I overpaid a state fuel fee for years because the state's own form never told me to subtract the exempt gallons — can I still get all my money back?

Plain-English summary

Smith Oil Company, Inc. is a fuel distributor in Clovis, New Mexico that sells diesel and other fuels. New Mexico's Petroleum Products Loading Fee Act (effective July 1, 1990) charges a "loading fee" when gasoline or special fuel is loaded from a refinery or terminal in the state. Crucially, diesel sold for use in equipment other than motor vehicles does not meet the Act's definition of "special fuel," so no loading fee is due on those gallons.

For more than five years — July 1990 through November 1995 — Smith Oil paid the fee on all the fuel it received, including diesel it sold for non-motor-vehicle use. Part of the reason was the Department's own paperwork: the original report form (drafted June 1990) had no line and no instruction for subtracting the exempt gallons. The Department only added a worksheet for that subtraction when it revised the form in November 1995.

In March 1996, Smith Oil filed claims for refund of the overpaid fees for the whole period. The Department agreed the fees had been overpaid and refunded 1993, 1994, and 1995 in full — but denied the claims for 1990, 1991, and 1992 (totaling $2,567.88 + $4,102.01 + $4,020.69) because they were filed more than three years after the end of the year the payments were due, the deadline set by § 7-1-26(B). Smith Oil protested, arguing the Department should be estopped (legally barred) from using the deadline as a defense.

Hearing Officer Ellen Pinnes denied the protest:

• The fees really were overpaid — but the older claims were filed too late. Section 7-1-26(B) gives a taxpayer three years from the end of the calendar year the payment was due to claim a refund. The 1990–1992 claims came in March 1996, past that window, so they were barred.
• No estoppel under § 7-1-60. The Tax Administration Act lets you estop the Department only if you acted in accordance with a Department regulation or a written ruling addressed to you. Smith Oil had no such ruling and relied on the general filing regulation (TA 13:2), which only governs how returns are filed, not how a particular tax is computed — and Smith Oil hadn't even shown its filings followed the statute or the form instructions (it was, after all, arguing they were wrong).
• No estoppel on equitable ("right and justice") grounds. Estoppel against the state is rare and requires a false representation or concealment the taxpayer reasonably relied on. The Department quoted the statute in a letter to fuel dealers and on the form; it never told Smith Oil the exempt gallons were taxable, and its silence wasn't concealment. Smith Oil had a duty to know the law applicable to its business and could have asked the Department for clarification. Estoppel is for the diligent, and Smith Oil hadn't been.
• No estoppel to bar the deadline itself. That kind of estoppel applies only where a defendant prevented the plaintiff from suing in time. The Department did nothing to stop Smith Oil from spotting the overpayment and filing timely claims; its failure to alert the taxpayer sooner was not enough.

The Hearing Officer was openly sympathetic — she twice called the Act "confusingly drafted" and said it would have been "helpful" had the Department flagged the exemption earlier — but held that a confusing statute and the state's silence don't override a firm refund deadline.

What this means for you

A refund clock runs from the payment date — not from when you discover the mistake

New Mexico gives you three years from the end of the calendar year a payment was due to claim it back (§ 7-1-26(B)). It doesn't matter that you only realized you overpaid years later, or that the overpayment was genuine and undisputed: file too late and the money is gone. If you suspect you've been overpaying any tax or fee, file protective refund claims now rather than waiting to nail down every year.

A confusing or even misleading government form usually won't extend the deadline

Smith Oil's overpayment flowed directly from a state form that lacked a subtraction line — yet that didn't estop the Department from enforcing the deadline. Estoppel against the state is reserved for cases of actual misrepresentation or concealment that you reasonably relied on, and "the form didn't mention the exemption" doesn't clear that bar when the underlying statute was public.

The duty to know a tax's rules is on you

Because New Mexico taxes are self-reported, you're expected to read the statute and work out your own liability. If a form or its instructions seem to conflict with the law, or you're unsure whether something is exempt, ask the Department in writing for a ruling. A written ruling you actually follow is one of the few things that can estop the Department under § 7-1-60; general instructions and oral impressions are not.

File on time even while you sort out the details

Smith Oil got 1993–1995 back simply because those years were still inside the window. The lesson is mechanical but decisive: get the claim in before the three-year line, even if you have to amend later. A timely imperfect claim beats a perfect one filed a month too late.

Common questions

Q: The state's own form caused my overpayment. Doesn't that guarantee a refund?
A: Not beyond the deadline. The Hearing Officer agreed the fees were overpaid and that the original form lacked a subtraction line, but still denied the older claims because § 7-1-26(B)'s three-year deadline had passed and the form's shortcomings didn't estop the Department from relying on it.

Q: How long do I have to claim a New Mexico tax refund?
A: Generally three years from the end of the calendar year in which the payment was originally due. Claims filed after that are barred by § 7-1-26(B), regardless of how clearly the money was overpaid.

Q: When can I stop the Department from using the deadline against me?
A: Only rarely. Under § 7-1-60 you need to have acted in line with a Department regulation or a written ruling addressed to you. Equitable estoppel requires the Department to have misrepresented or concealed facts you reasonably relied on, or to have actively prevented you from filing on time — none of which happened here.

Q: Doesn't the Department have a duty to tell me I'm overpaying?
A: No. In a self-reporting system the duty to know the law and compute the tax is yours. The Department quoting the statute and staying silent about an exemption is not concealment, and its failure to flag the issue sooner did not excuse the late claims.

Citations and references

Statutes and regulations:

• § 7-1-26(B) NMSA 1978 — a refund claim must be filed within three years of the end of the calendar year in which the payment was originally due
• § 7-1-60 NMSA 1978 — the Department may be estopped only where the taxpayer acted in accordance with a Department regulation or a written ruling addressed to it
• § 7-13A-1 et seq. NMSA 1978 (Petroleum Products Loading Fee Act) — imposes the loading fee; § 7-13A-2(K) defines "special fuel" as fuel used to propel a motor vehicle; § 7-13A-2(F) defines "motor vehicle"; §§ 7-13A-3, 7-13A-6 impose the fee and require monthly remittance
• § 7-1-13(B) NMSA 1978 and Regulation TA 13:2 — general requirement to file returns on the prescribed forms and per the secretary's regulations

Cases cited:

• Taxation & Revenue Department v. Bien Mur Indian Market Center, 108 N.M. 228, 770 P.2d 873 (1989) — the state may be estopped when provided for by statute or when right and justice demand it, but only rarely
• Rainaldi v. Public Employees Retirement Board, 115 N.M. 650, 857 P.2d 761 (1993) — estoppel against the state is applied only rarely
• Gonzales v. Public Employees Retirement Board, 114 N.M. 420, 839 P.2d 630 (Ct. App. 1992) — sets out the elements of equitable estoppel as to both parties
• Continental Potash v. Freeport-McMoran, 115 N.M. 690, 858 P.2d 66 (1993) — silence is concealment only where there is a duty to speak; the party claiming estoppel bears the burden of proof
• Heckler v. Community Health Services of Crawford County, Inc., 467 U.S. 51 (1984) — a party dealing with the government has a duty to familiarize itself with the legal requirements that apply to it
• Garcia v. LaFarge, 119 N.M. 532, 893 P.2d 428 (1995) — estoppel is an equitable remedy available only to a party that exercised reasonable diligence to protect its own interests
• Kern v. St. Joseph Hospital, Inc., 102 N.M. 452, 697 P.2d 135 (1985) — estoppel to assert a limitations period applies against a defendant who prevented the plaintiff from suing in time

Source

• Listing: New Mexico Decisions & Orders
• Decision post: Smith Oil Company, Inc.
• Decision PDF: D&O 97-01

Original ruling text

BEFORE THE HEARING OFFICER
OF THE TAXATION AND REVENUE DEPARTMENT

IN THE MATTER OF SMITH OIL COMPANY, INC.
I.D. No. # 01-798853-00 1, Claim for Refund NO. 97-01

DECISION AND ORDER

This matter came on for hearing on December 6, 1996 before Ellen Pinnes, Hearing Officer.

Smith Oil Co. ("the Taxpayer") was represented by its attorneys, Robert Brack and James Hart. The

Taxation and Revenue Department ("the Department") was represented by Frank Katz, Special

Assistant Attorney General. The case was submitted on stipulated facts and the hearing was limited

to legal argument.

Based upon the factual stipulations and exhibits submitted by the parties and the arguments

presented, IT IS HEREBY DECIDED AND ORDERED AS FOLLOWS:

FINDINGS OF FACT

1. The Taxpayer, a corporation, is in the business of selling fuel, including diesel fuel, in

Clovis, New Mexico.

2. The Petroleum Products Loading Fee Act, §7-13A-1 et seq. NMSA 1978 ("the Act"),

effective July 1, 1990, imposes a fee ("the loading fee") on loading of gasoline or special fuels in

New Mexico.

3. Following enactment of the Petroleum Products Loading Fee Act, the Department sent a

form letter to the Taxpayer and other affected parties, advising them of the Act's terms. (Exhibit H

to the parties' Stipulations of Fact, hereinafter referred to as "Stipulations".) That letter quoted the

statutory provisions that gasoline and "special fuels" are petroleum products subject to the fee, that

"special fuels" includes diesel fuel, kerosene and other liquid fuels used in generating power to

propel motor vehicles, and that petroleum products are considered to be received when first unloaded

in New Mexico. The letter further advised the Taxpayer that all petroleum products received are

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subject to the loading fee and that the Department would send the Taxpayer appropriate forms to use

in remitting the tax.

4. For each month for the period of July, 1990 through November, 1995, the Taxpayer filed

with the Department a "Petroleum Products Loading Fee Report", reporting quantities of fuel and

calculating fees due to the Department.

5. The Taxpayer reported and paid the loading fee on the total quantity of fuel received each

month, including gallons of diesel fuel that were sold for use in equipment other than motor vehicles.

6. Diesel fuel used in equipment other than motor vehicles is excluded from the definition

of "special fuel" subject to the loading fee under the Act. No loading fee was due on these gallons.

7. The loading fee reports were submitted by the Taxpayer on forms prepared by the

Department for that purpose.

8. The report form used by the Taxpayer from July, 1990 through November, 1995 ("the

original form") was drafted by the Department and promulgated in June, 1990. (Copies of the

original form, as submitted to the Department by the Taxpayer, are attached as Exhibit A to the

Stipulations.)

9. The Department revised the report form in November, 1995 ("the revised form"). (A

copy of the revised form is attached as Exhibit B to the Stipulations.)

10. The original form directed the Taxpayer to report quantities of gasoline and special

fuels received. The form did not include a line for deduction of fuels not used in motor vehicles,

either in the body of the form or in the instructions. Neither the form nor the accompanying

instructions specifically informed the Taxpayer that certain quantities of fuel should be excluded

from the total reported as received by the Taxpayer, because they were not used in motor vehicles (as

defined by the Act) and therefore were not subject to the loading fee. Neither the form nor the

instructions directed the Taxpayer to include these quantities of fuel in amounts reported to the

Department or to pay the loading fee on them.

11. The revised form includes a worksheet as part of the instructions on the back of the

form. The instructions and worksheet direct the Taxpayer to subtract, from total gallons of special

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fuel received, the number of gallons not used in motor vehicles.

12. On March 3, 1996 and March 14, 1996, the Taxpayer filed claims for refund with the

Department, seeking refunds of taxes erroneously paid for the period from July, 1990 through

November, 1995. (Stipulations, Exhibit C) The Taxpayer in March, 1996 also filed amended

reports for the months of July, 1990 through December, 1992. (Stipulations, Exhibit D)

13. The Department approved the refunds for 1993 through 1995, and refunded the full

amounts sought by the Taxpayer for those years.

14. By letters dated March 21, 1996 (Stipulations, Exhibit E), the Department denied the

claims for refund for 1990, 1991 and 1992, on the grounds that they were barred as untimely by

§7-1-26(B) NMSA 1978 because they were filed more than three years after the end of the calendar

year in which the payments were originally due.

15. By letters dated March 26, 1996 from its secretary-treasurer, Valeria Smith, the

Taxpayer filed a timely protest of the denials.

16. The amounts erroneously paid by the Taxpayer, of which refunds are sought, are

$2,567.88 for 1990, $4,102.01 for 1991, and $4,020.69 for 1992.

17. The Taxpayer did not at any time request from the Department a formal ruling or other

clarification of the status of diesel fuel sold by the Taxpayer for use in equipment other than motor

vehicles.

18. The Department did not at any time advise the Taxpayer that the loading fee was due on

gallons of fuel sold by the Taxpayer for use in equipment other than motor vehicles.

19. The Department did not, prior to issuance of the revised form, advise the Taxpayer that

no loading fee was due on gallons of fuel sold by the Taxpayer for use in equipment other than motor

vehicles.

DISCUSSION

The Petroleum Products Loading Fee Act

The Petroleum Products Loading Fee Act, enacted in 1990, imposes a fee on the "loading

[of] gasoline or special fuel from a rack at a refinery or pipeline terminal in this state into a cargo

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tank". §7-13A-3(A) NMSA 1978. The Act defines "special fuel" to mean "diesel-engine fuel,

kerosene and all other liquid fuels used for the generation of power to propel a motor vehicle", with

certain listed exceptions. §7-13A-2(K), emphasis added. A "motor vehicle" is defined as a

"self-propelled vehicle or device that is used or may be used on the public highways ... for the

purpose of transporting persons or property". §7-13A-2(F).

The term "loading" is not defined in the Act. The statute instead includes a definition of

"received", which is defined as occurring when the petroleum product is loaded in New Mexico into

transportation equipment or placed into a container from which sales or deliveries are made.

§7-13A-2(I).1

Diesel fuel that is used in equipment other than motor vehicles does not fall within the Act's

definition of "special fuel". Since the loading fee applies only to gasoline and special fuel, diesel

fuel sold for use in equipment other than motor vehicles is not subject to the fee.

An element of confusion arises because the fee applies, by the Act's terms, to fuel loaded by

the distributor, not to the fuel sold by it. §§7-13A-3A, 7-13A-6. The ultimate use of the fuel --

whether in motor vehicles or other equipment -- cannot be determined until the fuel is sold. At the

time the distributor receives diesel fuel, it is all diesel fuel. However, it may not all be special fuel

considered a petroleum product under the Act, because any of it that is sold for use other than in

motor vehicles will not be considered special fuel.2 This is obviously a confusing statutory scheme.

Smith Oil Company paid the loading fee on all quantities of fuel received, including those

amounts sold for use in equipment other than motor vehicles. The refunds it sought in 1996, some

of which are at issue here, are of fees paid on the latter amounts. The Department agreed that those

fees were improperly paid, and refunded the overpaid sums for periods that fell within the applicable

1
The term "received" is not used elsewhere in the statute.
2
The Act requires monthly reporting and remittance of the loading fee. §7-13A-6. If the fuel
is sold by the distributor within the month in which it is received, it is possible to determine what
portion is special fuel and how much is not. If the fuel is not sold within the month of receipt, the
distributor would have no way of knowing the exact quantity that was or was not special fuel subject
to the loading fee. It does not appear that Smith Oil was affected by this quandary, since it did not
exclude any amounts of fuel from its reports.

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three-year statutory limitations period in §7-1-26(B) NMSA 1978. The Department denied the

Taxpayer's claims for refund for earlier years.

The Taxpayer argues that the Department should be estopped to raise the statute of

limitations as a bar to the claimed refunds. The state may be estopped when provided for by statute

or when right and justice demand it. Taxation & Revenue Department v. Bien Mur Indian Market

Center, 108 N.M. 228, 770 P.2d 873 (1989). However, estoppel against the state is applied only

rarely. Rainaldi v. Public Employees Retirement Board, 115 N.M. 650, 857 P.2d 761 (1993); Bien

Mur.

Estoppel under §7-1-60

The Tax Administration Act, §7-1-60 NMSA 1978, expressly provides for estoppel against

the Department if the adverse party shows that its action or inaction was in accordance

with either a regulation of the Department or a written ruling addressed to the party. The Taxpayer

does not contend that any such ruling exists, but asserts that it acted in accordance with Department

regulations.

There is no departmental regulation explicitly addressing the issue of whether taxpayers are

or are not required to report and pay the loading fee on gallons of diesel fuel sold for use in

equipment other than motor vehicles. Instead, the Taxpayer relies on Regulation TA 13:2, which

states in part:
Information concerning the method of completing and filing a return ... may be found under
the specific tax statutes, the secretary's regulations thereunder, on the prescribed
forms and on the instructions accompanying the forms. Returns are considered
complete and timely filed when the requirements of those documents ... are complied
with by taxpayers. [Emphasis added.]

TA 13:2 implements the provisions of §7-1-13 of the Tax Administration Act, which provides in

pertinent part:
Every taxpayer shall, on or before the date on which payment of any tax is due, complete and
file a tax return in a form prescribed and according to the regulations issued by the
secretary.

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§7-1-13(B) NMSA 1978.

Neither §7-1-13 nor TA 13:2 goes to the method of computing particular taxes. They are general

provisions regarding the submission of returns for taxes administered by the Department.

The Taxpayer argues that it was required by TA 13:2 to submit forms in accordance with the

Department's instructions, that it did so, and that compliance with this regulation estops the

Department to deny the claimed refunds of overpaid taxes. However, the Taxpayer has not shown

that its reporting to the Department was in accordance with applicable instructions. The instructions

on the original form required the Taxpayer to report total gallons of special fuel and gasoline

received during the reporting month. The Petroleum Products Loading Fee Act defines "special

fuel" to include only fuel used to propel motor vehicles. §7-13A-2(K). "Motor vehicle" is defined

to include only those vehicles capable of being used on public highways to transport persons or

property. §7-13A-2(F). The reporting form's instructions did not direct Smith Oil to report gallons

sold for use in equipment other than motor vehicles or to pay the fee on those gallons.

Moreover, TA 13:2 requires that returns be filed in accordance with statute as well as

instructions on report forms. Smith Oil has not shown that its filings were in accord with the

Petroleum Products Loading Fee Act; it expressly argues to the contrary in seeking a refund of

amounts overpaid.

The Taxpayer has not shown that it completed its tax returns in accordance with statute or

the Department's instructions regarding the forms. It therefore cannot rely on compliance with

Regulation TA 13:2 as a basis for estoppel under §7-1-60.3

Estoppel based on the demands of right and justice

Although the Taxpayer has not established grounds for estoppel under §7-1-60, the

Department may still be estopped to deny the claimed refunds of overpaid taxes if right and justice

demand such action. Bien Mur, supra.

3
Because the Taxpayer has not demonstrated that it acted in accordance with the Act or the
instructions on the reporting form, the issue of whether compliance with the general terms of
TA 13:2 would be sufficient to support an estoppel under §7-1-60 need not be decided here.

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In determining whether estoppel is appropriate, the conduct of both parties must be

considered. Gonzales v. Public Employees Retirement Board, 114 N.M. 420, 427, 839 P.2d 630

(Ct.App. 1992), cert. den. 8/14/92. The following elements must be shown as to the party to be

estopped: 1) conduct that amounts to a false representation or concealment of material facts,

2) actual or constructive knowledge of the true facts, and 3) an intention or expectation that the other

party will act on the representations. As to the party claiming estoppel, the following must

be shown: 1) lack of knowledge of the true facts, 2) detrimental reliance on the adverse party's

representations or concealment of facts, and 3) that such reliance was reasonable. Id.

The Taxpayer has not established that the Department misrepresented material facts. The

Department did not advise the Taxpayer that diesel fuel sold for use in equipment other than motor

vehicles (as defined by the Act) was subject to the loading fee. The Department's actions, in the

letter distributed to the Taxpayer and other fuel dealers and in the original report form and

instructions, consisted of quoting the statutory provisions relating to imposition of the loading fee.

Nor is there any showing that the Department concealed material facts. The language of the

statute was readily available to the Taxpayer; in fact, the Department sent a letter to the Taxpayer

and others in the same line of business, quoting the statutory provisions. The Department did not

explicitly advise the Taxpayer that the loading fee was inapplicable to gallons of diesel fuel that did

not fall within the statutory definition of "special fuel". However, this did not constitute

concealment. To establish a claim to estoppel by virtue of the Department's failure to expressly

advise the Taxpayer on this point, Smith Oil must show that the Department had a duty to so advise

it and that the agency refrained from doing so with knowledge that Smith Oil was acting in reliance

on that silence. Continental Potash v. Freeport-McMoran, 115 N.M. 690, 858 P.2d 66 (1993), cert.

den. 114 S.Ct. 1064. No such showing was made.4

4
The Act is confusingly drafted, and it would have been helpful to taxpayers such as Smith Oil
if the Department had acted earlier to call their attention to the non-taxability of diesel fuel used in
equipment other than motor vehicles. However, not doing so is not adequate grounds for estoppel.

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Moreover, Smith Oil has not established its own lack of knowledge or that its alleged

reliance on the Department was reasonable. The Taxpayer had a duty to familiarize itself with the

legal requirements applicable to its operations. See Heckler v. Community Health Services of

Crawford County, Inc., 467 U.S. 51, 64 (1984). The Taxpayer was informed of the language of the

statute, and could interpret the Act's terms and draw its own conclusions about the statutory

provisions. It is true that the statute is confusingly written. However, if the Taxpayer was

uncertain as to whether fuel sold for use other than in motor vehicles was subject to the loading fee,

it could have contacted the Department to request clarification. This was not done. Estoppel is an

equitable remedy and, as such, applies only when a party has exercised reasonable diligence to

protect its own interests. Garcia on behalf of Garcia v. LaFarge, 119 N.M. 532, 536, 893 P.2d 428

(1995). The Taxpayer here failed to do so.

The Taxpayer, as the party alleging an estoppel, has the burden to prove all facts necessary to

support it. Continental Potash, supra. Smith Oil has not proved the facts necessary to establish an

estoppel here.

Estoppel to assert statute of limitations

Even assuming that the Department misled Smith Oil as to the applicability of the loading

fee, that would be insufficient to support the Taxpayer's estoppel claim here. The Taxpayer is not

attempting to estop the Department to deny that the fees were erroneously paid, as the Department

does not contest that point. The estoppel the Taxpayer attempts to assert is to bar the Department

from relying on the limitations period for making a claim for refund.

Estoppel to raise the statute of limitations as a defense will be applied against a defendant

who has prevented a plaintiff from bringing suit within the prescribed period. Kern v. St. Joseph

Hospital, Inc., 102 N.M. 452, 697 P.2d 135, 138-39 (1985). Thus, a defendant who has assured the

plaintiff that a claim can be settled without litigation, or who has concealed facts from the plaintiff to

prevent the latter from being aware of the existence of a claim, will be barred to assert the statute of

limitations. See Molinar v. City of Carlsbad, 105 N.M. 628, 735 P.2d 1134 (1987); Kern, supra. In

such circumstances, the statute is tolled until the right of action is discovered, or until it could have

8
been discovered through the exercise of due diligence on the part of the plaintiff. Bolton v. Board

of County Commissioners of Valencia County, 119 N.M. 355, 890 P.2d 808 (Ct.App. 1994), cert.

den. 119 N.M. 311, 889 P.2d 1233 (1995).

Here, there was no conduct by the Department to interfere with the Taxpayer claiming

refunds for 1990-92 within the three-year period set out in §7-1-26(B). The Taxpayer was free to

review the statute at any time following its enactment, and could have determined that the loading

fee appeared to be inapplicable and that it had made overpayments. The Department neither

prevented the Taxpayer from discovering the error nor discouraged it from filing timely claims to

recover overpaid sums.

What the Taxpayer is complaining of, in essence, is that the Department did not take action

sooner to alert the Taxpayer to its error in paying the loading fee. Failure to act earlier to protect the

Taxpayer from its own mistakes is not sufficient to estop the Department to assert the statute of

limitations applicable to the Taxpayer's claims.

CONCLUSIONS OF LAW

1. By its March 21, 1996 letters, the Taxpayer filed a timely protest of the Department's

denial of its claims for refund for 1990 through 1992. Jurisdiction thus lies over the parties and the

subject matter of the protest.

2. The Taxpayer overpaid loading fees under the Petroleum Products Loading Fee Act in

the amounts of $2,567.88 for 1990, $4,102.01 for 1991, and $4,020.69 for 1992.

3. The Taxpayer's claims for refund for 1990 through 1992 were not submitted to the

Department until March of 1996, more than three years following the end of the calendar year in

which the payment was originally due, and thus were barred by the statute of limitations in

§7-1-26(B) of the Tax Administration Act.

4. The Department is not estopped to assert the statute of limitations as a bar to the

Taxpayer's claims.

For the foregoing reasons, the Taxpayer's protest IS HEREBY DENIED.

9
DONE this 6th day of January, 1997.

10