Can I get late-filing penalties waived if COVID disruption and unanswered calls to the tax department kept me from filing my gross receipts tax returns on time?

Plain-English summary

Two related New Mexico dental practices — 6588 East Main Street Farmington Professional, LLC and 3501 North Butler Avenue Farmington Professional, LLC (acquired by the same parent in February 2020) — did not file their gross receipts tax (GRT) returns on time for periods in 2020 and early 2021. They were paying GRT during that stretch but simply weren't filing the returns. When the Department assessed penalties (and a little interest), the companies withdrew any dispute over the tax itself and protested only the penalty and interest: about $16,100.39 for the first LLC and $16,334.20 for the second. The Hearing Officer denied both protests.

New Mexico's late-filing penalty is mandatory — "there shall be added" 2% per month, up to 20% of the tax on the late return (NMSA 1978, Section 7-1-69(A)). A penalty can be excused only if the taxpayer shows it was not negligent, and "negligence" is defined broadly to include inadvertence, inattention, and failing to act where action is required. The companies pointed to the pandemic: mandatory closures, a rushed shift to remote work, mail-handling problems, and an employee who supposedly called the Department repeatedly in 2020–2021 without getting help. The Hearing Officer found that insufficient. The call evidence was hearsay — the employee who made the calls didn't testify, and the companies had no call logs to back it up — and the Department had no record of the calls. Crucially, the companies didn't claim the Department misled them; they said only that they were uninformed, and lack of knowledge is not reasonable cause (Grogan). They admitted receiving their business registrations, which the Department mails together with GRT filing instructions, and receiving a filing kit but not complying with it is itself evidence of negligence (Arco Materials). And when their inquiries went unanswered, they never took the obvious next steps — the Department's website or a tax professional. Interest was likewise mandatory on the few periods where tax wasn't fully paid on time.

What this means for you

Businesses new to New Mexico gross receipts tax

Registering isn't the end of it — you must file the returns, on time, even in months when little or no tax is due. Paying without filing (as these practices did) still draws the late-filing penalty. If you're unsure how, the Department's website and a tax professional are expected resources; don't just wait.

Anyone hoping COVID (or another disruption) excuses a late filing

Hard circumstances don't automatically waive the penalty. The standard is whether you acted reasonably, and being too busy, disorganized, or uninformed generally isn't enough. You have to show affirmative, documented efforts to comply.

If you plan to argue you tried to get help

Document everything. The companies lost largely because their "we called and got no help" story was uncorroborated hearsay — the caller didn't testify and there were no call logs. Keep dated records of your contacts, reference numbers, and who you spoke with, and be ready to put a witness with firsthand knowledge on the stand.

Anyone who got a registration/filing packet

If the Department mailed you a filing kit with your registration, you're charged with following it. Claiming you received the registration but not the instructions is a weak position — courts have treated receipt of the packet as evidence of negligence when the taxpayer didn't comply.

Common questions

Q: The pandemic wrecked our operations. Doesn't that excuse the late returns?
A: Not by itself. The penalty is excused only if you prove you weren't negligent — that you acted reasonably. The Hearing Officer found that disruption plus not knowing how to file did not meet that bar.

Q: We were paying the tax — why a penalty for not filing?
A: The late-filing penalty is triggered by the missing return, separate from whether the tax was paid. Paying without filing on time still incurs the 2%-per-month penalty (capped at 20%).

Q: We tried calling the Department and got no help. Isn't that reasonable cause?
A: The evidence has to hold up. Here it was hearsay — the employee who called didn't testify and there were no call logs — and the Department had no record of the calls. Being uninformed isn't reasonable cause, and you didn't allege the Department misled you.

Q: We say we never got the filing instructions. Does that help?
A: Not much. The companies admitted receiving their business registrations, which are mailed with the filing instructions. Receiving a filing kit and not complying has been treated as evidence of negligence.

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 show how narrowly "reasonable cause" is read for late-filing penalties.

Citations and references

Statutes and rules:

• NMSA 1978, § 7-1-69(A) (2021) — mandatory late-filing penalty: 2% per month, up to 20%
• NMSA 1978, § 7-1-67(A) (2013) — interest on tax not paid when due is mandatory
• NMSA 1978, § 7-1-17 (2007) — assessments are presumed correct
• NMSA 1978, § 7-1B-8 (2019) — protest jurisdiction; 90-day hearing requirement
• Regulation 3.1.11.10 NMAC (2001) — definition of "negligence" (inadvertence, inattention, failure to act where required)
• Regulation 3.1.11.11 NMAC (2001) — indicators of non-negligence, including (A): not negligent if misled by a Department employee
• Regulation 3.1.6.12(A) NMAC (2001) — taxpayer's burden to come forward with countervailing evidence
• Regulation 3.1.6.13 NMAC (2001) — presumption of correctness extends to penalty and interest
• Regulation 22.600.3.24(B) NMAC (2020) — the taxpayer has the burden of proof
• Regulation 3.1.10.18 NMAC (2001) — interest rate and daily interest calculation

Cases:

• Marbob Energy Corp. v. N.M. Oil Conservation Comm'n, 2009-NMSC-013 ("shall" makes penalty and interest mandatory)
• El Centro Villa Nursing Ctr. v. Taxation & Revenue Dep't, 1989-NMCA-070 (no penalty where the taxpayer acted reasonably; scope of Section 7-1-69)
• Arco Materials, Inc. v. State Taxation & Revenue Dep't, 1994-NMCA-062 (receiving a filing kit but not complying is evidence of negligence)
• Grogan v. N.M. Taxation & Revenue Dep't, 2003-NMCA-033 (lack of knowledge is not enough to show reasonableness)
• Gemini Las Colinas, LLC v. N.M. Taxation & Revenue Dep't, 2023-NMCA-039 (burden and presumption of correctness)
• Archuleta v. O'Cheskey, 1972-NMCA-165; N.M. Taxation & Revenue Dep't v. Casias Trucking, 2014-NMCA-099 (presumption of correctness; taxpayer's burden)

Source

• Listing: New Mexico Decisions & Orders
• Decision post: Farmington Professional LLC
• Decision PDF: D&O 24-17

Original ruling text

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

4 6588 EAST MAIN STREET FARMINGTON PROFESSIONAL, LLC &
5 3501 NORTH BUTLER AVENUE FARMINGTON PROFESSIONAL, LLC
6 v. AHO No. 24.09-030A & 24.09-031A
7 TAXATION AND REVENUE DEPARTMENT D&O No. 24-17

8 DECISION AND ORDER
9 On November 4, 2024, Hearing Officer Dee Dee Hoxie, Esq. conducted a

10 videoconference hearing on the merits of the protests to the assessments. The Taxation and

11 Revenue Department (Department) was represented by Cordelia Friedman, Staff Attorney, who

12 appeared by telephone. Lizette Rivera, Auditor, also appeared by telephone on behalf of the

13 Department. 6588 East Main Street Farmington Professional, LLC (EMFP) and 3501 North

14 Butler Avenue Farmington Professional, LLC (NBFP) (collectively, Taxpayers) were

15 represented by their CFO, Yatin Gandhi, who appeared by videoconference. Dimple Parekh,

16 Finance Manager, was also present by videoconference for the Taxpayers. Mr. Gandhi, Ms.

17 Parekh, and Ms. Rivera testified. The Hearing Officer took notice of all documents in the

18 administrative file. No exhibits were submitted.

19 The parties stipulated that the total liability for penalty and interest was $16,100.39 for

20 EMFP1 and $16,334.20 for NBFP2. The Taxpayers withdrew any protest to the tax3. The only

21 remaining issue is whether the Taxpayers are liable for the penalty and interest. The Hearing

22 Officer considered all of the evidence and arguments presented by both parties. Because the

23 Taxpayers failed to file timely returns and did not prove that they were not negligent, the

1
Penalty is $15,944.46 and interest is $155.93.
2
Penalty is $16,229.62 and interest is $104.58.
3
Most of the assessments show a zero tax liability or a tax liability of less than $1. A few assessments show a more
substantial amount of tax liability.
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1 Hearing Officer finds in favor of the Department. IT IS DECIDED AND ORDERED AS

2 FOLLOWS:

3 FINDINGS OF FACT

4 1. In December 2023, the Department issued a series of assessments to EMFP4. The

5 bulk of the assessments were for penalty for failure to file timely gross receipts tax returns in

6 2020 and 2021. [Testimony; Admin. file].

7 2. On October 24, 2023, the Department issued a series of assessments to NBFP.

8 The bulk of the assessments were for penalty for failure to file timely gross receipts tax returns in

9 2020 and 2021. [Testimony; Admin. file].

10 3. The Taxpayers filed timely written protests to the assessments. [Admin. file

11 protests].

12 4. The Department acknowledged its receipts of the protests. [Admin. file].

13 5. On September 9, 2024, the Department filed requests for hearing with answers to

14 the protests with the Administrative Hearings Office. [Admin. file requests].

15 6. On October 2, 2024, a telephonic scheduling hearing was conducted on each

16 protest, which was within 90 days of the requests as required by statute. [Admin. file].

17 7. On October 17, 2024, the parties filed stipulated motions in each protest to

18 consolidate the protests, which were granted on October 21, 2024. [Admin. file].

19 8. On October 22, 2024, the parties filed stipulated facts. [Admin. file].

20 9. The Taxpayers were acquired by the same parent company in February 2020.

21 [Testimony of Mr. Gandhi].

4
One assessment was also issued in July 2023; however, that assessment is not at issue according to the stipulated
facts.
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1 10. After the acquisition, the Taxpayers looked into how to register their businesses in

2 New Mexico. [Testimony of Mr. Gandhi].

3 11. The Taxpayers filed their business registrations in New Mexico around the time

4 that the pandemic hit, and businesses were required to be closed. [Testimony of Mr. Gandhi].

5 12. The Taxpayers provide dental health services. [Testimony of Mr. Gandhi].

6 13. The Taxpayers had to significantly and quickly change their usual business

7 practices due to the mandatory government-ordered closures during the pandemic. [Testimony

8 of Mr. Gandhi].

9 14. The Taxpayers faced significant challenges in transitioning to remote-working

10 models, especially with respect to receipt of mail. [Testimony of Mr. Gandhi].

11 15. The Taxpayers are required to display their business registration at their business

12 locations before engaging in business. [Testimony of Ms. Rivera].

13 16. The Department mailed the business registrations to the Taxpayers with a packet

14 of filing instructions for gross receipts taxes. [Testimony of Ms. Rivera].

15 17. The Taxpayers provided limited services as dental practices at their business

16 locations during the pandemic. [Testimony of Mr. Gandhi].

17 18. The Taxpayers did not receive the filing instructions. [Testimony of Mr. Gandhi].

18 19. As the Taxpayers were doing business, they presumably did receive their business

19 registrations. [Testimony of Mr. Gandhi, Testimony of Ms. Rivera].

20 20. The Taxpayers learned of the gross receipts tax obligation and began researching

21 how to take care of it. [Testimony of Mr. Gandhi].

22 21. An employee of the Taxpayers tried calling the Department to inquire about the

23 procedures and processes respecting the gross receipts tax. [Testimony of Mr. Gandhi].

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1 22. The employee tried to call several times, but he did not receive any assistance

2 until late in 2021. [Testimony of Mr. Gandhi].

3 23. The Department has no record that the Taxpayers called during that time.

4 [Testimony of Ms. Rivera].

5 24. The Taxpayers have no record of their calls to the Department during that time

6 because of the breakdown in their procedures and record-keeping that were caused by the

7 remote-working transition. The employee who made the calls was not available to testify.

8 [Testimony of Mr. Gandhi].

9 25. The Taxpayers were making gross receipts tax payments during that time, but

10 they were not filing their returns. [Testimony of Mr. Gandhi; Testimony of Ms. Rivera].

11 26. After receiving assistance in late 2021, the Taxpayers began filing their gross

12 receipts tax returns and filed the returns late for the tax periods in 2020 and early 2021.

13 [Testimony of Mr. Gandhi].

14 27. The Taxpayers withdrew any protest as to the gross receipts tax. The Taxpayers

15 are asking for relief from the penalty and interest that were assessed. [Testimony of Mr. Gandhi;

16 Admin. file].

17 DISCUSSION

18 “The taxpayer shall have the burden of proof, except as otherwise provided by law.”

19 22.600.3.24 (B) NMAC (2020). Assessments by the Department are presumed to be correct. See

20 NMSA 1978, § 7-1-17 (2007). See El Centro Villa Nursing Ctr. v. Taxation and Revenue

21 Department, 1989-NMCA-070, 108 N.M. 795. See also Archuleta v. O'Cheskey, 1972-NMCA-

22 165, ¶11, 84 N.M. 428. See also N.M. Taxation & Revenue Dep't v. Casias Trucking, 2014-

23 NMCA-099, ¶8. The presumption extends to the assessment of penalty and interest. See 3.1.6.13

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1 NMAC (2001). “The effect of the presumption of correctness is that the taxpayer has the burden of

2 coming forward with some countervailing evidence tending to dispute the factual correctness of the

3 assessment”. 3.1.6.12 (A) NMAC (2001). See Gemini Las Colinas, LLC v. N.M. Taxation &

4 Revenue Dep’t, 2023-NMCA-039. See also 22.600.1.18 and 22.600.3.24 NMAC.

5 Assessment of penalty.

6 When a return is not filed by the due date, “there shall be added to the amount assessed a

7 penalty”. NMSA 1978, § 7-1-69 (A) (2021) (emphasis added). The penalty equals two percent per

8 month, not to exceed 20 percent, of the tax liability established in the late-filed return. See id. The

9 word “shall” indicates that the assessment of penalty is mandatory, not discretionary. See Marbob

10 Energy Corp. v. N.M. Oil Conservation Comm’n., 2009-NMSC-013, ¶ 22, 146 N.M. 24. If a

11 taxpayer is not negligent, a penalty may be excused. See 3.1.11.11 NMAC (2001) (listing several

12 factors that indicate non-negligence). The Taxpayers presented no evidence of factors that indicate

13 non-negligence. See id.

14 Negligence includes “inadvertence, indifference, thoughtlessness, carelessness, erroneous

15 belief or inattention.” 3.1.11.10 NMAC (2001). It also includes failure to act where action is

16 required and the failure to exercise the degree of ordinary business care and prudence that

17 reasonable taxpayers would exercise in similar circumstances. See id. “Under the statutory

18 definition of negligence, it is inappropriate to impose a penalty where the taxpayer acted reasonably

19 in failing to report income or to pay taxes.” El Centro Villa Nursing Ctr., 1989-NMCA-070, ¶ 6.

20 The Taxpayers admit that they failed to file the returns involved in the assessments on time.

21 [Testimony of Mr. Gandhi]. Therefore, the Taxpayers were negligent under the regulation as they

22 failed to act where action was required. See 3.1.11.10 NMAC.

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1 The Taxpayers argued that they tried to get information from the Department by calling in

2 2020 and 2021. [Testimony of Mr. Gandhi]. The Taxpayers argued that they began filing and filed

3 their late returns after they received information from the Department in late 2021. [Testimony of

4 Mr. Gandhi]. The only evidence that the Taxpayers tried to call the Department in 2020 and in

5 2021 is hearsay. The employee who made the inquiries did not testify, the extent of his efforts is

6 not clear, the content of his conversations is unknown, and the Taxpayers do not have any business

7 records, such as call logs, to bolster the hearsay. Therefore, the Taxpayers’ evidence is inadequate.

8 The Department’s records do not show any calls were received from the Taxpayers during 2020 and

9 early 2021. [Testimony of Ms. Rivera]. Moreover, the Taxpayers are not alleging that the

10 Department misled them, merely that they were uninformed and did not understand how to file

11 before August or September in 2021. See 3.1.11.11 (A) NMAC (indicating that a taxpayer is not

12 negligent if misled by a department employee). A taxpayer’s lack of knowledge is not sufficient to

13 demonstrate that they acted reasonably for purposes of excusing penalty. See Grogan v. N.M.

14 Taxation & Revenue Dep’t, 2003-NMCA-033, ¶ 32-35, 133 N.M. 354.

15 The Department mailed filing instructions to the Taxpayers with their business registrations.

16 [Testimony of Ms. Rivera]. The Taxpayers do not deny receiving their business registrations, but

17 they deny receiving the filing instructions. [Testimony of Mr. Gandhi]. Evidence that a taxpayer

18 received a filing kit but failed to comply with its instructions was sufficient evidence that a taxpayer

19 was negligent. See Arco Materials, Inc. v. State of N.M. Taxation & Revenue Dep’t, 1994-NMCA-

20 062, ¶ 15, 118 N.M. 12, overruled in part on other grounds by Blaze Constr. Co. v. Taxation &

21 Revenue Dep’t, 1994-NMSC-110, 118 N.M. 647.

22 The Taxpayers failed to file their returns because they lacked information and failed to take

23 action where action was required. [Testimony of Mr. Gandhi]. See 3.1.11.10 NMAC. Although

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1 the Taxpayers inquired about filing returns, they failed to take any further action, such as using the

2 Department’s website or consulting a tax professional, when their inquiries went unanswered.

3 [Testimony of Mr. Gandhi]. The Taxpayers failed to prove that they acted reasonably when they

4 failed to file their returns. See Arco Materials, Inc., 1994-NMCA-062. See Grogan, 2003-NMCA-

5 033. See El Centro Villa Nursing Ctr., 1989-NMCA-070.

6 Assessment of interest.

7 The Taxpayers requested relief from interest. Interest “shall be paid” on taxes that were

8 not paid on or before the date on which they were due. NMSA 1978, § 7-1-67 (A) (2013).

9 Again, the word “shall” indicates that the assessment of interest is mandatory. See Marbob

10 Energy Corp., 2009-NMSC-013. The assessment of interest is not designed to punish taxpayers,

11 but to compensate the state for the time value of unpaid revenue. See also 3.1.10.18 NMAC

12 (2001) (indicating the interest rate per year and how daily interest is calculated). In a few

13 instances, the Taxpayers failed to pay the total tax when it was due, and interest was properly

14 assessed on those portions of tax that were not paid when they were due.

15 CONCLUSIONS OF LAW

16 A. The Taxpayers filed timely written protests of the Department’s assessments, and

17 jurisdiction lies over the parties and the subject matter of this protest. See NMSA 1978, § 7-1B-8

18 (2019).

19 B. The first hearing on each protest was timely set and held within 90 days of the

20 request for hearing. See id. See also 22.600.3.8 NMAC (2020).

21 C. The Taxpayers admitted that they failed to file their returns when they were due.

22 See NMSA 1978, § 7-1-17 and § 7-1-69.

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1 D. The Taxpayers failed to prove that they were not negligent when they failed to file

2 their returns when they were due; therefore, penalty was properly assessed. See NMSA 1978, § 7-

3 1-69. See 3.1.11.10 and 3.1.11.11 NMAC.

4 E. Small portions of the tax were not paid when they were due; therefore, interest was

5 properly assessed. See NMSA 1978, § 7-1-67.

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

7 Taxpayers are liable for $16,100.39 in penalty and interest for EMFP and $16,334.20 in penalty

8 and interest for NBFP.

9 DATED: December 6, 2024.

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

16 NOTICE OF RIGHT TO APPEAL

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

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

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

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

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

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

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

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

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

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

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

4 CERTIFICATE OF SERVICE

5 On December 6, 2024, a copy of the foregoing Decision and Order was submitted to the

6 parties listed below in the following manner:

7 First Class Mail & Email First Class Mail & Email
8
9
10 INTENTIONALLY BLANK

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