Protest letter, a letter relating facts concerning the protest, and a Tax Information

3 Authorization. [Administrative File].

4 5. On July 5, 2019, under Letter Id. No. L0227445936, the Department

5 acknowledged receipt of Taxpayer’s protest. [Administrative File].

6 6. On September 10, 2019, the Taxpayer, through Attorney Christopher Jaramillo,

7 submitted a Request for Hearing to the Administrative Hearings Office, requesting a hearing on

8 the merits of Taxpayer’s protest. [Administrative File].

9 7. On September 11, 2019, the Administrative Hearings Office mailed a Notice of

10 Administrative Hearing to the parties, setting the matter for a hearing on the merits of Taxpayer’s

11 protest on December 5, 2019 in Albuquerque, New Mexico. [Administrative File].

12 8. On September 25, 2019, the Department, through Attorney Kenneth E. Fladager,

13 timely submitted the Department’s Answer to Protest to the Administrative Hearings Office.

14 [Administrative File].

15 9. The undersigned Administrative Hearing Officer Ignacio V. Gallegos conducted

16 the merits hearing on December 5, 2019 with the parties present at the Administrative Hearings

17 Office in the Compass Bank Building in Albuquerque, New Mexico. Neither the Department

18 nor the Taxpayer objected that conducting the hearing satisfied the 90-day hearing requirements

19 of Section 7-1B-8 (F) (2019). The Administrative Hearings Officer preserved a recording of the

20 hearing. [Administrative File].

21 Substantive Findings

In the Matter of the Protest of Star Paving Co., page 3 of 17.
1 10. Taxpayer Star Paving Co. is a company specializing in hauling materials, paving

2 roads and parking lots, earthwork, and demolition. As part of this business, they own and operate

3 heavy trucks with a gross vehicle weight of more than 26,000 pounds. It is a business which

4 customarily hauls materials only one-way. [AHO examination of Michael Zamora, CD 31:00-

5 32:20; Department Exhibit B-5].

6 11. Michael Zamora is the Controller for Star Paving. He has been employed with

7 Taxpayer since December of 2004. Initially he was not in accounting, but in 2009 he became a

8 Controller-in-training and was tangentially involved in the WDT audit conducted in 2010.

9 [Direct examination of Michael Zamora, CD 21:50-23:30].

10 12. Mr. Zamora played a more significant role in the WDT audit that took place in

11 2018. He supplied auditors with fuel logs and driver time cards, which contain vehicle

12 identifiers, driver name, specific odometer readings for start and end, and a summary of the work

13 the driver did that day, including a supplier name and job site. The records supplied by Taxpayer

14 did not specifically state the number of miles the vehicle traveled empty separated from the

15 number of miles the vehicle traveled loaded. [Direct examination of Michael Zamora, CD 25:40-

16 27:30; Cross examination of Michael Zamora, CD 30:00-30:20; AHO examination of Michael

17 Zamora, CD 32:20-33:10].

18 13. Taxpayer’s business model has empty trucks travelling from their vehicle storage

19 lot to a materials supplier where they are loaded, then they proceed to the jobsite where the load

20 is delivered, and then the vehicles return empty either to the materials supplier where they are

21 reloaded, or back to the storage lot. [Direct examination of Michael Zamora, CD 28:30-29:05;

22 AHO examination of Michael Zamora, CD 30:50-32:15].

In the Matter of the Protest of Star Paving Co., page 4 of 17.
1 14. Taxpayer recalled being advised to place “all loads one-way” on driver time-cards

2 to qualify for the one-way haul reduced rate. Mr. Zamora was unsure of who exactly advised

3 him of this, but recalled it was a Department employee present at the audit review. [Direct

4 examination of Michael Zamora, CD 27:30-28:30; AHO examination of Michael Zamora, CD

5 35:00-35:40].

6 15. Taxpayer did not attempt either during the audit or thereafter to reconstruct an

7 accounting of only empty and only loaded miles, by using map distances from location to

8 location along the various routes. [AHO examination of Michael Zamora, CD 33:00-35:00].

9 16. Taxpayer was subject to an audit of weight distance tax reporting in 2010, at

10 which point the Department issued an assessment for improper WDT reporting. [Department

11 Exhibit B].

12 17. Taxpayer was subject to an audit of weight distance tax reporting in 2018, and the

13 Department issued an assessment for improper WDT records keeping, rejecting the one-way

14 hauler designation for a reduced mill-rate, because records of hauls did not include a separate

15 and distinct listing of empty miles and loaded miles. [Department Exhibit A].

16 18. Mayra Cabrera is the weight distance tax auditor supervisor who supervised the

17 2018 WDT audit and was the auditor for the 2010 WDT audit. [Direct examination of Mayra

18 Cabrera, CD 38:40-40:10, 50:35-50:55; Department Exhibits A and B].

19 19. The Department auditor determined that the documents (spreadsheets of odometer

20 readings) Taxpayer initially provided when audited were incomplete and did not correspond to

21 source documents, so the Department requested additional information. Taxpayer then supplied

22 fueling logs from its bulk fuel storage tank, which contained odometer readings when the various

23 vehicles refueled. The fuel logs also were not helpful in determining which miles were empty

In the Matter of the Protest of Star Paving Co., page 5 of 17.
1 and which were loaded. The Department again requested more information, to which the

2 Taxpayer supplied driver logs and driver timesheets, which also did not reflect which miles were

3 loaded or empty. [Direct examination of Mayra Cabrera, CD 40:10-47:55].

4 20. The audit report from 2010, and the auditor herself, explained to Taxpayer that in

5 order to qualify for the one-way haul tax rate, they would need to keep records of empty and

6 loaded miles. She offered advice on how to adjust their log forms by adding columns for

7 odometer readings along the route where the trucks are filled and emptied. [Direct examination

8 of Mayra Cabrera, CD 54:35-57:20].

9 21. The auditor did not use an alternative method of determining mileage in the 2018

10 audit but attempted to use alternative methods of determining eligibility for one-way hauler

11 status. [Direct examination of Mayra Cabrera, CD 42:00-47:55; 49:20-49:35; Cross examination

12 of Mayra Cabrera, CD 1:00:50-1:01:10; 1:03:30-1:04:15].

13 DISCUSSION

14 During the timeframe at issue in the audit, Star Paving Co. did not maintain records

15 which separated its vehicles’ mileage driven from their vehicle storage yard, to the materials

16 supplier, to the job site, and back to either the supplier or to the vehicle storage yard. Taxpayer’s

17 records contained total mileage for its trucks, which could be both those miles empty of all load

18 and fully or partially loaded. Taxpayer asserts that a statutory construction of the applicable

19 regulation does not specify that loaded miles are to be separately tabulated from empty miles.

20 Taxpayer further argues that the Department was required to use an alternative method. An

21 interpretation of the regulations upon which the Taxpayer rests his case would lead to an absurd

22 result, therefore, the Hearing Officer declines such opportunity.

In the Matter of the Protest of Star Paving Co., page 6 of 17.
1 Under NMSA 1978, Section 7-1-17 (C) (2007), the assessment issued in this case is

2 presumed correct. Consequently, Taxpayers have the burden to overcome the assessment. See

3 Archuleta v. O'Cheskey, 1972-NMCA-165, ¶11, 84 N.M. 428, 504 P.2d 638. Unless otherwise

4 specified, for the purposes of the Tax Administration Act, “tax” is defined to include interest and

5 civil penalty. See NMSA 1978, § 7-1-3 (Y) (2017). Under Regulation 3.1.6.13 NMAC, the

6 presumption of correctness under Section 7-1-17 (C) extends to the Department’s assessment of

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

8 NMCA-050, ¶16, 139 N.M. 498, 134 P.3d 785 (agency regulations interpreting a statute are

9 presumed proper and are to be given substantial weight). Accordingly, it is Taxpayers’ burden to

10 present some countervailing evidence or legal argument to show that they are entitled to an

11 abatement, in full or in part, of the assessment issued in the protest. See N.M. Taxation &

12 Revenue Dep't v. Casias Trucking, 2014-NMCA-099, ¶8, 336 P.3d 436. When a taxpayer

13 presents sufficient evidence to rebut the presumption, the burden shifts to the Department to

14 show that the assessment is correct. See MPC Ltd. v. N.M. Taxation & Revenue Dep't, 2003-

15 NMCA-021, ¶13, 133 N.M. 217, 62 P.3d 308.

16 The Weight Distance Tax Act imposes a tax on all registered vehicles with a declared

17 weight in excess of 26,000 pounds that travel on state highways. See NMSA 1978, § 7-15A-3

18 (1988). It is undisputed that the trucks used in the Taxpayer’s business operations are WDT

19 registered vehicles and that they meet the threshold requirements.

20 One-way hauler records requirements.

21 NMSA 1978, Section 7-15A-6 (2004) sets the tax rates under the Weight Distance Tax

22 Act for all motor vehicles other than some types of buses. Subsection A establishes the base tax

23 rates for all registered vehicles based on the vehicles’ declared gross weight and on the mileage

In the Matter of the Protest of Star Paving Co., page 7 of 17.
1 traveled on state highways. See § 7-15A-6 (A). Under Section 7-15A-6 (A), the tax rate increases

2 as a vehicle’s weight classification increases. However, Section 7-15A-6 (B) establishes a

3 reduced one-way haul tax rate:

4 All motor vehicles for which the tax is computed under Subsection A of
5 this section shall pay a tax that is two-thirds of the tax computed under
6 Subsection A of this section if:
7 (1) the motor vehicle is customarily used for one-way haul;
8 (2) forty-five percent or more of the mileage traveled by the motor
9 vehicle for a registration year is mileage that is traveled empty of all load;
10 and
11 (3) the registrant, owner or operator of the vehicle attempting to qualify
12 under this subsection has made a sworn application to the department to be
13 classified under this subsection for a registration year and has given
14 whatever information is required by the department to determine the
15 eligibility of the vehicle to be classified under this subsection and the
16 vehicle has been so classified.

17 If the registrant, owner or operator of the vehicle can satisfy the three one-way haul rate criteria

18 identified under Section 7-15A-6 (B), the Weight Distance Tax (WDT) is calculated at two-

19 thirds of the base tax rate established under Subsection A (or 33% less than the full tax rate per

20 vehicle weight class).

21 The issue in dispute here is whether audited records showed “forty-five percent or more

22 of the mileage traveled…is mileage that is traveled empty of all load.” The Department

23 acknowledged in the 2010 Audit report that this Taxpayer’s vehicles are customarily used for

24 one-way haul and have been classified as such in the past. The Department’s audit determined

25 that records maintained by the Taxpayer were insufficient to establish that forty-five percent or

26 more of the mileage traveled was empty. The Department therefore assessed the Taxpayer at the

27 normal undiscounted tax rate.

28 Numerous Department regulations address one-way haulers for the purposes of Section

29 7-15A-6 (B). Regulation 3.12.6.7 NMAC (11/15/01) provides definitions for empty miles,

30 loaded miles, and one-way haulers. Under Regulation 3.12.6.7 (A) NMAC, “empty miles” means

In the Matter of the Protest of Star Paving Co., page 8 of 17.
1 the “number of miles traveled on New Mexico roads when the vehicle or vehicle combination is

2 transporting no load whatsoever.”

3 Regulation 3.12.6.8 NMAC (11/15/01) and Regulation 3.12.6.9 NMAC (11/15/01)

4 respectively establish how a registrant can be qualified or disqualified as a one-way hauler.

5 Regulation 3.12.6.11 (11/15/01) provides a list of records required to be kept by a Taxpayer

6 wishing to establish or maintain a one-way hauler status.

7 One-way haulers shall maintain the following records on a reporting period
8 basis. All records shall be referenced by vehicle unit number:
9 A. Vehicle trip mileage records for each vehicle operated in New Mexico.
10 The mileage records shall reflect the total empty miles and the total loaded miles
11 traveled on New Mexico roads. Accurate trip mileage records indicating empty and
12 loaded miles may include:
13 (1) accurate map mileage for each trip;
14 (2) hubometer or odometer readings; or
15 (3) vehicle-specific log books.
16 B. Vehicle itineraries including the origin and destination point of each trip,
17 and the routes taken.

18 The Taxpayer established that he provided vehicle-specific log books in the form of driver time

19 cards which contained vehicle identification and starting and ending odometer readings, a materials

20 supplier name, and a job work site name (without addresses). The log books contained no odometer

21 readings for the stops along the way, only beginning and ending readings. Taxpayer did not attempt

22 to reconstruct miles traveled loaded or unloaded from the data at his disposal.

23 Under the Taxpayer’s interpretation of the regulation, the Taxpayer only needs to maintain

24 records of total mileage traveled. The proposed interpretation takes its hold from the language

25 “mileage records shall reflect the total empty miles and the total loaded miles.” In the view of the

26 Taxpayer, when one combines “the total empty miles” with “the total loaded miles” as the word

27 “and” between the two phrases would suggest, the sum is total mileage, which Taxpayer provided.

28 The claim is not frivolous. The merit of the claim, however, deserves further analysis.

In the Matter of the Protest of Star Paving Co., page 9 of 17.
1 “Tax statutes, like any other statutes, are to be interpreted in accordance with the

2 legislative intent and in a manner that will not render the statutes’ application absurd,

3 unreasonable, or unjust.” City of Eunice v. State Taxation & Revenue Dep’t, 2014-NMCA-085,

4 ¶8, 331 P.3d 986 (internal citations and quotation marks omitted). It is a canon of statutory

5 construction in New Mexico to adhere to the plain wording of a statute except if there is

6 ambiguity, error, an absurdity, or a conflict among statutory provisions. See Regents of the Univ.

7 of New Mexico v. New Mexico Fed’n of Teachers, 1998-NMSC-20, ¶28, 125 N.M. 401, 962 P.2d

8 1236. Only if the plain language interpretation would lead to an absurd result not in accord with

9 the legislative intent and purpose is it necessary to look beyond the plain meaning of the statute.

10 See Bishop v. Evangelical Good Samaritan Soc’y, 2009-NMSC-036, ¶11, 146 N.M. 473, 212

11 P.3d 361. When applying the plain meaning rule, the statutes should be read in harmony with the

12 provisions of the remaining statute or statutes dealing with the same subject matter. See State v.

13 Trujillo, 2009-NMSC-012, ¶22, 146 N.M. 14, 206 P.3d 125; Hayes v. Hagemeier, 1963-NMSC-

14 095, ¶9, 75 N.M. 70, 400 P.2d 945 (“All legislation is to be construed in connection with the general

15 body of law.”). Likewise, “[t]he canons of statutory construction guide our interpretation of

16 administrative regulations.” Albuquerque Bernalillo County Water Util. Auth. v. N.M. Pub.

17 Regulation Comm’n, 2010-NMSC-013, ¶51, 148 N.M. 21, 229 P.3d 494.

18 “[T]he guiding principle in statutory construction requires that we look to the wording of the

19 statute and attempt to apply the plain meaning rule, recognizing that when a statute contains

20 language which is clear and unambiguous, we must give effect to that language and refrain from

21 further statutory interpretation.” Wood v. State Educ. Ret. Bd., 2011-NMCA-020, ¶12, 149 N.M.

22 455, 250 P.3d 881. A statutory construction analysis begins by examining the words chosen by the

23 legislature and the plain meaning of those words. See State v. Hubble, 2009-NMSC-014, ¶13, 146

In the Matter of the Protest of Star Paving Co., page 10 of 17.
1 N.M. 70, 206 P.3d 579. Extra words should not be read into a statute if the statute is plain on its

2 face, especially if it makes sense as written. See Johnson v. N.M. Oil Conservation Comm’n, 1999-

3 NMSC-021, ¶ 27, 127 N.M. 120, 978 P.2d 327.

4 Looking back at the plain language of the regulation, the Taxpayer’s “mileage records shall

5 reflect the total empty miles and the total loaded miles.” The operative word Taxpayer’s focus rests

6 upon is “and.” The word “and” is a coordinating conjunction.2 Coordinating conjunctions (and, but,

7 or, nor) are words that join two elements of equal grammatical rank. Coordinating conjunctions can

8 join verbs, nouns, pronouns, adjectives, phrases, or clauses. As used in the sentence, the

9 conjunction “and” links the modified noun “total empty miles” with the modified noun “total loaded

10 miles.” Under Taxpayer’s reasoning, the “and” serves to require combining “total empty miles”

11 with “total loaded miles” which would result in simply “total miles,” the same way that “two and

12 two” can be summed up as “four.”

13 In the same way, for example, the sentence “there are four jars of red chile and four jars of

14 green chile in the bag” could be rewritten as “there are eight jars of chile in the bag.” But why

15 would someone use the adjectives “green” and “red” if it is all simply chile? The structure of the

16 sentence gives equal value to each modified noun. While it is certain that there are eight jars, in

17 New Mexico it is important to know which jars of chile contain red and which contain green, both

18 in terms of preference and perhaps price.3 The two co-equal parts of the sentence do not have the

19 same meaning as their sum, i.e., Christmas.

2
See generally L. SUE BAUGH, ESSENTIALS OF ENGLISH GRAMMAR 39 (3rd ed. 2005).
3
See H.J.M. 3, 42nd Leg., 1st Spec. Sess. (N.M. 1996), available at
https://nmlegis.gov/Sessions/96%20Special/memorials/house/HJM003.pdf (“all New Mexicans recognize the
importance of chile to our culture and rich heritage and understand that all New Mexicans prefer either Red or
Green”).

In the Matter of the Protest of Star Paving Co., page 11 of 17.
1 By the same token, a plain language reading of the regulation requires giving equal

2 grammatical value to both “total empty miles” and “total loaded miles.” In context, the records

3 must give equal value to “total empty miles” along with “total loaded miles” and each must be

4 distinguished within the records. Both are required, individually. Under the Taxpayer’s

5 interpretation of the regulation, requiring only the sum “total” miles, without distinguishing between

6 which are empty and which are loaded, would require adding words to the regulation (i.e., “records

7 shall reflect the sum of the total empty miles and the total loaded miles”) and would defeat the

8 purpose of the regulation, which is to ensure that a taxpayer’s records prove the claim that the

9 vehicles drove at least 45% of the time empty of all load as required by the statute. See Section 7-

10 15A-6 (B)(2). Under the Taxpayer’s interpretation, maintaining only records of “total mileage” as a

11 substitute for records of loaded miles and empty miles would “render the statutes’ application

12 absurd, unreasonable, or unjust” and therefore cannot be upheld by this administrative forum.

13 See City of Eunice v. State Taxation & Revenue Dep’t, 2014-NMCA-085, ¶8.

14 Furthermore, there is existing New Mexico case law which reiterates the requirement. “If

15 claiming the one-way haul rate, taxpayers must keep records of loaded miles versus empty miles

16 designated by truck number.” N.M. Taxation & Revenue Dep’t v. Casias Trucking, 2014-

17 NMCA-099, ¶ 6, 336 P.3d 436. Because the records supplied upon audit did not have separate

18 entries for empty miles and loaded miles, the Department properly disqualified the Taxpayer as a

19 one-way hauler pursuant to Regulation 3.12.6.9 NMAC.

20 Alternative methods of tax calculation.

21 Taxpayer argues that the Department was required, on its own, to determine the empty and

22 loaded miles. As support for this claim, the Taxpayer points to Regulation 3.1.5.8 NMAC

23 (12/29/00), entitled “sufficiency of records.” The regulation states “[f]ailure of a taxpayer to keep

In the Matter of the Protest of Star Paving Co., page 12 of 17.
1 adequate books of account or other records will cause the department to use alternative methods to

2 determine or estimate taxes due.” Regulation 3.1.5.8 (B) NMAC. The Department asserts that

3 because the one-way haul rate is more akin to a deduction or exemption from a tax, not a tax itself,

4 the burden falls squarely on the Taxpayer to prove its entitlement to the decreased tax rate.

5 The regulation at issue follows NMSA 1978, Section 7-1-10, entitled “Records required by

6 statute; taxpayer’s records; accounting methods; reporting methods; information returns.” In

7 pertinent part, the statute says: “[e]very person required by the provisions of any statute

8 administered by the department to keep records and documents and every taxpayer shall maintain

9 books of account or other records in a manner that will permit the accurate computation of state

10 taxes or provide information required by the statute under which the person is required to keep

11 records.” Part A of Regulation 3.1.5.8 NMAC places the burden on taxpayers: “[b]ooks of account,

12 documents and other records shall be kept and maintained by a taxpayer in a manner that will

13 permit the accurate computation of state taxes and provide information required by the statutes

14 under which the taxpayer is required to keep records.” Clearly the legislature intended to impose

15 the duty on taxpayers to maintain and provide records from which the Department can accurately

16 compute tax.

17 In this instance, the Department concluded that the Taxpayer’s records were insufficient in

18 one key respect: they did not provide evidence of which miles were loaded miles and which miles

19 empty miles. The testimony indicated that the Department attempted to use an alternative method

20 to determine the values at issue, when the information initially provided by Taxpayer was

21 insufficient to justify the one-way haul rate. To that end the Department requested more

22 information from Taxpayer. The Taxpayer provided fueling logs and provided driver timesheets.

23 Neither provided the information needed to justify the one-way haul. The record keeping

In the Matter of the Protest of Star Paving Co., page 13 of 17.
1 requirements under the weight distance tax act, indicates that “[a]ll registrants, owners or operators

2 required to pay the weight distance tax shall preserve the records upon which the periodic

3 payments… are based for four years following the period for which a payment is made.” NMSA

4 1978, Section 7-15A-9 (D) (1999). The statute further requires production of the records “[u]pon

5 request of the department… for audit as to accuracy of computations and payments.” Id.

6 Nothwithstanding the above, to address the Taxpayer’s contention, the reduced tax rate for

7 one-way haulers is akin to a 33% deduction or exemption from the loaded vehicle tax rate since the

8 weight distance tax itself is determined by the total mileage traveled on New Mexico roads. See

9 NMSA 1978, Section7-15A-8 (A) (1988). The burden is on a taxpayer to prove that it is entitled

10 to an exemption or deduction, if one should potentially apply. See Pub. Serv. Co. v. N.M.

11 Taxation & Revenue Dep't, 2007-NMCA-050, ¶141 N.M. 520, 157 P.3d 85; See also Till v.

12 Jones, 1972-NMCA-046, 83 N.M. 743, 497 P.2d 745. “Where an exemption or deduction from

13 tax is claimed, the statute must be construed strictly in favor of the taxing authority, the right to

14 the exemption or deduction must be clearly and unambiguously expressed in the statute, and the

15 right must be clearly established by the taxpayer.” Sec. Escrow Corp. v. State Taxation &

16 Revenue Dep't, 1988-NMCA-068, ¶8, 107 N.M. 540, 760 P.2d 1306; Wing Pawn Shop v.

17 Taxation & Revenue Dep't, 1991-NMCA-024, ¶16, 111 N.M. 735, 809 P.2d 649; see also

18 Chavez v. Comm'r of Revenue, 1970-NMCA-116, ¶7, 82 N.M. 97, 476 P.2d 67. Even if the

19 regulation imposed a responsibility on the Department to use alternative methods to justify the one-

20 way hauler rate, the Department met that responsibility by seeking additional information from

21 Taxpayer which may justify the reduced rate.

22 The Taxpayer’s records at audit did not suffice to the auditor. The assessment is entitled

23 to a presumption of correctness. Taxpayer did not provide any additional information to the

In the Matter of the Protest of Star Paving Co., page 14 of 17.
1 Hearing Officer at the merits hearing to overcome the presumption of correctness, by either the

2 same documents it provided to the auditor, summaries, or subsequent calculations of loaded

3 miles. A tax protestant can rebut the presumption of correctness by showing that the decision of

4 the Department is not supported by substantial evidence or the Department failed to follow

5 relevant statutory provisions. See Floyd & Berry Davis Co. v. Bureau of Revenue, 1975-NMCA-

6 143, ¶8, 88 N.M. 576, 544 P.2d 291; see also McConnell v. State ex rel. Bureau of Revenue,

7 1071-NMCA-181, ¶7, 83 N.M. 386, 492 P.2d 1003. In this case, Taxpayer was unable to prove

8 that the balance of substantial evidence supported its claim to entitlement of the one-way haul

9 reduced tax rate and was unable to show the Department’s assessment and subsequent denial of

10 refund was made in error.

11 CONCLUSIONS OF LAW

12 A. Taxpayer filed a timely, written protest of the Department’s denial of refund letter

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

14 B. The hearing was timely set and held within 90-days of Taxpayer’s request for

15 hearing pursuant to NMSA 1978, Section 7-1B-8 (2019).

16 C. Any assessment made by the Department is presumed to be correct, therefore it is

17 the taxpayer’s burden to come forward with evidence and legal argument to establish that the

18 Department’s assessment should be abated, in full or in part. See NMSA 1978, Section 7-1-17 (C)

19 (2007).

20 D. “Tax” is defined to include not only the tax program’s principal, but also interest and

21 penalty. See NMSA 1978, Section 7-1-3 (Y) (2017). Assessments of penalties and interest therefore

22 also receive the benefit of a presumption of correctness. See Regulation 3.1.6.13 NMAC (1/15/01).

In the Matter of the Protest of Star Paving Co., page 15 of 17.
1 E. Taxpayer failed to present evidence to overcome the presumption of correctness in

2 the Department’s denial of the one-way hauler tax rate, either in the Department’s application of

3 statutes or in Taxpayer’s factual entitlement to the reduced one-way hauler tax rate under the

4 Weight Distance Tax Act. See NMSA 1978, Section 7-15A-6 (B) (2004); see also Regulation

5 3.12.6.9 NMAC (11/15/01) and Regulation 3.12.6.11 (11/15/01).

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

7 Department’s denial of Taxpayer’s request for refund was proper and no refund is due.

8 DATED: January 28, 2020.

9

10
11 Ignacio V. Gallegos
12 Hearing Officer
13 Administrative Hearings Office
14 P.O. Box 6400
15 Santa Fe, NM 87502

16 NOTICE OF RIGHT TO APPEAL

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

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

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

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

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

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

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

In the Matter of the Protest of Star Paving Co., page 16 of 17.
1 Hearings Office may begin preparing the record proper. The parties will each be provided with a

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

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

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

5 CERTIFICATE OF SERVICE

6 On January 28, 2020, a copy of the foregoing Decision and Order was submitted to the

7 parties listed below in the following manner:

8 First Class Mail Interdepartmental Mail

9 INTENTIONALLY BLANK
10
11 John Griego
12 Legal Assistant
13 Administrative Hearings Office
14 P.O. Box 6400
15 Santa Fe, NM 87502

In the Matter of the Protest of Star Paving Co., page 17 of 17.