Were IT services sold directly to a New Mexico Air Force base deductible when the contractor obtained the wrong NTTC after the audit deadline?

Plain-English summary

Invictus Technical Solutions owed gross receipts tax on IT services it sold directly to Cannon Air Force Base, but it was not negligent because it had relied on professional multistate tax advice. The Administrative Hearings Office upheld tax and interest while abating the entire $9,516.33 penalty.

The December 2019 assessment covered January 2012 through April 2019 and totaled $64,049.05: $47,581.59 of gross receipts tax, $9,516.33 of penalty, and $6,951.13 of interest.

Invictus provided information-management and technology services at both Holloman and Cannon Air Force Bases. Only the Cannon work was assessed. At Holloman, Invictus acted as a subcontractor and proved that its client resold its services to the base, so those receipts qualified for the Section 7-9-48 resale deduction. At Cannon, Invictus served the ultimate consumer directly, leaving no resale transaction.

Invictus relied on two nontaxable transaction certificates, but neither established the Cannon deduction:

• The Department issued Invictus a Type 15 NTTC. That certificate allowed Invictus, as a purchaser, to execute an NTTC to one of its own sellers. It did not establish that Invictus's receipts as a seller were deductible, and a Type 15 certificate could not be used to purchase services.
• Cannon executed a Type 9 NTTC on November 26, 2019. Invictus had admitted receiving verbal notice on September 20 that certificates were required, making November 19 the 60-day deadline. The certificate was seven days late and could not be honored for the audit period. It was also the wrong type: Type 9 covered tangible personal property, while Invictus sold IT services.

Alternative evidence did not help. The Cannon services were delivered directly to the ultimate consumer rather than resold. And Section 7-9-54's government-sale deduction covered tangible personal property, not services sold to a government agency.

The good-faith NTTC safe harbor also failed. A certificate must be timely, properly executed, and accepted in good faith at the transaction. Invictus obtained Cannon's certificate after the transactions and audit notice, and it had not relied on an NTTC when omitting the receipts. Instead, it had believed that services sold to the federal government on federal property were exempt.

Penalty produced a different outcome. Invictus met quarterly with a CPA firm about state taxes across the multiple states where it operated. The firm reviewed Invictus's files and advised that it complied with each state's rules. Invictus was reporting and paying New Mexico withholding tax, and it replaced the firm after learning that the New Mexico gross receipts advice was wrong. On the total evidence, the hearing officer found reasonable professional reliance rather than negligence.

Interest remained mandatory because the tax was not paid when due and no statutory exception applied.

Result: protest DENIED IN PART and GRANTED IN PART. Invictus remained liable for $47,581.59 of tax and $6,951.13 of assessed interest, plus interest accruing until the principal was paid; the $9,516.33 penalty was abated.

What this means for you

Government customers do not make all services deductible

Section 7-9-54 addressed qualifying tangible-property sales to government agencies. It did not create a general deduction for services performed directly for a federal agency or on federal property.

A resale deduction requires an actual resale

Holloman receipts were not assessed because Invictus was a subcontractor whose client resold the services. Cannon receipts were taxable because Cannon was the direct customer and ultimate consumer.

The NTTC type must match the transaction

A Type 9 certificate for tangible personal property did not cover IT services. A Department-issued Type 15 certificate served a different purchaser-side purpose and did not prove Invictus's seller-side deduction.

Audit certificate deadlines can be triggered verbally

The hearing officer treated Invictus's admitted September 20 phone call as notice and enforced the 60-day deadline even without a formal written demand.

Professional reliance needs real engagement

Invictus proved recurring quarterly consultations, file review, broad state-tax advice, and corrective action after discovering the error. That record supported penalty relief even though the underlying tax position failed.

Common questions

Q: Why were the Holloman services treated differently?
A: Invictus proved that it acted as a subcontractor and its client resold the services to Holloman. At Cannon, Invictus sold directly to the ultimate consumer.

Q: What was wrong with the Type 9 NTTC?
A: It arrived after the 60-day audit deadline and expressly covered tangible personal property only, not services.

Q: Did the Type 15 NTTC establish a deduction?
A: No. It authorized Invictus as a purchaser to execute certificates to sellers; it did not make Invictus's own service receipts deductible.

Q: Why did the NTTC safe harbor fail?
A: Invictus did not timely accept and rely on a proper certificate at the transactions. It had omitted the receipts because it believed federal-government work on federal property was exempt.

Q: Why was penalty abated while interest remained?
A: The CPA-firm reliance showed Invictus was not negligent, eliminating penalty. Interest was mandatory compensation for tax not paid when due, and no exception applied.

Citations and references

Statutes and regulations:

• NMSA 1978, §§ 7-9-4, 7-9-3.3, 7-9-3.5(A)(1), and 7-9-5(A) — gross receipts tax on services performed in New Mexico
• NMSA 1978, § 7-9-43(A)-(E) — NTTC proof, alternative evidence, good-faith safe harbor, and issuance
• NMSA 1978, § 7-9-48 (2000) — service-for-resale deduction
• NMSA 1978, §§ 7-9-47 and 7-9-54 — tangible-property resale and government-sale deductions
• NMSA 1978, §§ 7-1-17, 7-1-67(A), and 7-1-69(A) — assessment presumption, mandatory interest, and negligence penalty
• Regulations 3.2.201.8, 3.2.201.12, 3.2.201.14, and 3.2.201.16 NMAC — NTTC timing, type, good faith, and issuance rules
• Regulations 3.2.205.11(B) and 3.2.212.9 NMAC — Type 15 certificate and services sold to government agencies
• Regulations 3.1.11.10(D) and 3.1.11.11 NMAC — reliance on tax counsel or an accountant

Cases:

• Leaco Rural Telephone Cooperative v. Bureau of Revenue, 1974-NMCA-076 — timely, good-faith acceptance of a proper NTTC
• Continental Inn v. New Mexico Taxation and Revenue Department, 1992-NMCA-030 — an NTTC does not transform a taxable sale and safe harbor requirements
• Gas Co. v. O'Cheskey, 1980-NMCA-085 — NTTC safe harbor
• McKinley Ambulance Service v. Bureau of Revenue, 1979-NMCA-026 — certificate must apply to the transaction
• CCA of Tennessee, LLC v. New Mexico Taxation and Revenue Department, No. A-1-CA-37548 (N.M. Ct. App. Jan. 21, 2021) (non-precedential) — timely good-faith NTTC protection
• Marbob Energy Corp. v. New Mexico Oil Conservation Commission, 2009-NMSC-013 — mandatory effect of “shall”

Source

• Listing: New Mexico Decisions & Orders
• Decision post: Invictus Technical Solutions, LLC
• Decision PDF: D&O 21-13

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 INVICTUS TECHNICAL SOLUTIONS, LLC
6 TO THE ASSESSMENT
7 ISSUED UNDER LETTER ID NO. L1324561072

8 v. AHO No. 20.08-110A, D&O No. 21-13

9 NEW MEXICO TAXATION AND REVENUE DEPARTMENT

10 DECISION AND ORDER

11 On April 16, 2021, Hearing Officer Dee Dee Hoxie, Esq. conducted a videoconference

12 hearing on the merits of the protest of Invictus Technical Solutions, LLC (Taxpayer) to the

13 assessment. The Taxation and Revenue Department (Department) was represented by Kenneth

14 Fladager, Staff Attorney, who appeared by videoconference. Alma Tapia, Auditor, also appeared

15 by videoconference on behalf of the Department. The Taxpayer was represented by its

16 employees, Christopher Lamont and Debbie O’Hara, who appeared by telephone. Mr. Lamont

17 and Ms. Tapia testified. The Hearing Officer took notice of all documents in the administrative

18 file. The Department’s exhibit A1 (audit narrative) was admitted.

19 The main issue to be decided is whether the Taxpayer is liable for the gross receipts

20 taxes, penalty, and interest assessed on its performance of services in New Mexico at a military

21 base. The Hearing Officer considered all of the evidence and arguments presented by both

22 parties. Because the Taxpayer was performing services in New Mexico and did not establish that

23 it was entitled to a deduction, the Hearing Officer finds in favor of the Department on the gross

24 receipts taxes and interest. Because the Taxpayer consulted a CPA firm and relied on their

25 advice regarding its multistate tax issues, the Taxpayer was not negligent, and the Hearing

1
Cited in the decision as Ex. A.
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1 Officer finds in favor of the Taxpayer on the penalty. IT IS DECIDED AND ORDERED AS

2 FOLLOWS:

3 FINDINGS OF FACT

4 1. On December 11, 2019, under letter id. no. L1324561072, the Department issued

5 an assessment to the Taxpayer for gross receipts taxes from January 31, 2012 through April 30,

6 2019. The assessment was for gross receipts tax of $47,581.59, penalty of $9,516.33, and

7 interest of $6,951.13 for a total liability of $64,049.05. [Admin. file L1324561072].

8 2. On January 10, 2020, the Taxpayer filed a timely written protest to the

9 assessment. [Admin. file protest].

10 3. On February 27, 2020, the Department acknowledged its receipt of the protest.

11 [Admin. file L1240177328].

12 4. On August 24, 2020, the Department filed a request for hearing with the

13 Administrative Hearings Office. [Admin. file request].

14 5. On September 25, 2020, a telephonic scheduling hearing was conducted, which

15 was within 90 days of the request as required by statute. [Admin. file].

16 6. The Taxpayer was providing information management and technology services

17 (IT services) to Holloman Air Force Base (Holloman) and to Cannon Air Force Base (Cannon)

18 in New Mexico. [Ex. A; Testimony of Mr. Lamont; Testimony of Ms. Tapia].

19 7. The Taxpayer was assessed for the services that it provided at Cannon. [Ex. A;

20 Testimony of Mr. Lamont; Testimony of Ms. Tapia].

21 8. Based on discussions with the auditor, the Taxpayer believed that it would be able

22 to deduct the services it performed for Cannon from its gross receipts if it obtained a nontaxable

23 transaction certificate (NTTC). [Admin. file; Testimony of Mr. Lamont].

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1 9. On September 20, 2019, the Taxpayer logged its call with the auditor and noted

2 that an NTTC was required. [Admin. file; Testimony of Mr. Lamont].

3 10. During the audit, the Taxpayer applied for and was issued a Type 15 NTTC on

4 October 2, 2019. [Admin. file; Testimony of Mr. Lamont].

5 11. The Taxpayer received a Type 9 NTTC from Cannon on November 26, 2019,

6 which was more than 60 days from the call2 when the Taxpayer learned that an NTTC would be

7 required. [Admin. file; Testimony of Mr. Lamont].

8 12. During the tax periods at issue, the Taxpayer employed a CPA firm and consulted

9 with them quarterly about multistate tax compliance. [Admin. file; Testimony of Mr. Lamont].

10 13. Although it did not claim expertise in every state’s tax laws, the CPA firm assured

11 the Taxpayer that it was in compliance with the taxes in the many different states in which it was

12 doing business. [Admin. file; Testimony of Mr. Lamont].

13 14. After learning that it was not in compliance with the New Mexico gross receipts

14 tax during the audit process, the Taxpayer switched CPA firms. [Admin. file; Testimony of Mr.

15 Lamont].

16 DISCUSSION

17 Burden of proof.

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

19 (2007). Therefore, the assessment issued to the Taxpayer is presumed to be correct, and it is the

20 Taxpayer’s burden to present evidence and legal argument to show that it is entitled to an

21 abatement. See El Centro Villa Nursing Ctr. v. Taxation and Revenue Department, 1989-NMCA-

22 070, 108 N.M. 795. See also Archuleta v. O'Cheskey, 1972-NMCA-165, ¶11, 84 N.M. 428. See

2
Sixty days after September 20, 2019 was November 19, 2019.
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1 also N.M. Taxation & Revenue Dep't v. Casias Trucking, 2014-NMCA-099, ¶8. The presumption

2 extends to the assessment of penalty and interest. See 3.1.6.13 NMAC (2001).

3 The burden is on the Taxpayer to prove that it is entitled to an exemption or deduction.

4 See Public Services Co. v. N.M. Taxation and Revenue Dep’t., 2007-NMCA-050, ¶ 32, 141 N.M.

5 520. See also Till v. Jones, 1972-NMCA-046, 83 N.M. 743. “Where an exemption or deduction

6 from tax is claimed, the statute must be construed strictly in favor of the taxing authority, the

7 right to the exemption or deduction must be clearly and unambiguously expressed in the statute,

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

9 and Revenue Dep’t., 1988-NMCA-068, ¶ 8, 107 N.M. 540. See also Wing Pawn Shop v.

10 Taxation and Revenue Dep’t., 1991-NMCA-024, ¶ 16, 111 N.M. 735. See also Chavez v.

11 Commissioner of Revenue, 1970-NMCA-116, ¶ 7, 82 N.M. 97. See also Pittsburgh and Midway

12 Coal Mining Co. v. Revenue Division, 1983-NMCA-019, 99 N.M. 545.

13 Gross receipts tax.

14 Anyone engaging in business in New Mexico is subject to the gross receipts tax. See

15 NMSA 1978, § 7-9-4 (2010). To engage in business in New Mexico “means carrying on or causing

16 to be carried on any activity with the purpose of direct or indirect benefit.” NMSA 1978, § 7-9-3.3

17 (2019) 3. Gross receipts include the total amount received “from performing services in New

18 Mexico.” NMSA 1978, § 7-9-3.5 (A) (1) (2019).

19 There is a statutory presumption “that all receipts of a person engaging in business are

20 subject to the gross receipts tax.” NMSA 1978, § 7-9-5 (A) (2019). The Taxpayer admits that it

21 was performing IT services in New Mexico, which are the subject of this assessment. [Admin. file;

3
The most current version of statutes and regulations will be referenced unless there is a relevant substantive change
between it and the version in effect at the time that the Taxpayer’s services were rendered.
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1 Testimony of Mr. Lamont]. Therefore, the Taxpayer’s gross receipts are presumptively subject to

2 the gross receipts tax. See NMSA 1978, § 7-9-5.

3 An NTTC issued by the Department.

4 The Taxpayer argues that it is entitled to take a deduction since it was issued a Type 15

5 NTTC by the Department. A taxpayer may establish that it is entitled to take a deduction from

6 their gross receipts “by obtaining a properly executed nontaxable transaction certificate from the

7 purchaser.” NMSA 1978, § 7-9-43 (A) (2018). For a purchaser to obtain a NTTC that it can then

8 execute to the seller, the purchaser must “apply to the department for permission to execute

9 nontaxable transaction certificates”. NMSA 1978, § 7-9-43 (E). Obtaining the NTTC from the

10 Department did not entitle the Taxpayer to take a deduction; rather, it allows the Taxpayer to serve

11 the NTTC to a seller from whom it is purchasing something. See id. See also 3.2.201.16 (2001)

12 (explaining the difference between the Department issuing a NTTC and a purchaser executing a

13 NTTC). Moreover, a Type 15 NTTC may not be issued “for the purchase of services.” See

14 3.2.205.11 (B) (2001).

15 An NTTC must be timely.

16 The Taxpayer argues that it is entitled to take a deduction because Cannon served it with an

17 NTTC during the course of the audit. Again, a taxpayer may establish that it is entitled to take a

18 deduction from their gross receipts “by obtaining a properly executed nontaxable transaction

19 certificate from the purchaser.” NMSA 1978, § 7-9-43 (A) (2018). A taxpayer should be in

20 possession of NTTCs when the transaction occurs. See 3.2.201.8 (A) (2012). A taxpayer must be

21 in possession of the NTTCs “within 60 days of notice by the department requiring such possession.”

22 Id. Possession of the NTTC “after the 60 days following notice have expired will not be honored by

23 the department for the period covered by the audit.” Id.

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1 Neither party presented evidence of a formal written demand for NTTCs. The notice is not

2 required to be in writing. See id. See NMSA 1978, § 7-9-43. Contrast with NMSA 1978, § 7-1-

3 11.2 (2007) (requiring commencement of audit notices to be in writing). The only evidence was

4 presented by the Taxpayer. [Admin. file; Testimony of Mr. Lamont]. The Taxpayer admitted that it

5 was notified of the need for NTTCs in its phone call with the auditor on September 20, 2019.

6 [Admin. file; Testimony of Mr. Lamont].

7 Given the Taxpayer’s admission, there is sufficient evidence to conclude that the Taxpayer

8 was given verbal notice that it must provide any NTTCs to the Department. Sixty days from the

9 admitted verbal notice on September 20, 2019 was November 19, 2019. Cannon executed a Type 9

10 NTTC to the Taxpayer on November 26, 2019. [Admin. file]. Therefore, the NTTC was not in the

11 Taxpayer’s possession within 60 days of the notice. When a taxpayer fails to present a NTTC

12 within the deadline, the taxpayer “is not entitled to the deductions.” 3.2.201.12 (C) NMAC (2001).

13 As the Taxpayer failed to obtain the NTTC within 60 days of the notice when the auditor requested

14 them, the NTTC does not entitle the Taxpayer to take the deduction. See id.

15 Alternative evidence.

16 A taxpayer who fails to obtain a properly executed and timely NTTC may still establish that

17 it is entitled to take a deduction “by presenting alternative evidence that demonstrates the facts

18 necessary to support entitlement to the deduction.” NMSA 1978, § 7-9-43 (B). A taxpayer may

19 deduct “[r]eceipts from selling a service for resale”. NMSA 1978, § 7-9-48 (2000). In other words,

20 the taxpayer is selling its services to a client who then resells the taxpayer’s services to the ultimate

21 consumer. See id.

22 With respect to the Taxpayer’s receipts for its sales to Holloman, it was able to establish that

23 it was acting as a subcontractor and that its services were resold to Holloman by the Taxpayer’s

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1 client. [Testimony of Ms. Tapia; Ex. A]. Consequently, the Taxpayer’s receipts for sales to

2 Holloman were not assessed as it had established that it was entitled to a deduction for the resale of

3 its services. [Testimony of Ms. Tapia; Ex. A]. See also NMSA 1978, § 7-9-48.

4 At Cannon, the Taxpayer was not acting as a subcontractor; rather, it was providing services

5 directly to the ultimate consumer, which was Cannon. [Testimony of Ms. Tapia; Ex. A]. Since the

6 Taxpayer’s services were not being resold at Cannon to another consumer, the Taxpayer failed to

7 prove that it is entitled to take the deduction. See NMSA 1978, § 7-9-48. Nevertheless, Cannon

8 executed a Type 9 NTTC to the Taxpayer. [Admin. file; Testimony of Mr. Lamont].

9 The Type 9 NTTC states that it is “[f]or the purchase of tangible personal property only and

10 may not be used for the purchase of services”. [Admin. file]. See also NMSA 1978, § 7-9-47

11 (allowing a deduction for receipts from selling tangible personal property to a customer who resells

12 it). The Taxpayer was not selling tangible personal property; it was selling IT services. [Admin.

13 file; Testimony of Mr. Lamont; Testimony of Ms. Tapia]. Therefore, the NTTC was not the proper

14 type to cover the sale of the Taxpayer’s services. See 3.2.201.8 NMAC (C) (noting that each type

15 of NTTC is limited to the particular type of deduction). The Type 9 NTTC also failed to prove that

16 the Taxpayer is entitled to take the deduction for the resale of its services. See NMSA 1978, § 7-9-

17 48.

18 The Taxpayer argued during the audit that its sales should not be subject to state tax because

19 it was providing services for a federal agency on federal property. [Ex. A]. Sales of tangible

20 personal property to a government agency are deductible. See NMSA 1978, § 7-9-54. This

21 deduction does not extend to sales of services to a government agency. See id. See also 3.2.212.9

22 NMAC (2001).

23 Accepted in good faith.

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1 “When a person accepts in good faith a properly executed [NTTC] from the purchaser, the

2 properly executed [NTTC] shall be conclusive evidence that the proceeds from the transaction are

3 deductible from the person’s gross receipts.” NMSA 1978, § 7-9-43 (D). See also Leaco Rural Tel.

4 Coop. v. Bureau of Revenue, 1974-NMCA-076, ¶ 22, 86 N.M. 269 (holding that the taxpayer was

5 not entitled to deduct the sales of the phone services, but also holding that the taxpayer was not

6 liable for the tax because the NTTC that it timely accepted in good faith protected it from liability).

7 See also CCA of Tennessee, LLC v. N.M. Taxation and Revenue Dep’t, No. A-1-CA-37548, mem.

8 op. (NMCA, January 21, 2021) (non-precedential) (holding that the NTTC timely accepted in good

9 faith provided the taxpayer safe harbor from its tax liability even though the sale was not

10 deductible). See also Continental Inn v. N.M. Taxation and Revenue Dep’t, 1992-NMCA-030, ¶

11 12-13, 113 N.M. 588. See also Gas Co. v. O’Cheskey, 1980-NMCA-085, ¶ 12, 94 N.M. 630.p

12 An NTTC does not transform a taxable transaction into a nontaxable transaction. See

13 Continental Inn, 1992-NMCA-030, ¶ 12-13. See also Gas Co., 1980-NMCA-085, ¶ 12. See also

14 McKinley Ambulance Serv. v. Bureau of Revenue, 1979-NMCA-026, 92 N.M. 599 (noting that a

15 NTTC is conclusive evidence only if the NTTC applies to the transaction at issue). See also

16 Arco Materials, Inc. v. State of New Mexico Taxation and Revenue Dep’t., 1994-NMCA-062,

17 118 N.M. 12, overruled on other grounds by Blaze Constr. Co. v. Taxation and Revenue Dep’t.,

18 1995-NMSC-110, 118 N.M. 647 (holding that the seller had a duty to know that a previously

19 valid NTTC had been invalidated by a change in the statute that disallowed the previously

20 allowed deduction).

21 Acceptance of an NTTC in good faith “is determined at the time of each transaction.”

22 3.2.201.14 NMAC (2001). The safe harbor protection will be conclusive when three

23 requirements are met; the acceptance of the NTTC 1) must be timely, 2) must be in good faith,

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1 and 3) the NTTC must be properly executed. See Leaco Rural, 1974-NMCA-076, ¶ 15. See also

2 Continental Inn, 1992-NMCA-030. See also Gas Co., 1980-NMCA-085. See also CCA, No. A-

3 1-CA-37548. A timely NTTC “conveys a message to the seller that the use of the NTTCs is

4 such that the seller is entitled to deductions”. Continental Inn, 1992-NMCA-030, ¶ 13. See also

5 Gas Co., 1980-NMCA-085, ¶ 12. See also CCA, No. A-1-CA-37548, ¶ 27.

6 The Taxpayer’s acceptance of the NTTC was not timely as it occurred more than 60 days

7 after the Department notified it that NTTCs were required. [Admin file; Testimony of Mr.

8 Lamont]. See also 3.2.201.8 and 3.2.201.12 NMAC. Therefore, the first criterion of the safe

9 harbor protection has not been met. See Leaco Rural, 1974-NMCA-076, ¶ 15. Moreover, the

10 Taxpayer did not rely on the NTTC to take deductions. [Ex. A]. Instead, the Taxpayer did not

11 report any gross receipts and deductions because it believed sales to the federal government on

12 federal property would be exempt from taxation. [Ex. A].

13 Penalty.

14 Penalty “shall be added to the amount assessed” when a tax is not paid on time due to

15 negligence or disregard of rules. See NMSA 1978, § 7-1-69 (A) (2007). The penalty assessed is

16 presumptively correct, and the Taxpayer has burden of proving otherwise. See 3.1.11.8 NMAC

17 (2001). Generally, a taxpayer is not considered negligent when the taxpayer relied on advice from

18 tax counsel or an accountant. See 3.1.11.10 NMAC (D) (2001).

19 The Taxpayer had a contract with a CPA firm that provided for quarterly meetings to

20 discuss state tax issues. [Admin. file]. The Taxpayer does business in multiple states. [Admin. file;

21 Testimony of Mr. Lamont]. The Taxpayer was reporting and paying the withholding tax in New

22 Mexico. [Ex. A]. Although the CPA firm did not claim to be experts in the taxes of every state,

23 they reviewed the Taxpayer’s files and advised that the Taxpayer was in compliance with the state

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1 tax regulations in every state where it was doing business. [Admin. file; Testimony of Mr. Lamont].

2 Upon learning that the CPA firm was incorrect about the New Mexico state tax obligations, the

3 Taxpayer fired that CPA firm and found another to consult. [Admin. file; Testimony of Mr.

4 Lamont].

5 Based on the totality of the evidence, the Taxpayer has met its burden. Consequently, the

6 Taxpayer was not negligent in failing to report and pay its gross receipts taxes. Therefore, the

7 penalty is abated.

8 Interest.

9 Interest “shall be paid” on taxes that are not paid by their due date. NMSA 1978, § 7-1-67

10 (A) (2013). The word “shall” indicates that the assessment of interest is mandatory, not

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

12 22, 146 N.M. 24. There are some instances when interest will not be due, such as when a managed

13 audit is done and promptly paid. See NMSA 1978, § 7-1-67 (A) (1-7).

14 There was no evidence that any of these exceptions apply to the Taxpayer’s assessment. See

15 id. The assessment of interest is not designed to punish, but to compensate the state for the time

16 value of unpaid revenues. Because the tax was not paid when it was due, interest was properly

17 assessed.

18 CONCLUSIONS OF LAW

19 A. The Taxpayer filed a timely, written protest of the Department’s assessment and

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

21 B. The first hearing was timely set and held within 90 days of the request for hearing.

22 See NMSA 1978, Section 7-1B-8 (2019).

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1 C. The Taxpayer failed to establish that it was entitled to take a deduction for the sale of

2 its services to Cannon. See NMSA 1978, § 7-9-48, § 7-9-43. See also 3.2.201.8 and 3.2.201.12

3 NMAC.

4 D. The Taxpayer’s possession of the NTTC was not timely, as it occurred more than 60

5 days after the Department notified it that NTTCs were required. See 3.2.201.8 and 3.2.201.12

6 NMAC.

7 E. As the Taxpayer’s acceptance of the NTTC was not timely, the safe harbor

8 protection does not apply. See id. See also 3.2.201.14 NMAC. See also Leaco Rural, 1974-

9 NMCA-076, ¶ 15. See also Continental Inn, 1992-NMCA-030. See also Gas Co., 1980-NMCA-

10 085. See also CCA, No. A-1-CA-37548.

11 F. The Taxpayer consulted with a CPA firm and relied on its advice regarding their

12 multistate tax issues. Therefore, the Taxpayer was not negligent, and penalty is abated. See

13 NMSA 1978, 7-1-69. See also 3.1.11.11 NMAC.

14 G. The Taxpayer failed to overcome the presumption that the assessment of tax and

15 interest was correct. See NMSA 1978, § 7-1-17, § 7-1-67.

16 For the foregoing reasons, the Taxpayer’s protest IS DENIED IN PART AND

17 GRANTED IN PART. IT IS ORDERED that the $9,516.33 penalty is HEREBY ABATED, and

18 the Taxpayer remains liable for the $47,581.59 in gross receipts tax and $6,951.13 4 in interest.

19 Interest continues to accrue until the tax principal is paid.

20 DATED: May 21, 2021.

21 Dee Dee Hoxie
22 Dee Dee Hoxie
4
This was the amount of interest due at the time of the assessment. An updated amount was not provided.
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1 Hearing Officer
2 Administrative Hearings Office
3 P.O. Box 6400
4 Santa Fe, NM 87502

5 NOTICE OF RIGHT TO APPEAL

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

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

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

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

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

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

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

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

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

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

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

Invictus Technical Solutions, LLC
Case No. 20.08-110A
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1 CERTIFICATE OF SERVICE

2 On May 21, 2021, a copy of the foregoing Decision and Order was submitted to the parties

3 listed below in the following manner:

4 Email Email

5 INTENTIONALLY BLANK
6
7 John Griego
8 Legal Assistant
9 Administrative Hearings Office
10 P.O. Box 6400
11 Santa Fe, NM 87502

Invictus Technical Solutions, LLC
Case No. 20.08-110A
page 13 of 13