Does New Mexico gross receipts tax apply to loan proceeds, a refunded investment, and affiliate credit-card reimbursements that a management company receives?

Plain-English summary

Warriors Management LLC provides shared "common owner entity" services to a network of assisted-living facilities owned by the Manning family (Nathan, Michael, and Jay Manning, one-third each). After a field audit, the Department assessed $72,777.61 in gross receipts tax, $14,570.39 in penalty, and $9,036.40 in interest — $96,384.40 total (Letter ID L0741418672), treating three categories of money the company received as taxable gross receipts. Warriors protested.

Hearing Officer Chris Romero granted the protest in part and denied it in part. The company did not claim any specific deduction or exemption, so the only question was whether each item fell within the statutory definition of "gross receipts" (Section 7-9-3.5) in the first place.

• Loan proceeds — $34,000, excluded. Warriors borrowed $34,000 from an affiliate (Beehive Staffing Services) to help buy a 25% interest in another company. The loan was informal — no written agreement, no interest, no maturity date — and the Department found that lack of documentation fatal. But the totality of the evidence corroborated a loan: each deposit was almost immediately matched by an outgoing check to a third party, and a running "due to" balance ($28,000 at the end of 2015) matched the year's deposits. "Although a close call," the money was a loan, not a receipt from engaging in business.
• Refund of investment — $57,000, excluded. When Warriors dissociated from High Desert Hospice, LLC, it got its $57,000 capital contribution back. The wire arrived the day after the signed Member Dissociation Agreement, in the exact amount, with the notation "Capital Investment Repayment." The fact that the wire came from a different entity than High Desert Hospice did not turn a return of capital into gross receipts.
• Credit-card reimbursements — ~$40,000, stayed taxable. Warriors let affiliated facilities charge business purchases to its American Express account, then collected reimbursement for their share. Amounts "received solely on behalf of another in a disclosed agency capacity" are excluded from gross receipts (Section 7-9-3.5(A)(3)(f)), and the Department had already accepted most of the reimbursements. But about $40,000 (roughly $3,000 of tax) — mostly cash reimbursements with no record tying a cash receipt to a specific charge — could not be verified. Because the owners also made purchases on the same card, the records couldn't distinguish reimbursable affiliate charges from the company's own spending, so that portion stayed taxable.

Penalty was not abated — Warriors did not protest the penalty or show a good-faith, reasonable mistake of law (Section 7-1-69), and none of the non-negligence indicators in Regulation 3.1.11.11 NMAC applied. Net result: gross receipts reduced by $91,000 ($34,000 loan + $57,000 refund), with corresponding reductions to tax, penalty, and interest.

The decision also applies the Gemini Las Colinas burden framework (2023-NMCA): the taxpayer must first produce some countervailing evidence to rebut the assessment's presumption of correctness; if it does, the burden of production shifts to the Department, but the taxpayer always keeps the burden of persuasion by a preponderance of the evidence.

What this means for you

Businesses that collect reimbursements from affiliates or clients

Money you collect to cover someone else's costs can be excluded from New Mexico gross receipts — but only if your records prove it was "received solely on behalf of another in a disclosed agency capacity." Cash reimbursements with no paper trail tying each receipt to a specific authorized charge are the weak point. If you front expenses on a shared credit card, keep documentation that separates each affiliate's charges from your own, or expect the unverified portion to be taxed.

Anyone treating a loan or a return of capital as non-taxable

Loan proceeds and a refund of your own investment are not gross receipts — but an informal, undocumented transfer between related companies invites the Department to treat it as taxable revenue. Contemporaneous evidence (a matching outgoing payment, a running balance on the books, a signed agreement, a same-amount wire with a clear notation) can carry the day even without a formal loan contract. Formal loan documents would make it far easier.

The bigger lesson: records win New Mexico GRT protests

The Department did not dispute the law on any of the three issues — it disputed whether Warriors' records proved the facts. Two issues the company documented well enough to win; one it couldn't, and lost. In New Mexico, all business receipts are presumed taxable (Section 7-9-5), and you must "maintain books of account... that will permit the accurate computation of state taxes" (Section 7-1-10). Good records are the whole ballgame.

Common questions

Q: Is a reimbursement from an affiliate taxable gross receipts in New Mexico?
A: Not if it's "received solely on behalf of another in a disclosed agency capacity" (Section 7-9-3.5(A)(3)(f)) — a pure pass-through of the affiliate's own charges. But you have to prove it with records. Here, undocumented cash reimbursements couldn't be verified, so about $40,000 stayed taxable.

Q: Are loan proceeds subject to gross receipts tax?
A: No — a genuine loan isn't a receipt from engaging in business. But an informal loan between related companies with no written terms will draw scrutiny. Warriors won on this only because deposits matched outgoing checks and a running balance appeared on its books.

Q: What about getting my own investment back?
A: A refund of a capital contribution isn't gross receipts. The $57,000 return here was excluded because the wire matched a signed dissociation agreement in amount and timing and was labeled a capital repayment — even though it came from a different entity.

Q: Why was the penalty not removed even though the company partly won?
A: Warriors never protested the penalty or argued a good-faith, reasonable mistake of law (Section 7-1-69), and none of the non-negligence indicators in Regulation 3.1.11.11 NMAC applied. Penalty stayed on the portion of the assessment that wasn't adjusted in the company's favor.

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 reliably illustrate how New Mexico treats loans, returns of capital, and agency-capacity reimbursements under the gross receipts tax — and how much the outcome turns on your records.

Citations and references

Statutes and regulations:

• NMSA 1978, § 7-9-3.5 (2019) — definition of "gross receipts"; subsection (A)(3)(f) excludes amounts received solely on behalf of another in a disclosed agency capacity
• NMSA 1978, § 7-9-4 (2010) — gross receipts tax imposed on receipts of persons engaged in business
• NMSA 1978, § 7-9-5 (2019/2002) — statutory presumption that all receipts are taxable
• NMSA 1978, § 7-9-3.3 (2019) — "engaging in business" defined
• NMSA 1978, § 7-1-17(C) (2007) — assessment presumed correct; taxpayer bears the burden to rebut
• NMSA 1978, § 7-1-3(X) (2013) — "tax" includes interest and civil penalty
• NMSA 1978, § 7-1-10(A) — duty to maintain records permitting accurate computation of tax
• NMSA 1978, § 7-1-67 — interest on unpaid tax
• NMSA 1978, § 7-1-69 — civil penalty; abatement for a good-faith mistake of law made on reasonable grounds
• NMSA 1978, § 7-1B-8 — hearing must be held within 90 days of the Department's answer
• NMSA 1978, § 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
• Regulation 3.1.11.11 NMAC — indicators of non-negligence for penalty abatement

Cases:

• Gemini Las Colinas, LLC v. N.M. Taxation & Revenue Dep't, 2023-NMCA-__, No. A-1-CA-38672 (burden framework: threshold burden of production, shifting production burden, taxpayer keeps the burden of persuasion)
• Archuleta v. O'Cheskey, 1972-NMCA-165, 84 N.M. 428 (taxpayer bears the burden to rebut the presumption of correctness)
• Chevron U.S.A., Inc. v. State ex rel. Dep't of Taxation & Revenue, 2006-NMCA-50, 139 N.M. 498 (agency regulations interpreting a statute are given substantial weight)
• N.M. Taxation & Revenue Dep't v. Casias Trucking, 2014-NMCA-099 (countervailing evidence needed to rebut the presumption)
• MPC Ltd. v. N.M. Taxation & Revenue Dep't, 2003-NMCA-021, 133 N.M. 217 (receipts include payments received for one's own account and expended to meet one's own responsibilities)
• Comer v. State Tax Comm'n, 1937-NMSC-032, 41 N.M. 403 (gross receipts reaches all activities engaged in for direct or indirect benefit)

Source

• Listing: New Mexico Decisions & Orders
• Decision post: Warriors Management LLC
• Decision PDF: D&O 23-11

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 WARRIORS MANAGEMENT LLC
6 TO ASSESSMENT ISSUED UNDER
7 LETTER ID NO. L0741418672

8 v. Case No. 21.07-044A, D&O 23-11

9 NEW MEXICO TAXATION AND REVENUE DEPARTMENT

10 DECISION AND ORDER

11 On February 27, 2023, Hearing Officer Chris Romero, Esq., of the Administrative

12 Hearings Office conducted an administrative hearing on the merits of the tax protest of Warriors

13 Management, LLC (Taxpayer) pursuant to the Tax Administration Act and the Administrative

14 Hearings Office Act.

15 Mr. Tracy Sprouls, Esq. appeared in person for Taxpayer along with Mr. Nathan

16 Manning and Mr. Tony Collyer, who both testified for Taxpayer. Staff Attorney, Mr. Peter

17 Breen, Esq., appeared in person representing the opposing party in the protest, the Taxation and

18 Revenue Department (Department), and was accompanied by Department tax auditors, Ms.

19 Angelica Rodriguez and Ms. Lizette Rivera. Ms. Cheryl Tafoya, tax auditor, was also present for

20 observation and training. Ms. Rivera testified for the Department.

21 Taxpayer Exhibits 1 – 9, and Department Exhibits A – E were admitted without objection

22 upon stipulation of the parties. The Department also contemplated submission of a late filed

23 exhibit but provided notice that it had encountered a delay attributed to GenTax, its computer

24 system software. The exhibit would have presumably detailed the current status of the

25 Department’s credit card reimbursement adjustments. Although the Department explained that it

26 still intended to file the exhibit once the technical issues were resolved, the record closed on May

In the Matter of the Protest of Warriors Management, LLC.
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1 12, 2023 when after notice to the parties, the exhibit had still not been filed.

2 Taxpayer’s main arguments for abatement of the assessment are that: (1) the computation

3 of gross receipts erroneously included reimbursements paid by affiliated companies for

4 authorized use of Taxpayer’s credit card; (2) the computation of gross receipts erroneously

5 included proceeds from a loan from an affiliated entity; (3) and the computation of gross receipts

6 erroneously included investment funds that were refunded to Taxpayer. With respect for each

7 issue presented, the Department does not dispute the legal foundation for the relief Taxpayer

8 seeks, but instead disputes the adequacy of records presented to establish the right to such relief.

9 As explained in greater detail in the subsequent discussion, the Hearing Officer finds

10 based on the evidence and arguments presented that Taxpayer’s records fall short of establishing the

11 exclusion of certain credit card reimbursements, but its records establish that the proceeds of a loan

12 and the refund of an investment should be excluded from the computation of gross receipts on

13 which the assessment is based. IT IS DECIDED AND ORDERED AS FOLLOWS:

14 FINDINGS OF FACT

15 Witness Backgrounds

16 1. Nathan J. Manning manages assisted living facilities operating in New Mexico

17 and Texas of which he is also part owner. [Direct Examination of Nathan Manning]

18 2. Mr. Manning shares ownership of Taxpayer with Michael Manning (his brother),

19 and Jay Manning (his father). Their respective interests are one-third apiece. [Direct Examination

20 of Nathan Manning; Cross examination of Nathan Manning; Taxpayer Ex. 9.1]

21 3. Mr. Manning manages Taxpayer’s daily business activities. [Direct Examination

22 of Nathan Manning; Cross examination of Nathan Manning; Direct Examination of Anthony

23 Collyer]

In the Matter of the Protest of Warriors Management, LLC.
Page 2 of 27
1 4. Anthony Collyer is a certified public accountant practicing in Albuquerque, New

2 Mexico. [Direct Examination of Anthony Collyer]

3 5. Mr. Collyer is a private practitioner, not employed by Taxpayer. He has been

4 practicing in public accountancy for more than 40 years and has provided accounting and

5 bookkeeping services for Taxpayer and its related entities for approximately 8 years. [Direct

6 Examination of Anthony Collyer]

7 6. Lizette Rivera conducted Taxpayer’s field audit in her previous position as a field

8 auditor. [Direct Examination of Lizette Rivera]

9 7. Since that time Ms. Rivera performed the field audit giving rise to the protest, Ms.

10 Rivera was elevated to a tax auditor supervisor for the Department. [Direct Examination of

11 Lizette Rivera]

12 Taxpayer’s Business Activities

13 8. Taxpayer’s business activities concentrate on providing various services for

14 commonly owned assisted living facilities, or as Mr. Manning explained, the provision of

15 “common owner entity services for our various assisted living homes.” [Direct Examination of

16 Nathan Manning; Cross examination of Nathan Manning; Direct Examination of Anthony

17 Collyer]

18 9. By use of the term, “commonly owned,” Mr. Manning referred to various assisted

19 living facilities in which he, his brother, and his father possess a mutual ownership. [Direct

20 Examination of Nathan Manning; Taxpayer Ex. 9]

21 10. In the network of facilities serviced by Taxpayer, some are affiliates of Taxpayer

22 and some are not. [Direct Examination of Nathan Manning; Taxpayer Ex. 9]

23 11. Taxpayer defines “affiliate” as “a business entity that directly or indirectly

In the Matter of the Protest of Warriors Management, LLC.
Page 3 of 27
1 through one or more intermediaries controls, is controlled by, or is under common control with

2 another business entity.” Taxpayer defines “control” in this context to mean an “equity

3 ownership in a business entity that represents at least 50 percent of the total equity of that

4 business entity.” [Direct Examination of Nathan Manning; Taxpayer Ex. 9.1]

5 12. According to Taxpayer Exhibit 9, a facility is not considered to be an affiliate

6 where Jay Manning has an ownership interest in his own right or through West Texas Warriors

7 (an entity in which Jay Manning owns 100 percent interest) if neither Michael Manning nor

8 Nathan Manning also possess an ownership interest. [Taxpayer Ex. 9]

9 13. Prior to March of 2017, Taxpayer provided services to 28 facilities of which nine

10 were affiliates and 19 were not. [Direct Examination of Nathan Manning; Taxpayer Ex. 9.1 –

11 9.4]

12 14. From March to December of 2017, Taxpayer provided services to 14 facilities of

13 which nine were affiliates and four were not. [Direct Examination of Nathan Manning; Taxpayer

14 Ex. 9.5 – 9.6]

15 15. After January of 2018, Taxpayer provided management services for 30 facilities

16 of which 26 were affiliates and four were not. [Direct Examination of Nathan Manning;

17 Taxpayer Ex. 9.7 – 9.9]

18 16. At all relevant times, Taxpayer compensated Mr. Manning with an occasional

19 distribution. Taxpayer did not compensate Mr. Manning with salary or wages. [Cross

20 Examination of Nathan Manning]

21 17. Taxpayer does not have any employees. [Cross examination of Nathan Manning]

22 Alleged Income – Credit Card Usage Reimbursements

23 18. Services Taxpayer provides include provision of credit with which facilities are

24 authorized to make necessary business purchases. Taxpayer pays the balance due at the end of

In the Matter of the Protest of Warriors Management, LLC.
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1 the billing period and obtains reimbursement from the facilities that incurred the authorized

2 charges. [Direct Examination of Nathan Manning; Cross Examination of Nathan Manning;

3 Direct Examination of Anthony Collyer]

4 19. Each facility or home is granted access to a credit account maintained by

5 Taxpayer which is then used by the facility or home for authorized business expenses which may

6 include purchases of groceries, household supplies, and home repairs. [Direct Examination of

7 Nathan Manning; Direct Examination of Anthony Collyer; Taxpayer Ex. 5]

8 20. A single credit card statement is received and paid by Taxpayer with each

9 individual facility subsequently reimbursing Taxpayer for its share of the balance due. [Direct

10 Examination of Nathan Manning; Direct Examination of Anthony Collyer; Taxpayer Ex. 5]

11 21. The benefit of the credit card arrangement is that a single credit card account

12 services all facilities in lieu of multiple individual credit accounts. [Direct Examination of

13 Nathan Manning]

14 22. Upon receipt of a credit card statement, it is deconstructed with each authorized

15 charge being assigned to each authorized facility for reimbursement of its share of charges.

16 [Direct Examination of Anthony Collyer; Taxpayer Exs. 5, 6, and 8]

17 23. Authorized facilities could reimburse Taxpayer through check, transfer, or cash.

18 [Direct Examination of Nathan Manning; Direct Examination of Lizette Rivera; Department Ex.

19 A-0254]

20 24. Taxpayer does not derive income from this activity because it does not charge

21 additional fees or interest on authorized facilities for use of the credit card. It only receives

22 reimbursement for actual charges incurred by authorized facilities. [Direct Examination of

23 Nathan Manning; Direct Examination of Anthony Collyer]

In the Matter of the Protest of Warriors Management, LLC.
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1 25. Purported reimbursements to Taxpayer’s credit card during the audit period by

2 authorized affiliated facilities was $168,147.48 comprised of actual charges only. [Direct

3 Examination of Anthony Collyer]

4 26. The Department observed that records detailing charges and reimbursements

5 varied depending on how the reimbursement was made. For example, a cash reimbursement was

6 unlikely to be documented in as much detail as a reimbursement occurring by check which might

7 contain memo notations. [Direct Examination of Lizette Rivera; Department Ex. A]

8 27. The Department accepted many of the credit card reimbursements as nontaxable

9 reimbursed expenditures. However, those reimbursements for which the Department found

10 insufficient documentation, primarily relevant to cash reimbursements, were not afforded

11 adjustments as of the time the assessment was issued. [Direct Examination of Lizette Rivera]

12 28. The Department made subsequent adjustments which reduced the disallowed

13 amount to approximately $40,000 in credit card reimbursements which were reflected in

14 Taxpayer’s records as cash receipts. The Department estimated the associated tax liability as “a

15 little over $3,000.” [Direct Examination of Lizette Rivera]

16 Alleged Income – Sales of Furniture, Flooring and Other Products

17 29. Taxpayer, by virtue of access to various wholesale products, also sells furniture,

18 flooring, and other home-improvement related products to affiliated and non-affiliated entities.

19 [Direct Examination of Nathan Manning; Cross Examination of Nathan Manning; Direct

20 Examination of Anthony Collyer]

21 30. Furniture, flooring, and perhaps other goods to which Taxpayer had wholesale

22 access, could possibly be sold to both affiliated and non-affiliated parties in which cases

23 Taxpayer paid tax on the taxable amount of gross receipts. [Cross Examination of Anthony

In the Matter of the Protest of Warriors Management, LLC.
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1 Collyer]

2 Alleged Income – Loan Proceeds

3 31. Taxpayer acquired part ownership in High Desert Hospice, LLC in or about 2015.

4 [Direct Examination of Nathan Manning]

5 32. It acquired its 25-percent interest in High Desert Hospice, LLC in consideration

6 for a capital contribution in the amount of $57,000. [Direct Examination of Nathan Manning]

7 33. Taxpayer did not have sufficient cash on hand to acquire a share of High Desert

8 Hospice, LLC so it borrowed a portion of the necessary funds from one of its affiliated entities,

9 Beehive Staffing Services Company. [Direct Examination of Nathan Manning]

10 34. The amount of the loan from Beehive Staffing Services Company was

11 $34,000.00. [Direct Examination of Anthony Collyer; Taxpayer Ex. 1]

12 35. The terms of the loan were informal. There was no formal written loan agreement,

13 no terms specifying any payment of principal or interest, no UCC filings or other transfer of

14 security interests, no repayment terms, no maturity date, or other formal terms. It was merely a

15 transfer of funds among affiliated entities to be repaid interest free when circumstances

16 permitted. [Cross Examination of Nathan Manning]

17 36. The loan funds in the total sum of $34,000 were received by Taxpayer in the

18 following payments:

Date Amount
6/22/2015 $4,000
8/5/2015 $6,000
9/3/2015 $6,000
11/18/2015 $6,000
12/16/2015 $6,000
3/31/2016 $6,000
TOTAL $34,000

19 [Direct Examination of Anthony Collyer; Taxpayer Exs. 1 – 2; Department Exs.

In the Matter of the Protest of Warriors Management, LLC.
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1 A-0035 – A-0056, A-0123 – A-0125 (Statement Dates 6/2015 – 12/2015 and 3/2016 showing

2 credits and debits in each corresponding month); A-0633; A-0609; A-0615; A-0634; A-0638; A-

3 682; A-0683; A-0687; A-0729; A-0811; A-0819; A-0831; A-0833]

4 37. Within one or two days after receipt of a deposit, a corresponding check in an

5 amount equal to the deposit cleared and was debited from Taxpayer’s bank account. [Department

6 Ex. A-0056; A-0052; A-0049; A-0041; A-0037]

7 38. Taxpayer’s balance sheet reflects a running balance due to Beehive Staffing

8 Services in the amount of $28,000 through calendar year 2015. [Department Ex. A-0067]

9 39. Despite occasional use of the term, “capital call,” the $34,000.00 transferred to

10 Taxpayer represented the proceeds of a loan. The relationship between Beehive Staffing Services

11 Company and Taxpayer would not permit a capital call since Beehive Staffing Services

12 Company had no interest in Taxpayer and was therefore not a member on which a capital call

13 could be made. [Direct Examination of Anthony Collyer]

14 40. The Department did not allow an adjustment for the amount of the loan

15 ($34,000.00) because it was dissatisfied with Taxpayer’s documentary evidence, or lack thereof,

16 formally establishing that the money represented the proceeds of a loan instead of gross receipts

17 derived from engaging in business. [Direct Examination of Lizette Rivera]

18 41. Taxpayer repaid the loan in full to Beehive Staffing Services Company in the

19 amount of $34,000. Taxpayer was not obligated to pay interest or other fees. [Direct

20 Examination of Anthony Collyer]

21 Alleged Income – Refund of Capital Contribution

22 42. Taxpayer purchased its interest in High Desert Hospice, LLC for payments

23 totaling $57,000.00 made in the following amounts on the dates specified below:

In the Matter of the Protest of Warriors Management, LLC.
Page 8 of 27
Date Amount
5/14/2015 $5,000
6/18/2015 $4,000
8/5/2015 $6,000
9/3/2015 $6,000
10/21/2015 $6,000
11/18/2015 $6,000
12/16/2015 $6,000
2/1/2016 $6,000
2/19/2016 $6,000
3/17/2016 $6,000
TOTAL $57,000

1 [Direct Examination of Nathan Manning; Direct Examination of Anthony

2 Collyer; Taxpayer Ex. 1.2; Taxpayer Ex. 2; Department Exs. A-0035 – A-0058; A-0123 – A-

3 0132 (Statement Dates 5/2015 – 12/2015; 1/2016 – 3/2016 showing corresponding credits and

4 debits)]

5 43. A 2015 Schedule K-1 suggested that Taxpayer’s contribution to High Desert

6 Hospice in 2015 totaled $39,000. (“Capital contributed during the year” in Section L). [Direct

7 Examination of Anthony Collyer; Taxpayer Ex. 3]

8 44. After some brief, but indeterminable duration of time, Taxpayer concluded that its

9 ownership in High Desert Hospice; LLC was not advantageous to its goals. It notified High

10 Desert Hospice, LLC of its desire to terminate ownership. High Desert Hospice, LLC agreed to

11 return Taxpayer’s capital contribution of $57,000 in exchange for return of the 25-percent

12 ownership interest. [Direct Examination of Nathan Manning]

13 45. On April 7, 2016, Taxpayer executed a Member Dissociation Agreement which

14 specified that High Desert Hospice, LLC would refund Taxpayer’s contribution of $57,000 in

15 exchange for relinquishment of its ownership interest. [Direct Examination of Nathan Manning;

16 Taxpayer Ex. 4]

17 46. On April 8, 2016, the next day, Taxpayer received an incoming wire transfer in

In the Matter of the Protest of Warriors Management, LLC.
Page 9 of 27
1 the amount of $57,000 accompanied by a notation specifying “Capital Investment Repayment.”

2 [Direct Examination of Nathan Manning; Taxpayer Ex. 1.1; Department Ex. A-0119]

3 47. Taxpayer did not provide goods or services to High Desert Hospice, LLC at any

4 relevant time prior to termination of its ownership interest or in exchange for refund of its

5 investment. [Direct Examination of Nathan Manning; Cross Examination of Nathan Manning]

6 48. The Department accurately observed that the bank statement that recorded the

7 relevant transfer of $57,000 on April 8, 2016 to Taxpayer was from an entity, not High Desert

8 Hospice, LLC, that was unfamiliar1 to the Department. [Direct Examination of Lizette Rivera;

9 Department Ex. C-004 (Column F); Department Ex. A-0119 (date 04/8 indicating incoming wire

10 transfer of $57,000.00); See also Department Ex. A-0837; Department Ex. A-0848]

11 49. This observation was significant to the Department because it signified “an

12 outside third-party transfer wire.” [Direct Examination of Lizette Rivera]

13 50. Other than the circumstances described herein, Taxpayer has had no other

14 relationship, business, familial, or otherwise, with High Desert Hospice, LLC. [Cross

15 Examination of Nathan Manning]

16 51. Ms. Rivera was unpersuaded that sufficient evidence existed to verify that the

17 funds at issue represented the refund of an investment. [Direct Examination of Lizette Rivera]

18 Income Reported in 2017

19 52. In 2017, Taxpayer reported costs of goods sold in the amount of $237,915.00.

20 [Cross examination of Nathan Manning; Department Ex. A-0598 (Line 8)]

1
A review of Department records may have revealed additional third-party information about the entity, but that
information need not be addressed here. First, revealing information the Department learned about this entity,
particularly from its own records during its review, may unnecessarily raise concerns for taxpayer confidentiality.
Moreover, such information is not relevant because the material issue for which this testimony was offered was to
merely establish that the refund was not technically paid by High Desert Hospice, LLC, but by another entity.

In the Matter of the Protest of Warriors Management, LLC.
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1 53. In 2017, Taxpayer reported gross receipts or sales in the amount of $295,122.00

2 reflecting the sum of its cost of goods sold (Line 2) and its gross profit (Line 3). [Cross

3 examination of Nathan Manning; Department Ex. A-0593 (Line 1a, 1b and 1c)]

4 54. In 2017, Taxpayer reported gross nonfarm income in the amount of $57,207.00

5 (Line 8) which represents the difference between reported gross receipts (Line 1a and Line 1c)

6 and costs of goods sold (Line 2). [Cross examination of Nathan Manning; Department Ex. A-

7 0593 (Lines 1c, 2, 3, and 8); Ex. A-0596 (Line 14c)]

8 55. None of the money reported as profit in 2017 derived from the authorized use of

9 Taxpayer’s credit card by authorized entities. As bookkeeper for both Taxpayer and its related

10 entities, Mr. Collyer is knowledgeable in the use of the credit card from both perspectives of

11 Taxpayer and related entities. [Direct Examination of Anthony Collyer; Department Ex. A-0593

12 (Lines 1c, 2, 3, and 8); Ex. A-0596 (Line 14c)]

13 56. Instead, the reported income in 2017 derives from the markup of products,

14 including flooring materials and furniture, sold to the various affiliated and non-affiliated entities

15 (re-emphasizing that Taxpayer had access to wholesale prices of such products which it

16 purchased at wholesale and resold for profit). [Cross examination of Nathan Manning; Direct

17 Examination of Anthony Collyer]

18 57. All income from such sales were reported in Taxpayer Form 1065. [Direct

19 Examination of Anthony Collyer]

20 58. At no place on a Form 1065 is there a place to specifically report proceeds from a

21 loan or debits reflecting repayment of the loan. [Direct Examination of Anthony Collyer]

22 Procedural History

23 59. On April 28, 2020, the Department issued a Notice of Assessment of Taxes and

In the Matter of the Protest of Warriors Management, LLC.
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1 Demand for Payment under Letter ID No. L0741418672 for $72,777.61 in gross receipts tax,

2 $14,570.39 in penalty, and $9,036.40 in interest for a total amount due of $96,384.40.

3 [Administrative File (accompanying Request for Hearing filed 7/26/2021)]

4 60. On or about July 1, 2020, Taxpayer filed a Formal Protest (Form ACD-31094) of

5 the Assessment. [Administrative File (accompanying Request for Hearing filed 7/26/2021

6 (signed by Mr. Manning on July 1, 2020))]

7 61. On or about July 1, 2020 Taxpayer, by and through Mr. Manning, appointed Mr.

8 R. Tracy Sprouls as Taxpayer Qualified Representative for the purpose of the protest.

9 [Administrative File (accompanying Request for Hearing filed 7/26/2021 (signed by Mr. Sprouls

10 on July 22, 2020))]

11 62. On July 29, 2020, the Department acknowledged Taxpayer’s protest under Letter

12 ID No. L1350563504. [Administrative File (accompanying Request for Hearing filed

13 7/26/2021)]

14 63. On July 26, 2021, Taxpayer filed a Request for Hearing in which it requested that

15 the Administrative Hearings Office place the protest on its docket and set a hearing to address

16 scheduling. [Administrative File]

17 64. On July 26, 2021, the Administrative Hearings Office entered a Notice of

18 Telephonic Scheduling Hearing that set an initial hearing in the protest for August 27, 2021.

19 [Administrative File]

20 65. On August 3, 2021, the Department filed its answer to Taxpayer’s protest.

21 [Administrative File]

22 66. On August 27, 2021, the Administrative Hearings Office held a telephonic

23 scheduling hearing, which the parties agreed satisfied the requirement to hold a hearing within

In the Matter of the Protest of Warriors Management, LLC.
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1 90 days of the Department filing an answer to the protest. [Administrative File]

2 67. On August 27, 2021, the Administrative Hearings Office entered a Scheduling

3 Order and Notice of Administrative Hearing which along with other deadlines, set a hearing on

4 the merits of Taxpayer’s protest for March 7, 2022. [Administrative File]

5 68. On February 14, 2022, the Department filed its pre-hearing statement.

6 [Administrative File]

7 69. On February 25, 2022, the Department filed a Notice of Pre-Filing of

8 Department’s Exhibits along with 329 pages of accompanying exhibits. The exhibits, in

9 anticipation that they would be proffered at the hearing on the merits of the protest, were not

10 previewed. [Administrative File]

11 70. On February 25, 2022, the Department filed an Amended Witness List.

12 [Administrative File]

13 71. On February 28, 2022, Taxpayer filed an unopposed motion to continue the

14 hearing. [Administrative File]

15 72. On March 3, 2022, the Administrative Hearings Office entered an Order

16 Converting Merits to Scheduling Hearing. [Administrative File]

17 73. On March 14, 2022, the Administrative Hearings Office entered a Scheduling

18 Order and Notice of Administrative Hearing which set a hearing on the merits of Taxpayer’s

19 protest to commence on August 8, 2022 and proceed through the following day, if necessary.

20 [Administrative File]

21 74. On June 3, 2022, the Department filed a Certificate of Service indicating that it

22 was proceeding with formal discovery. [Administrative File]

23 75. On June 14, 2021, the Department filed a Motion for Continuance and Request

In the Matter of the Protest of Warriors Management, LLC.
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1 for Procedural Conference. [Administrative File]

2 76. On June 16, 2022, the Administrative Hearings Office entered an Order Vacating

3 Merits Hearing and Notice of Telephonic Scheduling Hearing. [Administrative File]

4 77. On July 8, 2022, the Administrative Hearings Office entered a Notice of

5 Telephonic Scheduling Hearing upon the agreement of the parties. [Administrative File]

6 78. On September 7, 2022, Taxpayer filed an Amended Formal Protest alleging: “The

7 auditor included in taxable gross receipts (a) repayment of a loan; (b) return of Taxpayer's capital

8 investment in another entity; and (c) reimbursements of expenditures incurred on behalf of

9 affiliates through joint credit card accounts or through Taxpayer's purchase as agent for

10 affiliates.” [Administrative File]

11 79. On September 9, 2022, the Administrative Hearings Office entered a Scheduling

12 Order and Notice of Administrative Hearing which set a hearing on the merits of Taxpayer’s

13 protest to begin on February 27, 2023 and proceed as necessary through February 28, 2023.

14 [Administrative File]

15 80. On February 13, 2023, the Department filed its second pre-hearing statement

16 accompanied by 883 pages of exhibits. The exhibits, in anticipation that they would be proffered

17 at the hearing on the merits of the protest, were not previewed. [Administrative File]

18 81. On February 13, 2023, Taxpayer filed its pre-hearing statement. It also separately

19 submitted its own exhibits (not attached to its prehearing statement). The exhibits, in anticipation

20 that they would be proffered at the hearing on the merits of the protest, were not previewed.

21 [Administrative File]

22 82. On March 8, 2023, the Department filed a Notice Regarding Filing of Reimbursed

23 Expenses indicating that its software program was having issues generating computations that it

In the Matter of the Protest of Warriors Management, LLC.
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1 anticipated including in a late-filed exhibit (as discussed on the record of the hearing) and

2 suggested that the issue would be resolved in a matter of days. [Administrative File]

3 83. On May 4, 2023, the Administrative Hearings Office filed a Request for Update

4 observing that the exhibit the Department anticipated filing had still not been submitted. It

5 requested an update from the Department on the status of the anticipated submission on or before

6 Friday, May 12, 2023 and provided that the record would close on that date in the event no

7 response was received. No response was received. [Administrative File]

8 DISCUSSION

9 Taxpayer limited its protest to three specific issues for consideration under the New

10 Mexico Gross Receipts and Compensating Tax Act: (1) whether the proceeds of a purported loan

11 constitute gross receipts under the act; (2) whether the refund of a capital investment in another

12 business constitutes gross receipts under the act; and (3) whether reimbursements paid to

13 Taxpayer by affiliated entities for use of a credit card constitute gross receipts under the act.

14 These issues will be resolved primarily by reference to of NMSA 1978, Section 7-9-3.5 since

15 Taxpayer did not assert entitlement to any specific deduction or exemption in its written

16 amended protest or at the hearing.

17 Although the Department presented evidence that Taxpayer reported a modest profit in

18 2017, this fact is not necessarily in dispute. The same is true for the fact that Taxpayer derived

19 receipts from the sale of home improvement goods to affiliated and non-affiliated entities. The

20 evidence is helpful for the broader purpose of understanding Taxpayer’s revenue flow and

21 history, but the issues on which Taxpayer concentrates are those three items listed above.

22 Taxpayer does not explicitly dispute reporting a profit in 2017 nor the fact that it derives revenue

23 from also selling certain goods.

In the Matter of the Protest of Warriors Management, LLC.
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1 Presumption of Correctness.

2 Under NMSA 1978, Section 7-1-17 (C) (2007), the assessment issued in this case is

3 presumed correct. Consequently, Taxpayer has the burden to rebut the presumption. See

4 Archuleta v. O'Cheskey, 1972-NMCA-165, ¶ 11, 84 N.M. 428. Unless otherwise specified, for the

5 purposes of the Tax Administration Act, “tax” is defined to include interest and civil penalty. See

6 NMSA 1978, Section 7-1-3 (X) (2013). Under Regulation 3.1.6.13 NMAC, the presumption of

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

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

9 16, 139 N.M. 498, 503 (agency regulations interpreting a statute are presumed proper and are to be

10 given substantial weight).

11 Accordingly, it is Taxpayer’s burden to present some countervailing evidence or legal

12 argument to rebut the presumption of correctness. See N.M. Taxation & Revenue Dep't v. Casias

13 Trucking, 2014-NMCA-099, ¶8; Gemini Las Colinas, LLC v. N.M. Taxation & Revenue Dep’t,

14 2023-NMCA-__, ¶ 27, No. A-1-CA-38672 (March 13, 2023)

15 The question of whether a taxpayer has satisfied this initial burden of production is a

16 threshold legal determination in which the hearing officer decides whether a taxpayer has produced

17 some countervailing evidence tending to dispute the correctness of the assessment. See Gemini,

18 2023-NMCA-__, ¶¶ 21 – 23; 25. The Hearing Officer was persuaded in this protest that Taxpayer

19 satisfied its initial burden of production.

20 If a taxpayer, as Taxpayer did in this protest, satisfies the initial burden of production, then

21 the burden of production shifts to the Department to present evidence showing the correctness of its

22 assessment beyond mere assertions that a taxpayer’s evidence is unreliable or not credible. See

23 Gemini, 2023-NMCA-__, ¶ 29. The hearing officer is then to weigh the evidence presented from

In the Matter of the Protest of Warriors Management, LLC.
Page 16 of 27
1 both parties under the preponderance standard and ultimately determine whether a taxpayer has

2 carried its burden of persuasion in the protest. Id.

3 Because the Hearing Officer is persuaded that both parties satisfied their respective burdens

4 of production, the remainder of this Decision and Order will concentrate on the burden of

5 persuasion.

6 Gross Receipts Tax.

7 For the privilege of engaging in business in New Mexico, a gross receipts tax is imposed

8 on the receipts of any person engaged in business. See NMSA 1978, Section 7-9-4 (2010). The

9 term “gross receipts” is defined to mean:

10 [T]he total amount of money or the value of other consideration
11 received from selling property in New Mexico, from leasing or
12 licensing property employed in New Mexico, from granting a right to
13 use a franchise employed in New Mexico, from selling services
14 performed outside New Mexico, the product of which is initially used
15 in New Mexico, or from performing services in New Mexico.

16 See NMSA 1978, Section 7-9-3.5 (A) (1) (2019)

17 “Receipts include payments received for one’s own account and then expended to meet

18 one’s own responsibilities.” See MPC Ltd. v. New Mexico Taxation & Revenue Dept., 2003-

19 NMCA-021, ¶ 14, 133 N.M. 217, 220, 62 P.3d 308, 311. There is a statutory presumption that all

20 receipts of a person engaged in business are taxable. See NMSA 1978, Section 7-9-5 (2019).

21 “Engaging in business” is defined as “carrying on or causing to be carried on any activity with

22 the purpose of direct or indirect benefit.” See NMSA 1978, Section 7-9-3.3 (2019). See also

23 Comer v. State Tax Comm'n, 1937-NMSC-032, ¶37, 41 N.M. 403 (gross receipts applies to “all

24 activities or acts engaged in (personal, professional and corporate) or caused to be engaged in

25 with the object of gain, benefit[,] or advantage either direct or indirect.”)

26 As a practical matter, one of the initial steps in any audit is to compute or verify the amount

In the Matter of the Protest of Warriors Management, LLC.
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1 of gross receipts at issue. A subsequent step is to subtract from the taxpayer’s total gross receipts

2 those amounts which are deductible, exempt, or even excludable from the definition of gross

3 receipts, if excludable receipts were erroneously included in the computation. The difference

4 between total gross receipts and any applicable deductions or exemptions is the amount of taxable

5 gross receipts.

6 As previously stated, Taxpayer’s amended protest does not assert entitlement to a specific

7 deduction or exemption. Instead, the question is whether the money at issue, within the three

8 categories of purported receipts, comes within the definition of gross receipts and are therefore

9 presumed taxable.

10 Credit Card Usage Reimbursements

11 One of the benefits Taxpayer provides to its affiliated entities is provision of credit to make

12 business purchases, which might include groceries, home repairs, building supplies, or other similar

13 business-related expenses. Offering this service requires that Taxpayer maintain a credit card

14 account (American Express in this case) and distribute cards to its affiliated entities. Affiliated

15 entities use the card to make authorized purchases which American Express then bills to Taxpayer

16 in one single statement. Taxpayer pays the balance due in one payment, and then gets reimbursed by

17 each facility for its share of actual charges. Taxpayer does not charge affiliated facilities any

18 additional fees or interest for their use of the credit card. Facilities’ obligations to Taxpayer are only

19 to make Taxpayer whole for the actual charges attributed to it in the billing period.

20 The Department’s audit originally identified such reimbursements as gross receipts, but later

21 made adjustments in favor of Taxpayer as it provided documentation to satisfy the Department that

22 the reimbursements were excludable from gross receipts as reimbursed expenditures under Section

23 7-9-3.5 A (3) (f). That section excludes “amounts received solely on behalf of another in a disclosed

In the Matter of the Protest of Warriors Management, LLC.
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1 agency capacity” from the definition of gross receipts. According to the Department, it was satisfied

2 from the records Taxpayer provided that most of the reimbursements from this credit card usage

3 arrangement were excludable and it made appropriate adjustments.

4 However, the Department could not fully resolve this portion of the assessment in favor of

5 Taxpayer because it perceived that some purported reimbursements lacked sufficient documentation

6 to establish that they should be excluded in similar manner. The sort of reimbursements which the

7 Department could not substantiate were made by cash and not accompanied by any specific record

8 to attribute a cash receipt to a particular credit card reimbursement.

9 The Department asserted that the amount of purported reimbursements that could not be

10 substantiated was approximately $40,000 resulting in a tax liability of “a little over $3,000.”

11 Although the Department intended to provide a more precise figure in a late-filed exhibit, it did not

12 do so in part due to difficulties it reportedly encountered with GenTax, its tax management software

13 application.

14 On the other hand, Mr. Collyer credibly testified that all payments from Taxpayer to

15 American Express were comprised of money that its affiliates paid as reimbursement for their use of

16 the credit card. Considering Mr. Collyer’s testimony, the amount of reimbursed cash expenditures

17 could potentially be deduced by computing the sum of the payments made to American Express

18 during all relevant periods and then subtracting the amounts which the Department could verify in

19 those same periods. The result could hypothetically establish the maximum amount of non-taxable

20 reimbursed expenditures which could potentially equal the cash receipts the Department was unable

21 to validate.

22 Even if this method were viable, it is not reliable. A review of Taxpayer Ex. 5 reveals the

23 possibility that Taxpayer also used the credit card for its own business needs. This is demonstrated

In the Matter of the Protest of Warriors Management, LLC.
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1 by dozens of purchases by Mr. Nathan Manning and his brother who collectively own 66.6 percent

2 of Taxpayer. Even though the Manning brothers own other affiliated entities that could have

3 possibly incurred the charges, differentiation under the evidence presented relies too heavily on

4 speculation in that there is no way under the evidence presented to distinguish between expenses

5 incurred for Taxpayer’s own business needs, which would not have been reimbursed, and the needs

6 of its affiliates for which it would have been reimbursed.

7 This observation demonstrates the uncertainties caused by the lack of records and the

8 reasonableness of the Department’s position. The Hearing Officer was unpersuaded that Taxpayer

9 was entitled to further adjustments, beyond those which the Department reported had already been

10 made, to reduce Taxpayer’s gross receipts by excluding additional amounts received solely on

11 behalf of another in a disclosed agency capacity.

12 Loan Proceeds

13 At some point in 2015, Taxpayer acquired a 25-percent interest in High Desert Hospice,

14 LLC, an entity situated and doing business in Utah. Taxpayer acquired its interest for $57,000

15 which it paid in installments ranging from $4,000 to $6,000 per month between May 2015 and

16 March 2016.

17 Because Taxpayer did not have immediate access to $57,000, Taxpayer borrowed a portion

18 of the funds, totaling $34,000, from Beehive Staffing Services Company, an entity affiliated with

19 Taxpayer. Presumably given the affiliation, the loan was informal. The loan was unsecured and

20 lacked any formal terms and conditions addressing repayment, maturity, interest, penalties, or

21 other terms and conditions common to formal loans. The Department asserts that this lack of

22 formality and the resulting lack of documentation renders the purported loan proceeds taxable as

23 gross receipts under Section 7-9-5. Although the Department’s position is not unreasonable, the

In the Matter of the Protest of Warriors Management, LLC.
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1 totality of the testimony and exhibits ultimately corroborates Taxpayer’s position by the

2 preponderance of evidence.

3 The loan was funded in six parts. The first deposit occurred on June 22, 2015 in the

4 amount of $4,000 (Taxpayer Ex. 1.1; Department Ex. A-0020; A-0022; A-0055; A-0633; A-

5 0682). On June 23, 2015, Check No. 1007 in the amount of $4,000 cleared Taxpayer’s bank and

6 was debited from its account (Department Ex. A-0056).

7 The second deposit occurred on August 6, 2015 in the amount of $6,000 according to

8 Taxpayer’s bank statements, although Taxpayer’s own transaction summary suggests it occurred

9 on August 5, 2015 (Taxpayer Ex. 1.1; Department Ex. A-0024; A-0050; A-0634; A-0683). On

10 August 6, 2015, Check No. 2304 in the amount of $6,000 cleared Taxpayer’s bank and was

11 debited from its account (Department Ex. A-0052).

12 The third deposit occurred on September 3, 2015 in the amount of $6,000 (Taxpayer Ex.

13 1.1; Department Ex. A-0026; A-0046; A-0609; A-0615; A-0634; A-683; A-0729; A-0733; A-

14 0736; A-0748; A-0756; A-0811; A-0831). On September 4, 2015, Check No. 2323 in the amount

15 of $6,000 cleared Taxpayer’s bank and was debited from its account (Department Ex. A-0049).

16 The fourth deposit occurred on November 18, 2015 in the amount of $6,000 (Taxpayer

17 Ex. 1.1; Department Ex. A-0030; A-0039; A-0609; A-0615; A-0638; A-687; A-0811; A-0819;

18 A-0831). On November 19, 2015, Check No. 2387 in the amount of $6,000 cleared Taxpayer’s

19 bank and was debited from its account (Department Ex. A-0041).

20 The fifth deposit occurred on December 16, 2015 in the amount of $6,000 (Taxpayer Ex.

21 1.1; Department Ex. A-0032; A-0035; A-0609;A-0615; A-0638; A-0729; A-0734; A-0736; A-

22 0748; A-0756; A-0811; A-0831). On December 18, 2015, Check No. 2401 in the amount of

23 $6,000 cleared Taxpayer’s bank and was debited from its account (Department Ex. A-0037).

In the Matter of the Protest of Warriors Management, LLC.
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1 As of the end of 2015, according to Department Ex. A and Taxpayer Ex. 1.1, Taxpayer

2 had received $28,000 in money from Beehive Staffing Services Company. The amount borrowed

3 in 2015 was $28,000 and consistent with the amount noted in a balance sheet indicating an

4 amount “Due to” Beehive Staffing Solutions Company (Department Ex. A-0067).

5 The sixth and final deposit occurred on March 17, 2026 according to Taxpayer’s bank

6 statements, although Taxpayer’s own transaction summary suggests it occurred on March 31,

7 2016 (Taxpayer Ex. 1.1; Department Ex. A-0123; A-0645). On March 18, 2016, Check No. 2476

8 in the amount of $6,000 cleared Taxpayer’s bank and was debited from its account (Department

9 Ex. A-0125).

10 These observations are consistent with Taxpayer’s testimony about a loan, its purpose

11 and use. In each instance, the exhibits illustrate that a specified sum of money was received by

12 Taxpayer and almost immediately paid by check to a third party, entirely consistent with what

13 one would expect to see in such scenario (borrowing money to pay a debt). Moreover, a running

14 balance due was then noted in a balance sheet in which the “due to” amount for the end of 2015

15 ($28,000) matched the sum of all 2015 deposits. Repayment, the circumstances of which are

16 discussed in the next section, is also consistent with a loan.

17 Although a close call, considering the totality of the evidence, the Hearing Officer is

18 persuaded that Taxpayer’s records established that $34,000 should be excluded from the

19 computation of Taxpayer’s gross receipts as proceeds from a loan, and Taxpayer is entitled to a

20 corresponding adjustment of tax, interest, and penalty due.

21 Return of Investment

22 At some point prior to April 7, 2016, Taxpayer concluded that its ownership in High

23 Desert Hospice, LLC was not advantageous to its goals. High Desert Hospice, LLC and

In the Matter of the Protest of Warriors Management, LLC.
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1 Taxpayer entered into an agreement in which High Desert Hospice agreed to refund Taxpayer’s

2 investment of $57,000 in exchange for Taxpayer returning its 25-percent interest in High Desert

3 Hospice, LLC.

4 On April 7, 2016, High Desert Hospice, LLC and Taxpayer executed a Member

5 Dissociation Agreement (Taxpayer Ex. 4) which explained that “[Taxpayer] wishes to separate

6 and dissociate from control and ownership of [High Desert Hospice, LLC].” Accordingly, the

7 parties agreed that High Desert Hospice, LLC and Taxpayer would accomplish the dissociation

8 “by complete return of capital investment by [Taxpayer] to date in the amount of $57,000 which

9 will be repaid in full and upon repayment will end all membership interests in [High Desert

10 Hospice, LLC].”

11 On April 8, 2016, the very next day after the parties executed the Member Dissociation

12 Agreement, Taxpayer received an incoming wire transfer in the amount of $57,000 (Department

13 Exhibits A-0119; A-0837). The notation on the transfer as it appeared in Taxpayer’s bank

14 statement (Department Ex. A-0119) read, “Capital Investment Repayment.”

15 Taxpayer argues this deposit into its account did not represent gross receipts but is merely

16 a refund of an investment which does not come within the definition of gross receipts. The

17 Department does not seemingly contest the legal reasoning underlying that position, but once

18 again raises doubts regarding the sufficiency of Taxpayer’s records, particularly with respect for

19 the entity that is identified as the source of the refund which is not High Desert Hospice, LLC or

20 any other entity familiar to the Department.

21 Although the Hearing Officer recognizes the Department’s hesitation as reasonable, it is

22 not persuasive in light of the totality of the evidence presented at the hearing. The Hearing

23 Officer is convinced that the incoming wire transfer was what it purported to be which was a

In the Matter of the Protest of Warriors Management, LLC.
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1 refund on an investment in High Desert Hospice, LLC. First, the money was received the day

2 after the dissociation agreement was executed as contemplated by the agreement. Second, the

3 incoming wire transfer was for the same amount stated in the dissociation agreement ($57,000).

4 Third, the notation in Taxpayer’s bank statement stated, “Capital Investment Repayment.”

5 The fact that the entity initiating the transfer was not High Desert Hospice, LLC does not

6 transform this money into gross receipts when all other evidence, including the testimony of

7 Taxpayer’s witnesses, the Member Dissociation Agreement, Taxpayer’s bank statements, as well

8 as the proximity of relevant events establish otherwise. The record evidence persuades by the

9 preponderance that the incoming wire transfer of $57,000 was a return on an investment

10 regardless of whether the entity that transmitted the money was familiar to the parties. The

11 possibility that this incoming wire transfer served any other purpose is negligible.

12 Taxpayer’s refund of $57,000 should be excluded from the computation of Taxpayer’s

13 gross receipts. Taxpayer’s gross receipts tax obligation, including associated interest and penalty

14 should also be adjusted accordingly.

15 Penalty

16 Taxpayer did not explicitly protest the imposition of penalty nor address the issue at the

17 hearing. Being familiar with the facts and having reviewed the applicable law and accompanying

18 regulations, the Hearing Officer finds no basis in fact or law for abatement of penalty with

19 respect to any part of the assessment not adjusted in Taxpayer’s favor.

20 For the reasons discussed herein, Taxpayer’s protest should be GRANTED IN PART and

21 DENIED IN PART.

22 CONCLUSIONS OF LAW

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

In the Matter of the Protest of Warriors Management, LLC.
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1 jurisdiction lies over the parties and the subject matter of this protest.

2 B. A hearing in the protest was timely held as required by NMSA 1978, Section 7-1B-8

3 which requires a hearing within 90 days of the Department filing an answer to a taxpayer’s request

4 for hearing.

5 C. Under NMSA 1978, Section 7-1-10 A, taxpayers shall “maintain books of account

6 or other records in a manner that will permit the accurate computation of state taxes[.]”

7 D. Under NMSA 1978, Section 7-9-5 (2002), all of Taxpayer’s receipts in New

8 Mexico are presumed subject to New Mexico’s gross receipts tax unless the records maintained

9 under NMSA 1978, Section 7-1-10 A establish otherwise.

10 E. Under NMSA 1978, Section 7-1-67, Taxpayer is liable for accrued interest under

11 the assessment, adjusted consistently with this Decision and Order. Interest continues to accrue

12 until the tax principal is satisfied.

13 F. Taxpayer did not establish a good faith, mistake of law made on reasonable grounds

14 that would allow for abatement of penalty under Section 7-1-69.

15 G. None of the indicators of non-negligence found under Regulation 3.1.11.11 NMAC

16 allow for abatement of penalty under the facts established in this protest.

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

18 IN PART. Taxpayer shall be entitled to a reduction of its total gross receipts by $91,000

19 (comprised of the sum of the loan in the amount of $34,000 and the refund of its investment of

20 $57,000) and corresponding adjustments to the associated gross receipts tax, interest, and

21 penalty. Taxpayer shall not be entitled to further adjustments for credit card reimbursements

22 except for those adjustments which the Department stated it had substantiated.

23 DATED: June 30, 2023

In the Matter of the Protest of Warriors Management, LLC.
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1
2 Chris Romero
3 Hearing Officer
4 Administrative Hearings Office
5 P.O. Box 6400
6 Santa Fe, NM 87502

7 NOTICE OF RIGHT TO APPEAL

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

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

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

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

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

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

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

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

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

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

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

In the Matter of the Protest of Warriors Management, LLC.
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1 CERTIFICATE OF SERVICE

2 I hereby certify that I served the foregoing on the parties listed below this 30th day of June,

3 2023 in the following manner:

4 INTENTIONALLY BLANK

In the Matter of the Protest of Warriors Management, LLC.
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