New Mexico levied my bank account for unpaid gross receipts tax I never protested — can I get the money back by arguing my work was really out of state?

Plain-English summary

The protest was denied. Darlene Krueger was an independent contractor who provided good-clinical-practice and quality-assurance auditing services for the New Mexico VA Health Care Center in Albuquerque, traveling frequently to sites around the country. The Department issued four gross receipts tax assessments for 2007–2010 totaling $79,786.93. She did not protest, pay, or secure them within 90 days, so she became a "delinquent taxpayer" and the assessments became final. In March 2015 the Department levied $82,072.68 from her bank account, and in December 2018 she filed a claim to get that money refunded.

Hearing Officer Dee Dee Hoxie denied the protest on two levels.

1. No "prior right" to the levied money. A person can claim a refund of levied property only if they have a "prior right" to it (Section 7-1-26) — typically a secured creditor, someone who wasn't a delinquent taxpayer, or where the levy was legally deficient. Ms. Krueger was none of those: she wasn't a secured creditor of her own funds, there was no claim the levy was defective, and she was a delinquent taxpayer when the levy issued. So the refund was properly denied.

2. On the merits, the receipts were taxable anyway. Because the statute is unclear whether the "pay the tax and claim a refund" route to revive a lapsed protest (Section 7-1-24(F)(2)) requires a voluntary payment or can be satisfied by an involuntary levy, the hearing officer resolved that ambiguity in the taxpayer's favor and considered her substantive argument — then still ruled against her.

• She claimed the Section 7-9-57 deduction for services "sold to an out-of-state buyer," arguing most of her work happened outside New Mexico. But that deduction's threshold element is that the buyer is out of state — it's about who bought the service, not where it was performed. Her only buyer was the New Mexico VA Health Care Center, located in Albuquerque. That it was administered from Washington, D.C., and paid her through Austin, Texas, didn't change the in-state buyer identified in the written contract (the best evidence).
• The fact that the buyer was a federal instrumentality doesn't block New Mexico's gross receipts tax on the contractor (U.S. v. New Mexico, 455 U.S. 720).
• Independently, her reconstructed invoice/expense lists didn't match her 1099 forms (the best evidence of what she was paid) and were built on admittedly inadequate records, so she failed her burden of proof under the Gemini framework.

Result: protest DENIED.

What this means for you

If you get a New Mexico assessment, the 90-day clock is everything

If you don't protest, pay, or post security within 90 days, the assessment becomes final and you become a "delinquent taxpayer" the Department can collect from by levy. Your only way back is to pay the tax and claim a refund within the limitations period — and even then, you have to win on the merits. Don't let the protest window lapse.

You generally can't "refund" money the state levied from you

A claim to recover levied funds requires a "prior right" to that property — a secured creditor's interest, a non-delinquent owner, or a defective levy. A delinquent taxpayer trying to claw back their own properly seized funds does not have a prior right.

The Section 7-9-57 "out-of-state buyer" deduction is about the buyer, not the work

This deduction turns on where your buyer is, not where you perform the service. If your customer is a New Mexico location — even a branch of a national or federal organization headquartered elsewhere and paying you from another state — your receipts are generally New Mexico gross receipts. Look at who contracted with you and where that buyer sits.

Contracting with the federal government doesn't exempt you

An independent contractor's receipts are subject to New Mexico gross receipts tax even when the customer is a federal agency or instrumentality (U.S. v. New Mexico).

Records beat reconstructions

When your recreated numbers conflict with your 1099s, the 1099s win. Keep contemporaneous records; a good-faith after-the-fact reconstruction that doesn't reconcile to your tax forms won't carry your burden of proof.

Common questions

Q: New Mexico levied my bank account for taxes I never protested. Can I get the money back?
A: Usually not. Once you miss the 90-day protest/pay/secure window you become a delinquent taxpayer and the assessment is final. To recover levied funds you'd need a "prior right" to them, which a delinquent taxpayer reclaiming their own properly seized money does not have.

Q: Most of my work was out of state. Doesn't that make my receipts non-taxable?
A: Not under Section 7-9-57, which asks whether your buyer is out of state — not where you did the work. If your buyer is a New Mexico location, the deduction doesn't apply no matter how much you traveled.

Q: My client is a New Mexico branch of a federal agency headquartered in D.C. Who's the "buyer"?
A: The entity that contracted with you and that your written contract identifies — here, the Albuquerque VA center. Its national administration and out-of-state payment processing didn't make it an out-of-state buyer.

Q: Does contracting with the federal government exempt me from New Mexico gross receipts tax?
A: No. New Mexico may tax an independent contractor's receipts even when the customer is a federal agency (U.S. v. New Mexico).

Q: Can I rely on this decision for my own situation?
A: Not directly. A Decision and Order resolves one taxpayer's protest on its specific facts and is not a general ruling or advisory opinion of the Department. It does illustrate New Mexico's finality/levy rules and the buyer-location focus of the Section 7-9-57 deduction.

Citations and references

Statutes and regulations:

• NMSA 1978, § 7-1-24 — protest deadline; an unprotested assessment becomes final; pay-and-claim-refund route to revive protest rights
• NMSA 1978, § 7-1-16 — a taxpayer who doesn't pay, secure, or protest within 90 days becomes a "delinquent taxpayer"
• NMSA 1978, § 7-1-26 (2021) — refund/credit claims, including a "prior right" claim to levied property
• NMSA 1978, § 7-1-31; §§ 7-1-32 through 7-1-36 — levy/seizure authority and requirements for a valid levy
• NMSA 1978, § 7-1-17 (2007) — assessment presumed correct
• NMSA 1978, § 7-9-4 (2010) — gross receipts tax on those engaging in business; § 7-9-3.3 (2019) — "engaging in business"; § 7-9-3.5(A)(1) (2019) — receipts from performing services; § 7-9-5(A) (2019) — presumption of taxability
• NMSA 1978, § 7-9-57 — deduction for the sale of services to an out-of-state buyer (threshold element: the buyer is out of state)
• NMSA 1978, § 7-1B-8 — hearing procedures; § 7-1-25 (2015) — appeal to the New Mexico Court of Appeals
• Regulation 3.1.6.13 NMAC — presumption of correctness extends to penalty and interest; 22.600.3.8, 22.600.1.18, 22.600.3.24 NMAC — AHO procedure and taxpayer burden

Cases:

• U.S. v. New Mexico, 455 U.S. 720 (1982) (New Mexico may impose gross receipts tax on independent contractors even when they contract with the federal government)
• Gemini Las Colinas, LLC v. N.M. Taxation & Revenue Dep't, -NMCA-, No. A-1-CA-38672 (taxpayer bears both the burden of production and the burden of persuasion)
• Hi-Country Buick GMC v. Taxation & Revenue Dep't, 2016-NMCA-027 ("prior right" and the priority of secured creditors over the state)
• In re Kilmer, 2004-NMCA-122, 136 N.M. 440 (purpose of protest deadlines is to avoid stale claims and stabilize revenue)
• Marbob Energy Corp. v. N.M. Oil Conservation Comm'n, 2009-NMSC-013, 146 N.M. 24 (plain-language statutory interpretation)
• Security Escrow Corp. v. State Taxation & Revenue Dep't, 1988-NMCA-068, 107 N.M. 540; Wing Pawn Shop v. Taxation & Revenue Dep't, 1991-NMCA-024, 111 N.M. 735 (deductions construed strictly against the taxpayer; taxpayer must clearly establish entitlement)
• Public Service Co. v. N.M. Taxation & Revenue Dep't, 2007-NMCA-050, 141 N.M. 520; Till v. Jones, 1972-NMCA-046, 83 N.M. 743 (burden on the taxpayer to prove a deduction)
• El Centro Villa Nursing Ctr. v. Taxation & Revenue Dep't, 1989-NMCA-070, 108 N.M. 795; Archuleta v. O'Cheskey, 1972-NMCA-165, 84 N.M. 428; N.M. Taxation & Revenue Dep't v. Casias Trucking, 2014-NMCA-099 (presumption of correctness)

Source

• Listing: New Mexico Decisions & Orders
• Decision post: Darlene H Krueger
• Decision PDF: D&O 23-08

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 DARLENE H. KRUEGER
6 TO THE DENIAL OF REFUND
7 ISSUED UNDER LETTER ID NO. L1919510704

8 v. AHO No. 19.06-116R, D&O No. 23-08

9 NEW MEXICO TAXATION AND REVENUE DEPARTMENT

10 DECISION AND ORDER

11 On January 20, 2023, Hearing Officer Dee Dee Hoxie, Esq. conducted a hearing on the

12 merits of the protest to the denial of refund. The Taxation and Revenue Department (Department)

13 was represented by Timothy Williams, Staff Attorney. Angelica Rodriguez, Auditor, also

14 appeared on behalf of the Department. Darlene H. Krueger (Taxpayer) was present with her

15 attorney, Tracy Sprouls. The Taxpayer and Ms. Rodriguez testified. The Hearing Officer took

16 notice of all documents in the administrative file. The Taxpayer’s Exhibits #11 thru #20 and #22

17 thru #27, and the Department’s Exhibits A thru D and G thru J2 were admitted. A more detailed

18 description of exhibits submitted at the hearing is included on the Administrative Exhibit

19 Coversheet. Final pleadings were due on March 3, 2023.

20 The main issue to be decided is whether the Taxpayer is entitled to a refund of the

21 amounts seized by a warrant of levy. The Hearing Officer considered all of the evidence and

22 arguments presented by both parties. Because the Taxpayer failed to prove that she was entitled

1
Exhibit 1 includes the page marked as Exhibit 1a.
2
Exhibits H, I, and J were submitted after the hearing by the deadline given at the hearing. Exhibit J was originally
marked by the Department as Exhibit G. However, Exhibit G had already been admitted during the hearing;
therefore, the second Exhibit G was changed to J by the Hearing Officer.
Darlene H. Krueger
Case No. 19.06-116R
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1 to a refund, the Hearing Officer finds in favor of the Department. IT IS DECIDED AND

2 ORDERED AS FOLLOWS:

3 FINDINGS OF FACT

4 Procedural Findings

5 1. On January 8, 2019, the Department issued a denial of refund to the Taxpayer.

6 The Taxpayer’s refund claim was denied for $82,072.68 for the warrant of levy on outstanding

7 tax periods from January 1, 2007 through December 31, 2010. [Exhibit B].

8 2. On April 3, 2019, the Taxpayer filed a timely written protest to the denial of

9 refund. [Exhibit C].

10 3. On April 10, 2019, the Department acknowledged its receipt of the protest.

11 [Admin. file L0555431088].

12 4. On June 19, 2019, the Administrative Hearings Office first learned of the

13 Taxpayer’s protest when the Department filed a request for hearing. The hearing request was

14 filed 70 days after the Department acknowledged its receipt of the protest. [Exhibit A].

15 5. On July 3, 2019, a telephonic scheduling hearing was conducted, which was

16 within 90 days of the date that the protest was acknowledged. See NMSA 1978, §7-1B-8

17 (2015)3. See also 22.600.3.8 NMAC (2018)4. [Admin. file].

18 6. Several scheduling hearings were conducted before the hearing on the merits5.

19 [Admin. file].

3
The statute in effect at the time that the Taxpayer’s protest was filed. The statute was amended in 2019 to require a
hearing within 90 days of the request, rather than the protest.
4
The regulation in effect at the time that the Taxpayer’s protest was filed. The regulation was amended in 2020.
5
A comprehensive history of the protest may be acquired by referring to the administrative file.
Darlene H. Krueger
Case No. 19.06-116R
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1 7. At the hearing on the merits, the Hearing Officer requested additional exhibits

2 related to the underlying assessment and levy with a deadline for submission by January 27,

3 2023. The Taxpayer had the opportunity to respond to any filed exhibits by February 3, 2023.

4 The Hearing Officer also requested that the parties brief the issue of the scope of the protest for a

5 claim for refund on a warrant of levy as it related to the Taxpayer’s status as a delinquent

6 taxpayer with a deadline of February 24, 2023. [Admin. file].

7 8. The Department filed Exhibits H, I, and J on January 27, 2023. The Taxpayer did

8 not respond to those exhibits by February 3, 2023. [Admin. file].

9 9. On February 7, 2023, the parties filed a motion for a telephonic hearing to clarify

10 the briefing issue, and a telephonic hearing was conducted on February 10, 2023. The Hearing

11 Officer requested that the parties brief the issue of the scope of the protest and whether or not the

12 assessment should be considered final when the Taxpayer did not file a protest to the assessment

13 and did not pay the assessment. The deadline for briefing was extended to March 3, 2023.

14 [Admin. file].

15 10. The Taxpayer filed a brief on March 3, 2023. The Department filed its brief on

16 March 6, 2023. [Admin. file].

17 Substantive Findings

18 11. On November 12, 2013, the Department issued four assessments to the Taxpayer

19 for gross receipts tax, penalty, and interest for tax periods from January 1, 2007 through

20 December 31, 2010. The total liability for the four assessments at that time was $79,786.93.

21 [Exhibit J].

Darlene H. Krueger
Case No. 19.06-116R
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1 12. The Taxpayer did not file a protest the assessment, did not provide security for

2 payment of the assessment, and did not pay the assessment within 90 days of November 12,

3 2013. [Admin. file; Testimony of Taxpayer; Testimony of Ms. Rodriguez; Exhibit H; Exhibit I].

4 13. Ninety days after the assessments on November 12, 2013 was February 10, 2014.

5 On that date, the Taxpayer became a delinquent taxpayer. See NMSA 1978, § 7-1-16 (2019)6.

6 14. On March 9, 2015, more than a year after the assessments and more than a year

7 after the Taxpayer became a delinquent taxpayer, the Department served a warrant of levy on the

8 Taxpayer’s bank account for $82,072.687. [Exhibit I].

9 15. On March 31, 2015, the bank surrendered $82,072.68 from the Taxpayer’s

10 account to the Department pursuant to the warrant of levy. [Exhibit H].

11 16. On December 27, 2018, the Taxpayer filed a claim for refund of $82,072.68 that

12 was seized by virtue of the warrant of levy. [Testimony of Taxpayer; Exhibit D].

13 17. The Taxpayer claimed her refund based on her assertion that much of her income

14 from 2007 through 20108 was derived from services performed outside of New Mexico for out-

15 of-state buyers and was exempt from the gross receipts tax. [Testimony of Taxpayer; Exhibit D].

16 18. The Taxpayer contracted with the New Mexico VA Health Care Center on San

17 Pedro Drive in Albuquerque, New Mexico to provide services on good clinical practice and

18 quality assurance for the VA Cooperative Studies Program. [Testimony of Taxpayer; Exhibit

19 1.19].

6
Generally, citations will be to the current version of the statute unless there is a material difference between the
current version and the version in effect at the time of the Taxpayer’s assessment.
7
The difference from the originally assessed amount stems from the additional interest that accrued.
8
Further references to Taxpayer’s work and services are in reference to this time frame.
9
The contract was executed in 2009, but the Taxpayer acknowledged that it was a continuation and formalization of
the work she began doing in 2007.
Darlene H. Krueger
Case No. 19.06-116R
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1 19. Invoices and payments for the Taxpayer’s services were handled by the

2 Department of Veterans Affairs in Austin, TX. [Testimony of Taxpayer; Exhibit 1.1-1.2].

3 20. The contract provided for two categories of service, one that occurred solely in

4 New Mexico at the Taxpayer’s place of business or at the VA office in Albuquerque, and one

5 that required travel to other sites. [Exhibit 1.4].

6 21. The contract specified that the Taxpayer was providing services to the New

7 Mexico VA Health Care System Cooperative Studies Program. [Exhibit 1.4].

8 22. The Taxpayer’s services were to be delivered to the VA Cooperative Studies

9 Program on Centre Avenue in Albuquerque, New Mexico. [Testimony of Taxpayer; Exhibit

10 1.1].

11 23. The contract estimated that the services performed in New Mexico would be 2040

12 hours, and that the services requiring travel would be 36 trips per year. [Exhibit 1.4-1.6].

13 24. The contract indicated that the Taxpayer was responsible for all applicable taxes

14 and that questions regarding New Mexico’s tax requirements should be directed to the

15 Department. [Exhibit 1.6].

16 25. The purpose of the contract was for the Taxpayer to provide services to the VA

17 Cooperative Studies Program through the Site Monitoring, Auditing and Resource Team

18 (SMART) located in Albuquerque, New Mexico. [Exhibit 1.13].

19 26. The contract indicated that the work shall be performed at various sites

20 throughout the country, the Taxpayer’s place of business, and the SMART office in

21 Albuquerque, New Mexico. [Exhibit 1.15].

22 27. The contract required the Taxpayer to maintain liability and proper damage

23 insurance with limits as required by the laws of the State of New Mexico. [Exhibit 1.28].

Darlene H. Krueger
Case No. 19.06-116R
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1 28. The Taxpayer contracted to perform services only with the New Mexico VA

2 Health Care Center in Albuquerque, New Mexico. [Testimony of Taxpayer; Exhibit 1].

3 29. The Taxpayer had no other source of income than her contract with the New

4 Mexico VA Health Care Center in Albuquerque, New Mexico. [Testimony of Taxpayer].

5 30. The Taxpayer had the option to subcontract in order to fulfill her “obligations to

6 NMVAHCS”. [Exhibit 1.13].

7 31. The Taxpayer traveled frequently to perform her services for the New Mexico VA

8 Health Care Center to various locations throughout the country. [Testimony of Taxpayer;

9 Exhibit 17-20].

10 32. The Taxpayer occasionally traveled on short notice when a for-cause audit was

11 directed to be done by the central VA office in Washington, DC. [Testimony of Taxpayer;

12 Exhibit 27].

13 33. After visiting sites outside of New Mexico, the Taxpayer returned to New Mexico

14 and prepared reports which were delivered to the VA office in Albuquerque, unless they were a

15 for-cause audit. Reports on for-cause audits are highly confidential and were submitted to the

16 office in Washington, DC. [Testimony of Taxpayer; Exhibit 1].

17 34. The Taxpayer estimated that she traveled outside of New Mexico for the VA

18 office 20 to 30 times per year. [Testimony of Taxpayer; Exhibit 2-5].

19 35. The Taxpayer estimated that the number of for-cause audits she traveled for in

20 2008 was four, in 2009 was three, and in 2010 was one. [Testimony of Taxpayer].

21 DISCUSSION
22 Burden of proof.

23 The Taxpayer’s claim for refund stems from a warrant of levy that was served on the

24 Taxpayer’s bank account for the unpaid assessments. Assessments by the Department are

Darlene H. Krueger
Case No. 19.06-116R
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1 presumed to be correct. See NMSA 1978, § 7-1-17 (2007). Therefore, the assessments issued to

2 the Taxpayer are presumed to be correct. See id. See El Centro Villa Nursing Ctr. v. Taxation

3 and Revenue Department, 1989-NMCA-070, 108 N.M. 795. See also Archuleta v. O'Cheskey,

4 1972-NMCA-165, ¶11, 84 N.M. 428. See also N.M. Taxation & Revenue Dep't v. Casias

5 Trucking, 2014-NMCA-099, ¶8. The presumption extends to the assessment of penalty and

6 interest. See 3.1.6.13 NMAC (2001). The Taxpayer “bears both the burden to produce evidence (in

7 order to overcome the presumption of correctness) and the burden to ultimately prove [her] case by

8 a preponderance of evidence.” Gemini Las Colinas, LLC v. N.M. Taxation & Revenue Dep’t, __-

9 NMCA-__, ¶ 27, No. A-1-CA-38672 (March 13, 2023)10. See also 22.600.1.18 (A) NMAC (2018)

10 and 22.600.3.24 (B) NMAC (2020).

11 Protesting an assessment.

12 Generally, a person may file a written protest to an assessment within 90 days of the

13 assessment. See NMSA 1978, § 7-1-24 (2019). Failure to file a timely protest means that the

14 “tax assessed and not protested becomes final”. See NMSA 1978, § 7-1-24 (F) (1) (2019)11.

15 Failure to file a timely protest also means that “the taxpayer is deemed to have waived the right

16 to protest the assessment, unless the taxpayer pays the tax and claims a refund”. NMSA 1978, §

17 7-1-24 (F) (2) (2019)12. A taxpayer who fails to pay, to provide security for payment, or to

18 protest an assessment within 90 days “becomes a delinquent taxpayer”. NMSA 1978, § 7-1-16

19 (A) (2019)13. Failure to file a timely protest also means that the Department may proceed to

10
Because this is a recent opinion from the Court of Appeals, it is unknown at the time of this decision and order
whether certiorari will be sought, let alone whether it might be granted or denied.
11
This provision was added in the 2017 version of the statute. See NMSA 1978, § 7-1-24 (2017).
12
A similar provision appears in the 2015 version of the statute. The 2013 version does not contain such a
provision.
13
This was also true of the previous version of the statute. See NMSA 1978, § 7-1-16 (2013).
Darlene H. Krueger
Case No. 19.06-116R
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1 enforce collection on a delinquent taxpayer. See NMSA 1978, § 7-1-24 (F) (3) (2019)14. All

2 parts of a statute are to be read together, in conjunction with other statutes, to achieve a

3 harmonious whole. See Team Specialty Prods. v. N.M. Taxation & Revenue Dep’t, 2005-

4 NMCA-020, ¶ 9, 137 N.M. 50. See also Key v. Chrysler Motors Corp., 1996-NMSC-038, ¶ 14,

5 121 N.M. 764. See also State ex rel. Quintana v. Schnedar, 1993-NMSC-033, ¶ 4, 115 NM 573.

6 The statutes, read together, indicate that a taxpayer who does not within 90 days pay an

7 assessment, provide security for payment of the assessment, or protest the assessment generally

8 will be deemed to have waived the right to protest the assessment and the assessment becomes

9 final. See NMSA 1978, § 7-1-24. However, a taxpayer may revitalize their right to protest the

10 assessment by paying the assessment and claiming a refund within the statute of limitations. See

11 id. See also NMSA 1978, § 7-1-26. This revitalization requires that “the taxpayer pays the tax”.

12 NMSA 1978, § 7-1-24 (F) (2). In this case, the Department seized the funds by warrant of levy

13 from the Taxpayer’s account.

14 The Department can enforce collection on a delinquent taxpayer, and nothing in the

15 statutes indicates that such collection action by the Department revitalizes a taxpayer’s right to

16 protest an assessment. See NMSA 1978, § 7-1-24. However, nothing in the statute explicitly

17 requires a taxpayer’s payment to be voluntary either. See id. The first step in statutory

18 interpretation is to look at the plain language of the statute and to refrain from further

19 interpretation if the plain language is not ambiguous. See Marbob Energy Corp. v. N.M. Oil

20 Conservation Comm’n., 2009-NMSC-013, 146 N.M. 24. Statutes are to be applied as written

21 unless a literal use of the words would lead to an absurd result. See N.M. Real Estate Comm’n. v.

22 Barger, 2012-NMCA-081, ¶ 7.

14
Similar provisions were previously found in Subsection C of the statute. See NMSA 1978, § 7-1-24 (2013) and
(2015).
Darlene H. Krueger
Case No. 19.06-116R
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1 If a statute is ambiguous or would lead to an absurd result, then it should be construed in

2 accordance with the legislative intent or spirit and reason for the statute, even though it may

3 require a substitution or addition of words. See id. See also State ex rel. Helman v. Gallegos,

4 1994-NMSC-023, 117 N.M. 346. When a statute is ambiguous or would lead to an absurd result,

5 it should be construed according to its obvious purpose. See T-N-T Taxi Co. v. N.M. Pub.

6 Regulation Comm’n, 2006-NMSC-016, ¶ 5, 139 N.M. 550. The purpose of the statute is

7 twofold, to allow taxpayers to protest and to set deadlines for those protests. See NMSA 1978, §

8 7-1-24. The purpose of enforcing deadlines is to “avoid stale claims, which protect the

9 Department’s ability to stabilize and predict, with some degree of certainty, the funds it collects

10 or manages.” In re Kilmer, 2004-NMCA-122, ¶ 16, 136 N.M. 440 (a case dealing with the

11 statute of limitations for protesting an inaction by the Department). Allowing a protest to the

12 assessment after the Department has enforced collection against a delinquent taxpayer would

13 create confusion and uncertainty in the state’s ability and authority to accurately project and

14 collect revenue. As the deadline for protest is ambiguous as to whether a taxpayer’s payment

15 must be voluntary or can be involuntary, the underlying arguments on the assessment will be

16 considered. See NMSA 1978, § 7-1-26.

17 Refund claims on warrants of levy.

18 A person “who claims a prior right to property in possession of the department pursuant

19 to a levy” may claim a refund within three years of the end of the calendar year in which the

20 property was levied. NMSA 1978, § 7-1-26 (2021). “Prior right” is not defined in the statute.

21 See id. Logically, a secured creditor would have a prior right to the Department. See Hi-Country

22 Buick GMC v. Taxation & Revenue Dep’t, 2016-NMCA-027, ¶ 22 (noting that the state would

Darlene H. Krueger
Case No. 19.06-116R
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1 likely be in line behind secured creditors with little funds left to satisfy the accrued taxes). There

2 was no evidence that the Taxpayer was a secured creditor of her own funds.

3 However, a taxpayer may claim a prior to their own property if that property was seized

4 improperly. See NMSA 1978, § 7-1-26. Warrants of levy must meet certain criteria. See

5 NMSA 1978, § 7-1-32 through § 7-1-36. There was no evidence or argument that the levy used

6 against the Taxpayer’s account was deficient.

7 Likewise, if the funds seized by levy were the property of a person who was not a

8 delinquent taxpayer, that person would have a prior right to their funds. See NMSA 1978, § 7-1-

9 24 (allowing enforcement collection against delinquent taxpayers). See also NMSA 1978, § 7-1-

10 31 (allowing the Department to proceed with collection on delinquent taxpayers by seizure by

11 levy).

12 The assessments against the Taxpayer were made on November 12, 2013. [Exhibit J].

13 Ninety days after the assessments was February 10, 2014. By function of statute, the Taxpayer

14 became a delinquent taxpayer on February 10, 2014 because she had not paid the tax, had not

15 provided security for payment, and had not protested the assessment by that date. See NMSA

16 1978, § 7-1-16. As of February 10, 2014, the Department was authorized to enforce collection

17 against the Taxpayer. See NMSA 1978, 7-1-24 and § 7-1-31. As the Taxpayer was a delinquent

18 taxpayer, the Taxpayer did not establish that she had a prior right to the property seized by the

19 Department pursuant to the levy. See NMSA 1978, § 7-1-26. The claim for refund was properly

20 denied. See id.

21 Gross receipts tax.

22 The majority of the arguments and evidence at the hearing centered on the correctness of

23 the assessment. Given the ambiguity in the statute as to whether an involuntary payment is

Darlene H. Krueger
Case No. 19.06-116R
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1 sufficient to revitalize a taxpayer’s right to protest an assessment, the substance of the arguments

2 and evidence was considered. See NMSA 1978, § 7-1-26. Based on the evidence presented, the

3 Taxpayer did not persuasively establish that she was entitled to a refund.

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

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

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

7 (2019). Gross receipts include the total amount received “from performing services in New

8 Mexico.” NMSA 1978, § 7-9-3.5 (A) (1) (2019). There is a statutory presumption that “all receipts

9 of a person engaging in business are subject to the gross receipts tax.” NMSA 1978, § 7-9-5 (A)

10 (2019). The Taxpayer provided New Mexico VA Health Care Center on San Pedro Drive in

11 Albuquerque, New Mexico with services on good clinical practice and quality assurance for the

12 VA Cooperative Studies Program. [Exhibit 1]. Presumptively, the Taxpayer’s receipts for

13 providing those services are subject to the gross receipts tax. See NMSA 1978, § 7-9-4, §7-9-5.

14 The Taxpayer argues that she is entitled to take the deduction under Section 7-9-57 for

15 the sale of her services to out-of-state buyers and because most of her services were performed

16 outside of New Mexico. The burden is on the Taxpayer to prove that she is entitled to an

17 exemption or deduction. See Public Services Co. v. N.M. Taxation and Revenue Dep’t., 2007-

18 NMCA-050, ¶ 32, 141 N.M. 520. See also Till v. Jones, 1972-NMCA-046, 83 N.M. 743.

19 “Where an exemption or deduction from tax is claimed, the statute must be construed strictly in

20 favor of the taxing authority, the right to the exemption or deduction must be clearly and

21 unambiguously expressed in the statute, and the right must be clearly established by the

22 taxpayer.” Sec. Escrow Corp. v. State Taxation and Revenue Dep’t., 1988-NMCA-068, ¶ 8, 107

23 N.M. 540. See also Wing Pawn Shop v. Taxation and Revenue Dep’t., 1991-NMCA-024, ¶ 16,

Darlene H. Krueger
Case No. 19.06-116R
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1 111 N.M. 735. See also Chavez v. Commissioner of Revenue, 1970-NMCA-116, ¶ 7, 82 N.M.

2 97. See also Pittsburgh and Midway Coal Mining Co. v. Revenue Division, 1983-NMCA-019,

3 99 N.M. 545.

4 The Taxpayer tried to recreate a list of invoices and expenses to demonstrate her in-state

5 and out-of-state work. [Exhibit 2 through Exhibit 10; Exhibit 21 through Exhibit 25]. However,

6 she admitted that it was very difficult for her to recreate this list of invoices and expenses, as she

7 did not keep adequate records regarding expenses and fees. [Exhibit 17 through Exhibit 25].

8 The Taxpayer claims that her total gross receipts for the tax years from 2007 to 2010 were

9 $901,686.17, and that only $31,120.00 was taxable in New Mexico. [Exhibit 6]. The Taxpayer

10 admitted that elements of her out-of-state assignments were performed in New Mexico. [Exhibit

11 2 through Exhibit 5]. In fact, the Taxpayer argues that most of the gross receipts that she admits

12 are subject to New Mexico tax are from creating and filing reports in New Mexico on out-of-

13 state assignments. [Exhibit 2 through Exhibit 5]. The Taxpayer argues that most of her gross

14 receipts, including for work that was conducted solely within the state, are deductible. [Exhibit 2

15 through Exhibit 5].

16 The Taxpayer submitted her 1099 forms for three of the four years in dispute. The

17 Hearing Officer finds that these federal tax forms are the best evidence of the amount of

18 compensation that the Taxpayer received, especially in light of the Taxpayer’s acknowledged

19 challenges in recreating her list of invoices and expenses. [Exhibit 11 through Exhibit 13]. The

20 Taxpayer’s calculations for two of the three provided years do not match the compensation

21 reflected on the 1099 forms those years. [Exhibit 6; Exhibit 11; Exhibit 12]. The Taxpayer’s

22 calculations also do not match the total provided by the invoice lists. [Exhibit 6; Exhibit 8;

23 Exhibit 9]. In 2008, the Taxpayer reports total gross receipts of $241,640.21, while the 1099

Darlene H. Krueger
Case No. 19.06-116R
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1 form reports nonemployee compensation of $268,555.21. [Exhibit 6; Exhibit 11]. In 2009, the

2 Taxpayer reports total gross receipts of $222,103.35, while the 1099 form reports nonemployee

3 compensation of $215,045.82. [Exhibit 6; Exhibit 12]. In 2010, the Taxpayer’s report and the

4 1099 form both reflect a total of $225,410.77. [Exhibit 6; Exhibit 13]. The Taxpayer provides

5 one expense example per year, one year has no receipts to prove the expenses, and some receipts

6 are illegible. [Exhibit 17 through Exhibit 20]. Although it appears that the Taxpayer made a

7 good faith effort to recreate her tax records, the evidence provided is not persuasive because of

8 the inconsistencies between the 1099s and the Taxpayer’s recreated lists, which were based on

9 incomplete and inadequate records. Therefore, the Taxpayer failed to prove her case by the

10 preponderance of the evidence and failed to prove that she is entitled to a deduction. See Gemini

11 Las Colinas, LLC v. N.M. Taxation & Revenue Dep’t, -NMCA-, ¶ 27, No. A-1-CA-38672

12 (March 13, 2023). See also Public Services Co., 2007-NMCA-050, ¶ 32. See also Till, 1972-

13 NMCA-046. See also Sec. Escrow Corp., 1988-NMCA-068, ¶ 8. See also Wing Pawn Shop,

14 1991-NMCA-024, ¶ 16. See also Chavez, 1970-NMCA-116, ¶ 7. See also Pittsburgh and

15 Midway Coal Mining Co., 1983-NMCA-019.

16 The first element of the deduction is that “the sale of the service is made to an out-of-

17 state buyer”. NMSA 1978, § 7-9-57. The evidence established that the Taxpayer performed

18 services, both in New Mexico and out of state, for only one buyer, the New Mexico VA Health

19 Care Center. [Exhibit 1]. The New Mexico VA Health Care Center is administered by the VA

20 Office in Washington, DC. [Exhibit 27]. However, the New Mexico VA Health Care Center

21 was the agency that contracted with the Taxpayer and described her duties both within and

22 outside of the state. [Exhibit 1; Exhibit 14 through Exhibit 16]. The New Mexico VA Health

23 Care Center is located within the state of New Mexico at the address on San Pedro in

Darlene H. Krueger
Case No. 19.06-116R
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1 Albuquerque. [Exhibit 1; Exhibit 27]. The Taxpayer argues that the practical realities of

2 contracting with a federal agency with multiple levels of management are sufficient to prove an

3 out-of-state buyer and argues that the written contract with the in-state buyer should be

4 disregarded. The Hearing Officer finds that the contract is the best evidence of the Taxpayer’s

5 responsibilities and for whom she was working. [Exhibit 1]. Under that contract, the Taxpayer’s

6 only buyer was located in New Mexico. [Exhibit 1]. The fact that the in-state buyer was also an

7 instrumentality of the federal government does not prohibit the imposition of gross receipts tax

8 on the Taxpayer. See U.S. v. N.M., 455 US 720, 102 S. Ct. 1373 (1982) (holding that New

9 Mexico could impose its gross receipts tax on independent contractors even when their contracts

10 were with the federal government). Consequently, the Taxpayer was not entitled to a deduction

11 for sales to an out-of-state buyer. See NMSA 1978, § 7-9-57.

12 CONCLUSIONS OF LAW

13 A. The Taxpayer filed a timely written protest to the denial of refund, and jurisdiction

14 lies over the parties and the subject matter of this protest. See NMSA 1978, § 7-1B-8 (2019).

15 B. The hearing was timely set and held within 90 days of the date that the protest was

16 acknowledged. See NMSA 1978, §7-1B-8 (2015). See also 22.600.3.8 NMAC (2018).

17 C. The Taxpayer she did not protest the assessments within 90 days. See NMSA

18 1978, § 7-1-24.

19 D. The Taxpayer was a delinquent taxpayer at the time that the Department issued

20 the warrant of levy. See NMSA 1978, § 7-1-16 and § 7-1-31.

21 E. The Department was authorized to enforce collection against the Taxpayer as a

22 delinquent taxpayer. See NMSA 1978, § 7-1-24 and § 7-1-31.

Darlene H. Krueger
Case No. 19.06-116R
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1 F. Because the Taxpayer was a delinquent taxpayer, she failed to establish a prior

2 right to the property seized by the levy. See NMSA 1978, § 7-1-26.

3 G. The Taxpayer failed to prove her case by the preponderance of the evidence and

4 failed to carry her burden of persuasion that she was entitled to a deduction for performing

5 services for an out-of-state buyer as the Taxpayer’s only buyer was located within New Mexico.

6 See NMSA 1978, § 7-9-57. See also Gemini Las Colinas, LLC v. N.M. Taxation & Revenue

7 Dep’t, -NMCA-, ¶ 27, No. A-1-CA-38672 (March 13, 2023). See also Public Services Co.,

8 2007-NMCA-050, ¶ 32. See also Till, 1972-NMCA-046. See also Sec. Escrow Corp., 1988-

9 NMCA-068, ¶ 8. See also Wing Pawn Shop, 1991-NMCA-024, ¶ 16. See also Chavez, 1970-

10 NMCA-116, ¶ 7. See also Pittsburgh and Midway Coal Mining Co., 1983-NMCA-019.

11 For the foregoing reasons, the Taxpayer’s protest IS DENIED.

12 DATED: April 7, 2023.

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.

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

Darlene H. Krueger
Case No. 19.06-116R
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1 Hearings Office contemporaneous with the Court of Appeals filing so that the Administrative

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

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

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

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

6 CERTIFICATE OF SERVICE
7 On April 7, 2023, a copy of the foregoing Decision and Order was submitted to the parties

8 listed below in the following manner:

9 INTENTIONALLY BLANK

Darlene H. Krueger
Case No. 19.06-116R
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