Can New Mexico collect a company's unpaid withholding taxes from a corporate officer by sending a demand letter, without ever issuing a tax assessment to the officer personally?

Subject

Anthony Tafoya (D&O 99-19)

(Note: the decision's signature line reads "DATED April 30, 1998," but that is a typographical error. The decision recites that the case was submitted for decision on April 14, 1999, references Department action taken on June 10, 1998, and relies on a 1998 Court of Appeals opinion — so it could not have been issued in April 1998. The Department's own listing and post date it May/April 1999, and the case number is a 1999-series number; this page uses the corrected issued date of 1999-04-30.)

Plain-English summary

American Ready-Mix, Inc. failed to pay New Mexico withholding taxes for periods in 1989 and 1990, while the company slid from Chapter 11 into Chapter 7 bankruptcy. Anthony Tafoya had been made the company's president and CEO during that time and was the officer responsible for hiring. Between 1990 and 1995 the Department issued ten assessments totaling $43,595.25 — but all of them were issued to the corporation, never to Tafoya. In August 1995 the Department sent Tafoya a demand-for-payment letter treating him as personally liable as an "employer," threatened to levy, and filed a lien against his property. Tafoya protested.

The Hearing Officer agreed Tafoya was substantively liable: under the Withholding Tax Act, a corporate officer who controls the payment of wages is an "employer" responsible for the company's withholding tax, and the parties stipulated Tafoya fit that description. But the Department still lost, because it skipped a required step:

• The Department must assess each liable person. Section 7-1-17(A) says that once the Department determines someone is liable, it "shall promptly assess" that person — and "shall" is mandatory. An assessment is effective only when delivered "to the taxpayer against whom the liability for tax is asserted." The Department never assessed Tafoya; it assessed only the corporation.
• No assessment means no "delinquent taxpayer." Under Section 7-1-16, a delinquent taxpayer is one to whom taxes have been assessed (or a demand made under a specific business-transfer statute) who then fails to pay or protest within 30 days. As the Court of Appeals held in Bank of Commerce, "a delinquent taxpayer is not simply anyone who owes taxes." Since Tafoya was never assessed, he never became delinquent, and only a delinquent taxpayer's property can be levied (Section 7-1-31).
• Skipping the assessment also skipped the taxpayer's protest rights. Bypassing Section 7-1-17 deprived Tafoya of the Section 7-1-24 chance to challenge the assessments themselves — he could only argue the "employer" question, and more than 90 days had passed on the corporation's assessments.
• The later "secondarily liable" regulation didn't apply. In October 1996 the Department adopted a rule (Regulation 3 NMAC 1.6.16) letting it skip separate assessments of secondarily liable taxpayers, but that came after the August 1995 demand and was not retroactive.

Because the Department's collection actions did not comply with the Tax Administration Act, Tafoya overcame the presumption that the demand was correct, and his protest was granted.

What this means for you

• The state must assess you personally before it can collect from you. Even if you are genuinely liable — for example, as a responsible corporate officer for unpaid withholding tax — the Department generally cannot levy or demand payment unless it first issues an assessment to you and you then fail to pay or protest.
• An assessment against the company is not an assessment against you. A notice sent to the corporation does not make a corporate officer a "delinquent taxpayer." That status attaches only to the specific taxpayer who was assessed.
• Watch the effective date of any rule the Department cites. The regulation that would have let the Department skip a separate assessment did not apply because it post-dated the demand and was not retroactive.
• This concerns collection procedure, not whether the officer owed the tax. Tafoya was found liable as an "employer"; he won only because the Department failed to follow the statutory steps. For periods governed by the later regulation, the analysis may differ.
• You can defeat a collection demand by showing the Department skipped a required step. The presumption that a demand is correct can be overcome by proving the Department did not follow the Tax Administration Act.

Key questions answered

Was Tafoya actually liable for the company's withholding taxes?
Yes, in substance. As the corporate officer controlling the payment of wages, he was an "employer" under the Withholding Tax Act, and the parties stipulated to the facts establishing that. His liability was not the problem — the collection procedure was.

Then why did he win?
Because the Department never issued an assessment to him personally. Section 7-1-17 requires the Department to assess each liable person, and only a taxpayer who has been assessed (and fails to pay or protest) becomes a "delinquent taxpayer" subject to levy under Section 7-1-16. Assessing only the corporation was not enough.

Doesn't Section 7-1-17(D) let the Department demand payment whenever tax is assessed to "any taxpayer" and unpaid?
The Department argued that, but the Hearing Officer held it cannot be read to override Subsection A's command to assess each liable person, or the other sections that limit collection to "delinquent" taxpayers. Reading it the Department's way would bypass the statutory safeguards.

What about the 1996 rule allowing collection from "secondarily liable" taxpayers without a separate assessment?
It didn't apply. That regulation took effect in October 1996, after the August 1995 demand to Tafoya, and regulations are not applied retroactively unless clearly intended.

Verbatim citations

The mandatory assessment requirement (Section 7-1-17(A)):

If the secretary or the secretary's delegate determines that a taxpayer is liable for taxes in excess of ten dollars ($10.00) that are due and that have not been previously assessed to the taxpayer, the secretary or the secretary's delegate shall promptly assess the amount thereof to the taxpayer.

Who is a "delinquent taxpayer" (quoting Bank of Commerce):

Under Section 7-1-16 a delinquent taxpayer is not simply anyone who owes taxes. For a taxpayer to be a "delinquent taxpayer," the Department must have assessed taxes against the taxpayer or demanded payment from the taxpayer, and the taxpayer must have gone thirty days without paying the taxes, furnishing security for payment, or protesting the assessment or demand.

The conclusion:

There is nothing in the Tax Administration Act that would make this assessment effective against Anthony Tafoya, a corporate officer of American Ready-Mix, in his individual capacity.... A delinquent taxpayer is someone "to whom" taxes have been assessed. This does not include a corporate officer who may be liable for payment of withholding taxes, but to whom no assessment has been issued.

Source

• Listing: New Mexico Decisions & Orders
• Decision post: Anthony Tafoya
• Decision PDF: D&O 99-19

Original ruling text

BEFORE THE HEARING OFFICER
OF THE TAXATION AND REVENUE DEPARTMENT
OF THE STATE OF NEW MEXICO

IN THE MATTER OF THE PROTEST
OF ANTHONY TAFOYA
TO DEMAND FOR PAYMENT OF No. 99-19
ASSESSMENT Nos. 1348190, dated 11/30/90
1351755, dated 12/08/90
1360529, dated 11/11/91
1360530, dated 11/11/91
1360531, dated 11/11/91
1916365, dated 04/02/95
1916366, dated 04/02/95
1916367, dated 04/02/95
1916368, dated 04/02/95
1916369, dated 04/02/95

DECISION AND ORDER

On April 14, 1999, the above-referenced protest was submitted to Margaret B. Alcock,

hearing officer, for decision on a written stipulation and briefs. Anthony Tafoya was represented by

Tracy J. Ahr and Claudia Gayheart Crawford of Keleher & McLeod, P.A.. The Taxation and Revenue

Department ("Department") was represented by Donald F. Harris, Special Assistant Attorney General.

Based on the evidence and arguments presented, IT IS DECIDED AND ORDERED AS FOLLOWS:

FINDINGS OF FACT

1. During the period at issue, American Ready-Mix, Inc. (the “Corporation”), ID No.

01-177568-00-8, was a corporation licensed to do business in New Mexico.

2. In 1989, Anthony Tafoya, Ralph Villegas and Jerry Alsup were the directors and

shareholders of the Corporation.

3. Ralph Villegas was president, Anthony Tafoya was vice president, and Jerry Alsup

was general operations manager of the Corporation.

4. In July 1989, the Corporation declared Chapter 11 bankruptcy.
5. On or about July 31, 1989, the directors and shareholders held an emergency meeting

and appointed Anthony Tafoya as president and chief executive officer of the Corporation and

removed Ralph Villegas as president and director.

6. The Corporation did not pay New Mexico withholding taxes from July 1989 until

October 1990.

7. Anthony Tafoya was the primary officer of the Corporation responsible for hiring

personnel during the period July 1989 through September 1990.

8. Anthony Tafoya was in a position to sign the withholding tax returns, he knew the

returns had to be filed, and he knew the Corporation was liable for these taxes.

9. On or about October 24, 1990, the Corporation converted from a Chapter 11 to a

Chapter 7 bankruptcy.

10. From approximately October 24, 1990 onward, the Chapter 7 trustee managed the

Corporation.

11. Anthony Tafoya entered personal bankruptcy on July 13, 1992, which was discharged

on August 13, 1994.

12. Between November 1990 and April 1995, the Department issued ten assessments

totaling $43,595.25 to the Corporation for withholding taxes, penalty and interest due for report

periods July through October 1989 and May through October 1990.

13. Since at least 1995, the Department has followed the practice of demanding payment

and pursuing collection action against corporate officers for withholding taxes assessed to the

corporation but not separately assessed to the corporate officers.

14. On August 7, 1995, the Department sent Tafoya a letter notifying him that as an

"employer" under Section 7-3-2(C) NMSA 1978, he was liable for the Corporation's unpaid with-

holding taxes in the amount $43,595.25.

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15. The Department's August 7, 1995 letter stated: "Unless we receive payment or we

are not contacted by you within ten (10) days, regarding any disagreement with this assessment, we

will proceed to enforce collection by levy."

16. The Department subsequently filed a lien against Tafoya’s property.

17. On August 28, 1995, Tafoya filed a protest to the Department's August 7, 1995

demand for payment of withholding taxes.

18. On June 10, 1998, the Department acknowledged Tafoya's protest.

DISCUSSION

The issue to be decided is whether the Department may demand payment and pursue

collection action against a corporate officer for withholding taxes assessed to the corporation but not

separately assessed to the corporate officer. Tafoya argues that Section 7-1-17(A) NMSA 1978

requires the Department to issue a formal assessment to each taxpayer the Department determines to

be liable for payment of tax. The Department relies on Subsection (D) of Section 7-1-17 NMSA

1978 to support its practice of pursuing collection action against corporate officers the Department

determines to be liable for payment of withholding taxes, so long as an assessment for those taxes

has been issued to "any taxpayer" and remains unpaid.

In October 1996, the Department adopted Regulation 3 NMAC 1.6.16, which states that the

Department is not required to issue separate assessments against "secondarily liable" taxpayers,

defined as taxpayers who would not normally be expected to file a return reporting the liability or

would not be expected to have a tax identification number with respect to the liability. Because the

Department's demand for payment to Tafoya was made in August 1995, the parties agree that the

regulation is not applicable to this protest. See also, Kewanee Industries, Inc. v. Reese, 114 N.M. 784,

845 P.2d 1238 (1993) (a regulation promulgated by an administrative agency shall be construed to have

retroactive effect only if it is clearly and manifestly intended). Accordingly, the only matter before the

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hearing officer is whether the Department's administrative practice of demanding payment of

withholding taxes from corporate officers to whom no assessment has been issued complies with

applicable tax statutes.

I. WITHHOLDING TAX ACT.

Payment of withholding taxes is governed by the Withholding Tax Act, Sections 7-3-1, et

seq., NMSA 1978. For periods prior to July 1, 1990, Section 7-3-5 imposed liability for withholding

taxes on "every employer." The term "employer" was defined in Section 7-3-2(B) as follows:

B. "employer" means a person doing business in or deriving income from
sources within the state who has control of the payment of wages to an
individual for services performed for him by that individual or a person who is
the officer, agent or employee of the person having control of the payment of
wages.

In 1990, the legislature amended Section 7-3-5 by substituting "withholder" for "employer." The

term "withholder" was defined in amended Section 7-3-2(J) to mean "a payor or an employer." The

definition of "employer" in Section 7-3-2(C) was changed to read:

C. "employer" means a person, or an officer, agent or employee of that
person having control of the payment of wages, doing business in or deriving
income from sources within the state for whom an individual performs or
performed any service as the employee of that person except that if the person
for whom the individual performs or performed the services does not have
control over the payment of the wages for such services, "employer" means the
person having control of the payment of wages.

Under both versions of the Withholding Tax Act applicable to tax periods July 1989 through October

1990, a corporate officer who had control of the payment of wages was liable for payment of the

corporation's withholding tax. In this case, the parties stipulated that Anthony Tafoya was the

primary corporate officer responsible for hiring personnel, knew the Corporation was liable for

withholding tax, knew withholding tax returns had to be filed with the state, and was in a position to

sign these returns on behalf of the Corporation. Based on these facts, there is no question that

Anthony Tafoya was liable for the withholding taxes American Ready-Mix failed to pay to the state

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of New Mexico. The only issue is whether the Department's efforts to collect the tax from Tafoya

comply with the statutory requirements set out in the Tax Administration Act.

II. TAX ADMINISTRATION ACT.

Section 7-1-17: Requirements for Issuing Assessments. In arguing their opposing

positions, both parties focus on the proper interpretation of Section 7-1-17 NMSA 1978,1 which

provides:

7-1-17. Assessment of tax; presumption of correctness.

A. If the secretary or the secretary's delegate determines that a
taxpayer is liable for taxes in excess of ten dollars ($10.00) that are due and
that have not been previously assessed to the taxpayer, the secretary or the
secretary's delegate shall promptly assess the amount thereof to the taxpayer.

B. Assessments of tax are effective:

(1) when a return of a taxpayer is received by the department
showing a liability for taxes;

(2) when a document denominated "notice of assessment of
taxes", issued in the name of the secretary, is mailed or delivered in person to
the taxpayer against whom the liability for tax is asserted, stating the nature
and amount of the taxes assertedly owed by the taxpayer to the state,
demanding of the taxpayer the immediate payment of the taxes and briefly
informing the taxpayer of the remedies available to the taxpayer; or

(3) when an effective jeopardy assessment is made as
provided in the Tax Administration Act.

C. Any assessment of taxes or demand for payment made by the
department is presumed to be correct.

D. When taxes have been assessed to any taxpayer and remain
unpaid the secretary or the secretary's delegate may demand payment at any
time except as provided otherwise by Section 7-1-19 NMSA 1978.

The Department maintains that Subsection D allows the Department to demand payment from any

person liable for payment of withholding tax, so long as the amount of tax due has been assessed to

1
Unless otherwise noted, the statutory provisions of the Tax Administration Act in effect during the period at issue
are compiled in the 1995 Replacement Pamphlet.
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"any taxpayer" and remains unpaid. Department Brief at 3. As Tafoya points out, this argument

ignores the express direction in Subsection A that once the Department determines a person is liable

for taxes not "previously assessed to the taxpayer", the secretary "shall promptly assess the amount

thereof to the taxpayer." (emphasis added). Based on the legislature’s use of the word “shall”, the

Department is required to issue an assessment to each person liable for payment of tax. See, State v.

Lujan, 90 N.M. 103, 105, 560 P.2d 167, 169 (1977) (the word "shall" is mandatory not

discretionary). Nothing in Section 7-1-17 indicates that an assessment issued to one taxpayer is

effective as to all other persons who may be liable for the same tax. To the contrary, Subsection B

provides that an assessment is not effective until a taxpayer files a return showing a liability for taxes

or a document denominated "notice of assessment of taxes" is mailed or delivered "to the taxpayer

against whom the liability for tax is asserted...." (emphasis added). In this case, no assessment of

withholding taxes was mailed or delivered to Anthony Tafoya.

Section 7-1-16: Definition of a Delinquent Taxpayer. The Department's interpretation of

Section 7-1-17(D) to allow collection of withholding taxes from a corporate officer to whom no

assessment has been issued is directly contrary to other sections of the Tax Administration Act

limiting collection activities to "delinquent" taxpayers. See, e.g., Section 7-1-31 (levying on

taxpayer property); Section 7-1-53 (enjoining a taxpayer from engaging in business); Section 7-1-82

(refusing a tax clearance for the transfer or renewal of a liquor license). Section 7-1-16 defines a

delinquent taxpayer as:

Any taxpayer to whom taxes have been assessed as provided in Section 7-1-
17 NMSA 1978 or upon whom demand for payment has been made as
provided in Section 7-1-63 NMSA 1978 who does not within thirty days after
the date of assessment or demand for payment make payment, protest the
assessment or demand for payment as provided by Section 7-1-24 NMSA
1978 or furnish security for payment as provided by Section 7-1-54 NMSA
1978 becomes a delinquent taxpayer....

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The importance of issuing an assessment before initiating collection action is illustrated by the court

of appeals' decision in Bank of Commerce v. State of New Mexico Department of Taxation and

Revenue, 125 N.M. 183, 958 P.2d 753 (Ct. App.), cert. denied, 125 N.M. 145, 958 P.2d 103 (1998).

In that case, the Department conditioned issuance of a tax clearance for transfer of a liquor license

on the payment of back taxes. The court subsequently ordered the Department to refund the taxes

collected because the transferor of the license did not meet the definition of a "delinquent taxpayer."

As the court noted:

Under Section 7-1-16 a delinquent taxpayer is not simply anyone who owes
taxes. For a taxpayer to be a "delinquent taxpayer," the Department must
have assessed taxes against the taxpayer or demanded payment from the
taxpayer, and the taxpayer must have gone thirty days without paying the
taxes, furnishing security for payment, or protesting the assessment or
demand. (emphasis added).

125 N.M. at 186, 958 P.2d at 756. The court further noted that the only circumstance in which the

Department could demand payment without first issuing an assessment was in connection with the

transfer of a business under Section 7-1-63 NMSA 1978.2 The provisions of Section 7-1-63 have no

application to the facts of this case.

In construing a statute, courts look first to the plain language of the statute as the primary

indicator of legislative intent and construe the words of the statute according to their ordinary

meaning, absent evidence of legislative intent to the contrary. Wilson v. Denver, 125 N.M. 308, 314,

961 P.2d 153, 159 (1998); Whitely v. New Mexico State Personnel Bd., 115 N.M. 308, 311, 850 P.2d

1011, 1014 (1993). According to the plain language of Section 7-1-17(A), the Department is

required to issue an assessment to any person who is liable for taxes in excess of $10.00. The

assessment is effective when it is mailed or delivered "to the taxpayer against whom the liability for

2
Prior to July 1, 1997, Section 7-1-63 read: "If, after any business is sold, any tax for which the former owner is liable
remains due, the director or his delegate shall make demand upon the purchaser for payment over of that amount and the
purchaser shall comply with the demand". Effective July 1, 1997, the legislature amended Section 7-1-63 to require
the Department to formally assess the purchaser of a business for the former owner's outstanding tax liabilities.
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tax is asserted." If the taxpayer fails to protest the assessment, pay the assessment or furnish security

for payment within 30 days, he becomes a "delinquent taxpayer" under Section 7-1-16. Only then is

the Department authorized to take collection action by such means as levying on the taxpayer's

property. See, Section 7-1-31(A): ("The secretary or secretary's delegate may proceed to collect tax

from a delinquent taxpayer by levy upon all property or right to property of such person....").

In this case, the Department assessed withholding taxes to American Ready-Mix, Inc., a

corporation. There is nothing in the Tax Administration Act that would make this assessment

effective against Anthony Tafoya, a corporate officer of American Ready-Mix, in his individual

capacity. Nor is there any provision of the Tax Administration Act authorizing the Department's

August 7, 1995 letter to Tafoya demanding payment of the taxes assessed to American Ready-Mix

and stating: "Unless we receive payment or we are not contacted by you within ten (10) days,

regarding any disagreement with this assessment, we will proceed to enforce collection by levy." As

the court found in Bank of Commerce, Id.: "a delinquent taxpayer is not simply anyone who owes

taxes." A delinquent taxpayer is someone "to whom" taxes have been assessed. This does not

include a corporate officer who may be liable for payment of withholding taxes, but to whom no

assessment has been issued.

Section 7-1-24: Right to Hearing. Section 7-1-24 of the Tax Administration Act provides

that any taxpayer may dispute "the assessment to the taxpayer of any amount of tax, the application

to the taxpayer of any provision of the Tax Administration Act or the denial of or failure to either

allow or deny a claim for refund...." Protests must be filed within thirty days of mailing or service of

the assessment or other peremptory notice or demand. If requested timely, the taxpayer may receive

an extension of up to an additional sixty days. If no protest is filed within the time required, "the

secretary may proceed to enforce collection of any tax if the taxpayer is delinquent within the

meaning of Section 7-1-16 NMSA 1978." (emphasis added).

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Between November 1990 and April 1995, the Department issued ten assessments for with-

holding taxes to American Ready-Mix, Inc. During this period, the corporation was under the

management of the bankruptcy trustee. Anthony Tafoya did not receive notice of the assessments

until the Department's demand letter was issued on August 7, 1995. Although Tafoya filed a timely

protest to the demand for payment, he was foreclosed from protesting the underlying assessments:

first, because he was not the taxpayer to whom the assessments were issued, and second, because

more than 90 days had passed since the assessments were mailed to American Ready-Mix. Given

the strict time limits in Section 7-1-24, the only issue Tafoya could protest was the Department's

contention that he was liable for payment of withholding taxes assessed to American Ready-Mix

because he qualified as an "employer" under the Withholding Tax Act. Tafoya could not raise other

defenses that might have been available to dispute the correctness of the assessments themselves.

The Department's decision to by-pass the assessment requirement in Section 7-1-17(A) and

proceed directly to collection action against Tafoya also served to by-pass the procedural safeguards

provided in Section 7-1-24. The Department had Tafoya's address, as evidenced by the August 7,

1995 demand for payment, and could have assessed Tafoya as well as American Ready-Mix. This

would have given each taxpayer actual notice of the liability and an opportunity to protest. In the

absence of any evidence that the legislature intended to treat corporate officers differently than other

taxpayers, there is no legal basis for the Department's administrative practice of assessing some, but

not all, taxpayers liable for payment of withholding tax to the state.3

III. Deference to Agency Interpretation.

The Department argues that its use of demand letters to collect withholding tax from

corporate officers represents a "long-standing" administrative interpretation of Section 7-1-17(D)

3
Tafoya also argued that the Department's failure to give him a timely notice of assessment violated his
constitutional right to due process. It is not necessary to reach the constitutional issues raised by the taxpayer since
9
that should be accorded deference by the hearing officer. There is no evidence that the Depart-

ment's practice is particularly long-standing. While it is clear the use of demand letters to collect

withholding tax goes back to at least 1995, the record is silent as to when or why this practice was

instituted. It was not until October 1996 that the Department's interpretation of Section 7-1-17 was

reduced to writing in Regulation 3 NMAC 1.6.16.

More problematic is the fact that the Department's interpretation cannot be reconciled with

the language of the statutes. An administrative agency has no power to create a rule or regulation that

is not in harmony with its statutory authority, Rivas v. Board of Cosmetologists, 101 N.M. 592, 593,

686 P.2d 934,935 (1984), and a reviewing authority may not give legal sanction to an agency's

incorrect construction of unambiguous statutory language. Miller v. Bureau of Revenue, 93 N.M.

252, 254, 599 P.2d 1049, 1051 (Ct. App.) cert. denied, 92 N.M. 532, 591 P.2d 286 (1979). Statutes

are to be interpreted in accordance with legislative intent and in a manner that will not render the

statute's application absurd, unreasonable or unjust. City of Las Cruces v. Garcia, 102 N.M. 25, 26-

27, 690 P.2d 1019, 1020-21 (1984). Statutes must be read in their entirety and each part must be

construed in connection with every other part to produce a harmonious whole. State ex rel. Klineline

v. Blackhurst, 106 N.M. 732, 735, 749 P.2d 1111, 1114 (1988).

When read in its entirety, the Tax Administration Act sets out a fair and uniform method to:

(1) determine a person's liability for payment of tax to the state; (2) give that person notice of the

liability and an opportunity to challenge any assessment issued by the Department; and (3) enable the

Department to collect payment of established liabilities through the use of liens, levies and other

collection alternatives. The Department's practice of proceeding directly from the initial

determination of a corporate officer's withholding tax liability to a demand for payment and threats

the Department's attempts to collect withholding taxes from Tafoya are clearly contrary to the statutory requirements
of the Tax Administration Act.
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of levy is contrary to the plain language of the statutes and violates the procedural safeguards the

legislature has provided to all taxpayers.

IV. BURDEN OF PROOF.

Section 7-1-17(C) NMSA 1978 states that any assessment of taxes or demand for payment

made by the Department is presumed to be correct, and it is the taxpayer's burden to overcome this

presumption. See also, Archuleta v. O'Cheskey, 84 N.M. 428, 431, 504 P.2d 638, 641 (Ct. App. 1972).

One way in which the presumption may be overcome is "by showing that the Bureau of Revenue failed

to follow the statutory provisions contained in the Tax Administration Act." Regents of New Mexico

College of Agriculture and Mechanic Arts v. Academy of Aviation, Inc., 83 N.M. 86, 488 P.2d 343, 346

(1971). The Department's collection actions against Tafoya were not in compliance with the statutory

provisions of the Tax Administration Act, and Tafoya has overcome the presumption of correctness that

attaches to the Department's demand for payment.

CONCLUSIONS OF LAW

1. Anthony Tafoya filed a timely, written protest to the Department's August 7, 1995

demand for payment, and jurisdiction lies over the parties and the subject matter of this protest.

2. The Department's collection actions against Tafoya for withholding taxes assessed to

American Ready Mix, Inc., but not separately assessed to Tafoya, were contrary to the provisions of

the Tax Administration Act and exceeded the Department's authority to interpret the statutes with

which it is charged with administering.

3. Because the Department failed to assess Tafoya for withholding taxes as required by

Section 7-1-17(A) NMSA 1978, Tafoya was not a "delinquent taxpayer" under Section 7-1-16 NMSA

1978, and the Department was not entitled to demand payment or levy against Tafoya's property to

enforce payment of those taxes.

For the foregoing reasons, the Taxpayer's protest IS GRANTED.

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DATED April 30, 1998.

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