Was a nurse an employee exempt from New Mexico gross receipts tax after a patient's mother began paying him directly for respite care?

Plain-English summary

Christopher O’Connor owed New Mexico gross receipts tax on payments he received directly from a patient's mother for in-home respite care. He did not prove that those payments were exempt employee wages, even though he performed similar nursing services when he had previously worked for a home-health company.

O’Connor was a licensed nurse who had long cared for a developmentally disabled patient named David. He originally provided the care as a salaried Gentiva Health Services employee receiving Forms W-2. After David moved to the Developmental Disabilities Waiver program and Gentiva no longer participated, David's mother began paying O’Connor directly.

She set his schedule and paid $10 per hour for preparing services and $18.75 per hour while he provided care. O’Connor used the equipment in David's home, monitored his medical status, provided medication information, and alerted the family to medical issues.

Most employee indicators were missing

Section 7-9-17 exempted employee wages from gross receipts tax. Regulation 3.2.105.7 directed the Department to consider seven indicators, including wage payment, withholding, FICA, workers' compensation, unemployment contributions, the payer's classification, and control over the work.

Hourly pay and the mother's control of O’Connor's schedule supported employee treatment. But five indicators did not:

• she withheld no income tax;
• she paid no FICA tax;
• she made no unemployment-insurance contributions;
• O’Connor had no workers' compensation coverage; and
• the record did not show that she considered him an employee.

O’Connor also filed federal Schedule SE and Schedule C-EZ forms, reported himself as self-employed, and claimed business expenses. Considering the whole record, the AHO held that he did not carry his burden to establish the employee-wage exemption.

Income tax and gross receipts tax were separate obligations

O’Connor argued that gross receipts tax was excessive because he had already paid federal and state income tax on the same money. The decision rejected that argument: gross receipts tax was an excise tax on receipts from engaging in business, distinct from personal income tax, and imposing both was not prohibited double taxation.

He also found it distasteful to pass the tax cost to David's mother. The decision explained that the legal incidence fell on the person engaged in business. O’Connor was free not to pass the cost along, but that choice did not remove his own tax liability.

Department advice removed only the later penalties

The AHO upheld civil-negligence penalties for 2008 and 2009. O’Connor had not filed or paid gross receipts tax, and erroneous belief or inaction ordinarily met the regulation's definition of negligence.

The result changed for 2010 and 2011. In 2010, O’Connor responded to a Department tax-amnesty notice concerning 2007, explained his work for David, and was told that the employee would close the matter without further action. The AHO found that this statement could reasonably have led him to believe the same services were not subject to gross receipts tax. Under the good-faith mistake-of-law and affirmative-misleading rules, the 2010 and 2011 penalties were abated.

Interest remained mandatory for every year until the tax principal was paid. After the two penalty abatements, the order stated that O’Connor owed:

• 2008: $656.10 tax, $131.22 penalty, and $138.22 interest;
• 2009: $731.87 tax, $146.38 penalty, and $121.30 interest;
• 2010: $565.06 tax and $71.19 interest; and
• 2011: $559.86 tax and $50.40 interest.

Result: protest GRANTED IN PART and DENIED IN PART. Gross receipts tax and interest remained due for 2008 through 2011; the 2008 and 2009 penalties remained, while the 2010 and 2011 penalties were abated.

D&O 15-03 is the January 22, 2015 amended version of D&O 14-41. It corrected an address error and the spelling of O’Connor's surname in the original December 22, 2014 order and made no other substantive change.

What this means for you

Nurses and other in-home caregivers

Doing the same work you once performed as an employee does not preserve employee status after the payment relationship changes. Direct payment without withholding or employment coverage can make the receipts taxable business income for New Mexico gross receipts tax purposes.

Families paying respite-care providers

An hourly rate and control over scheduling are relevant but not conclusive. Payroll withholding, FICA, unemployment insurance, workers' compensation, how the parties classify the relationship, and control over how the work is performed all matter.

Accountants and tax professionals

Check state gross receipts obligations when a worker files federal self-employment schedules or moves from agency payroll to direct payment. Paying income tax on the earnings does not satisfy a separate gross receipts tax obligation.

Common questions

Q: Why was O’Connor not treated as an employee?
A: Only hourly pay and schedule control supported employment. Five other regulatory indicators did not, and his federal returns reported self-employment and business expenses.

Q: Did paying income tax eliminate gross receipts tax?
A: No. The decision treated personal income tax and gross receipts tax as distinct taxes.

Q: Did he have to charge David's mother extra for the tax?
A: No. He could choose not to pass the cost along, but he still owed the gross receipts tax himself.

Q: Why were the 2010 and 2011 penalties abated?
A: A Department employee had told him in 2010 that the same 2007 gross-receipts issue would be closed without further action. The AHO found that statement could reasonably mislead him for the later periods.

Q: Was interest also abated?
A: No. The decision held that interest was mandatory until the tax principal was paid.

Citations and references

Statutes and regulations:

• NMSA 1978, §§ 7-9-3.3, 7-9-3.5, 7-9-4, and 7-9-5 — engaging in business, receipts, and gross receipts tax
• NMSA 1978, § 7-9-17 — employee wage exemption
• NMSA 1978, § 7-1-18(C) — assessment period when a required return was not filed
• NMSA 1978, §§ 7-1-67 and 7-1-69(B) — mandatory interest, penalty, and the good-faith mistake-of-law exception
• Regulation 3.2.105.7(A)-(B) NMAC — employee-status indicators
• Regulations 3.1.11.10 and 3.1.11.11(A) NMAC — negligence and affirmative misleading
• Regulations 3.2.4.8 and 3.2.6.9 NMAC — incidence of gross receipts tax

Cases cited:

• Archuleta v. O'Cheskey, 1972-NMCA-165 — assessment presumption
• Wing Pawn Shop v. Taxation and Revenue Department, 1991-NMCA-024 — strict proof of an exemption
• Tiffany Construction Co. v. Bureau of Revenue, 1976-NMCA-127 — duty to determine tax consequences
• New Mexico State Board of Public Accountancy v. Grant, 1956-NMSC-068 — double taxation is not prohibited
• State ex rel. Attorney General v. Tittmann, 1938-NMSC-005 — an excise tax and income tax may both apply

Source

• Listing: New Mexico Decisions & Orders
• Decision post: Christopher X. O’Connor
• Decision PDF: D&O 15-03

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
CHRISTOPHER X. O’CONNOR No. 15-03
TO ASSESSMENTS ISSUED UNDER LETTER
ID NO.’s L12014065616, L0067908560, L1141650384 and L0604779472

AMENDED DECISION AND ORDER

On January 22, 2015, this decision was amended in order to correct a clear address error

and the spelling of Mr. O’Connor’s last name from the original decision and order filed on

December 22, 2014. No other substantive changes were made to the decision and order.

A protest hearing occurred on the above captioned matter on October 14, 2014 before

Brian VanDenzen, Esq., Hearing Officer, in Santa Fe. Christopher X. O’Connor (“Taxpayer”)

appeared pro se. Staff Attorney Elena Morgan appeared representing the State of New Mexico,

Taxation and Revenue Department (“Department”). Protest Auditor Milagros Bernardo appeared

as a witness for the Department. Taxpayer Exhibits #1-11 and Department Exhibits A-G were

admitted into the record, as described more thoroughly in the Administrative Protest Hearing

Exhibit Log. Based on the evidence and arguments presented, IT IS DECIDED AND

ORDERED AS FOLLOWS:

FINDINGS OF FACT

1. On July 16, 2014, the Department assessed Taxpayer for $656.10 in gross receipts

tax, $131.22 in penalty, and $133.58 in interest for a total assessment of $920.90 for the

combined reporting period ending on December 31, 2008. [Letter id. no. L2014065616].

2. On July 16, 2014, the Department assessed Taxpayer for $731.87 in gross receipts

tax, $146.38 in penalty, and $115.53 in interest for a total assessment of $993.78 for the

combined reporting period ending on December 31, 2009. [Letter id. no. L0067908560].

3. On July 16, 2014, the Department assessed Taxpayer for $565.06 in gross receipts

tax, $113.01 in penalty, and $66.73 in interest for a total assessment of $744.80 for the combined

reporting period ending on December 31, 2010. [Letter id. no. L1141650384].

4. On July 16, 2014, the Department assessed Taxpayer for $559.86 in gross receipts

tax, $111.98 in penalty, and $45.98 in interest for a total assessment of $717.82 for the combined

reporting period ending on December 31, 2011. [Letter id. no. L0604779472].

5. On July 24, 2014, Taxpayer protested the Department’s assessments, arguing that

he was not a business subject to gross receipts tax, that to impose gross receipts on him would be

unfair double taxation, and that in a previous telephone conversation he had with a Department

employee he believed that this issue had been resolved.

6. On August 27, 2014, the Department requested a hearing in this matter with the

Hearings Bureau.

7. On August 29, 2014, the Hearings Bureau sent Notice of Administrative Hearing,

scheduling this matter for a hearing on October 14, 2014.

8. Taxpayer at all relevant time was a licensed nurse in New Mexico. [Taxpayer Ex.

7].

9. Taxpayer has long cared for developmentally disabled patient named David in

David’s home. [Taxpayer Ex. #1].

In the Matter of the Protest of Christopher X. O’Connor, page 2 of 14

10. Taxpayer, as an employee of Gentiva Health Service receiving a salary and

accompanying W-2’s, began to provide in home nursing care for David when David was a five-

year old child. [Taxpayer Ex. #1].

11. When David turned 21, he moved from the New Mexico Medically Fragile Child

Program to the New Mexico Developmental Disabilities Waiver Program (“DD Waiver”).

[Taxpayer Ex. #1].

12. Taxpayer’s employer Gentiva Health Services did not participate in the DD

Waiver program and therefore no longer provided care to David. [Taxpayer Ex. #1].

13. For the purposes of the DD Waiver program, David’s mother is listed as David’s

caregiver. [Taxpayer Ex. #1].

14. David’s mother directly receives payments from the DD Waiver program for

David’s case. The DD Waiver program allows David’s mother to make payments to others for

David’s respite care. [Taxpayer Ex. #1].

15. Since Taxpayer had a long history of providing in-home care to David, David’s

mother paid Taxpayer for respite care. [Taxpayer Ex. #1].

16. David’s mother sets Taxpayer’s schedule for providing respite care to David, with

the hours varying depending on David’s mother’s schedule and need for relief.

17. Taxpayer does not have a written agreement to provide services to David.

18. Taxpayer does not prepare written reports to David’s mother.

19. Taxpayer monitors David’s medical status with David’s mother.

20. Taxpayer provides information and contraindications regarding David’s

prescribed medication.

In the Matter of the Protest of Christopher X. O’Connor, page 3 of 14

21. Taxpayer will alert David’s mothers of any medical issues that arise while in

Taxpayer’s care.

22. Taxpayer uses the equipment at David’s home to care for David.

23. Taxpayer is not reimbursed for his professional licensure expenses by David’s

mother.

24. Taxpayer is paid an hourly wage of $10.00 per hour for preparing services for

David, and $18.75 per hour when he is actually providing services to David.

25. Beginning in June of 2006, Taxpayer received payment directly from David’s

mother for Taxpayer’s in-home care of David. [Taxpayer Ex. #1].

26. David’s mother did not withhold any taxes from her payments to Taxpayer and

did not annually provide Taxpayer with W-2’s.

27. David’s mother did not make any unemployment insurance contributions on

Taxpayer’s behalf.

28. Taxpayer is not covered by worker’s compensation insurance for his work with

David.

29. There is no evidence on the record that David’s mother considers Taxpayer an

employee.

30. There is no evidence on the record that David’s mother is paying FICA tax on

Taxpayer’s work.

31. Taxpayer began to make quarterly estimated personal income tax payments on the

money he received for providing David’s care in 2008, 2009, 2010, 2011.

In the Matter of the Protest of Christopher X. O’Connor, page 4 of 14

32. After David’s mother spoke with her accountant, David’s mother informed

Taxpayer that he would need to fill out a federal Schedule SE for the money she paid him for

David’s care.

33. Taxpayer filled out federal Schedule SE and Schedule C-EZ forms as part of

preparing his federal income tax returns during the relevant time. Taxpayer acknowledged for the

purposes of preparing his federal income tax returns, he had income as a self-employed business.

34. Taxpayer claimed a deduction for business expenses on his federal income tax

returns during the relevant time.

35. Taxpayer did not file or pay New Mexico gross receipts during the relevant years,

the reporting periods of 2008 through 2011.

36. In 2009, Taxpayer also performed services for a William Brown, for which he

received a 1099-MISC for non-employee compensation. [Department Ex. G].

37. On July 23, 2010, Taxpayer was offered an opportunity to enter into the tax

amnesty program for gross receipts tax in tax year 2007. The amnesty offer included a specific

contact person at the Department. Taxpayer contacted the listed Department employee

telephonically and explained his situation of providing care for David. After Taxpayer explained

his situation, the Department employee told Taxpayer he would cancel the matter without any

further action on the 2007 gross receipts tax.

38. As of the date of hearing, for 2008, Taxpayer owed $656.10 in gross receipts tax,

$131.22 in penalty, and $138.22 in interest for a total 2008 liability of $926.08. In 2009,

Taxpayer owed $731.87 in gross receipts tax, $146.38 in penalty, and $121.30 in interest for a

total 2009 liability of $999.55. In 2010, Taxpayer owed $565.06 in gross receipts tax, $113.01 in

penalty, and $71.19 in interest for a total 2010 liability of $749.26. In 2011, Taxpayer owed

In the Matter of the Protest of Christopher X. O’Connor, page 5 of 14
$559.86 in gross receipts tax, $111.98 in penalty, and $50.40 in interest for a total 2011 liability

of $722.24. As of the date of hearing, Taxpayer had a total outstanding liability of $3,397.13.

[Department Ex. A].

DISCUSSION

The main issue in this case is whether Taxpayer was a person engaged in business liable

for the payment of gross receipts tax in 2008, 2009, 2010, and 2011. Taxpayer also argued that

requiring him to pay gross receipts tax when he already paid income tax was excessive double

taxation and that passing the gross receipts tax onto David’s mother was distasteful. The final

issue is whether Taxpayer is liable for penalty in light of his conversation with a Department

employee.

Under NMSA 1978, Section 7-1-17 (C) (2007), the assessments issued in this case are

presumed correct. Consequently, Taxpayer has the burden to overcome the assessments. See

Archuleta v. O'Cheskey, 1972-NMCA-165, ¶11, 84 N.M. 428. Moreover, “[w]here an exemption or

deduction from tax is claimed, the statute must be construed strictly in favor of the taxing authority,

the right to the exemption or deduction must be clearly and unambiguously expressed in the statute,

and the right must be clearly established by the taxpayer.” Wing Pawn Shop v. Taxation and

Revenue Department, 1991-NMCA-024, ¶16, 111 N.M. 735 (internal citation omitted); See also

TPL, Inc. v. N.M. Taxation & Revenue Dep't, 2003-NMSC-7, ¶9, 133 N.M. 447. Once a taxpayer

rebuts the presumption of correctness, the burden shifts to the Department to show the correctness

of the assessed tax. See MPC Ltd. v. N.M. Taxation & Revenue Dep't, 2003 NMCA 21, ¶13, 133

N.M. 217.

For the privilege of engaging in business, New Mexico imposes a gross receipts tax on the

receipts of any person engaged in business. See NMSA 1978, § 7-9-4 (2002). “Engaging in

In the Matter of the Protest of Christopher X. O’Connor, page 6 of 14
business” is defined as “carrying on or causing to be carried on any activity with the purpose of

direct or indirect benefit.” NMSA 1978, § 7-9-3.3 (2003). Gross receipts applies to the

performance of a service in New Mexico. See NMSA 1978, § 7-9-3.5 (2007). Although

Taxpayer clearly had a good intentions to help David and his family, Taxpayer nevertheless was

also performing nursing services for David for direct monetary benefit. Consequently, under the

definition contained under Section 7-9-3.3, Taxpayer was a person engaged in business. Under

the Gross Receipts and Compensating Tax Act, there is a statutory presumption that all receipts of a

person engaged in business are taxable. See NMSA 1978, § 7-9-5 (2002). Since Taxpayer was a

person engaged in business, it is presumed that all of Taxpayer’s receipts from performing services

were subject to gross receipts tax.

However, exempted from gross receipts taxes are the wages of employees. See NMSA

1978, § 7-9-17. It is undisputed that Taxpayer was an employee of Gentiva. When Taxpayer was an

employee of Gentiva, he was not required to register for a CRS number, file or pay gross receipts

tax. See § 7-9-5 (A) and Regulation 3.2.100.8 NMAC. Because Gentiva was not in the DD

Waiver program, it could no longer provide services to David. In order to continue to work with

David providing respite care, Taxpayer started accepting direct payment from David’s mother for

services performed. Taxpayer believed that because he was performing the same services for

David as he had when employed by Gentiva, he still should be considered an employee not

subject to gross receipts tax rather than a business. But the question is not whether Taxpayer

performed the same services as he had previously done as an employee, but whether he was an

employee eligible for the exemption of tax under Section 7-9-17.

In the Matter of the Protest of Christopher X. O’Connor, page 7 of 14
Regulation 3.2.105.7 (A) NMAC lists seven criteria for the Department to use in

determining whether a person is an employee for the purposes of the exemption under Section 7-9-

17:

A. In determining whether a person is an employee, the department will
consider the following indicia:
(1) is the person paid a wage or salary;
(2) is the "employer" required to withhold income tax from the person's
wage or salary;
(3) is F.I.C.A. tax required to be paid by the "employer";
(4) is the person covered by workmen's compensation insurance;
(5) is the "employer" required to make unemployment insurance
contributions on behalf of the person;
(6) does the person's "employer" consider the person to be an employee;
(7) does the person's "employer" have a right to exercise control over the
means of accomplishing a result or only over the result (control does not
mean "mere suggestion").

Under Regulation 3.2.105.7 (B) NMAC, “[i]f all of the indicia mentioned Subsection A of Section

3.2.105.7 NMAC are present, the department will presume that the person is an employee.

However, a person may be an employee even if one or more of the indicia are not present.”

Applying the criteria under Regulation 3.2.105.7 (B) NMAC to the facts of this case,

Taxpayer did not establish that he was an employee of David’s mother, exempt from gross receipts

tax under Section 7-9-17. Two factors do support that Taxpayer may have been an employee:

Taxpayer was paid an hourly wage and David’s mother set the hours of work and the specific

timing of David’s care during those hours. In contrast, the remaining factors do not establish that

Taxpayer was an employee. David’s mother did not withhold income taxes from Taxpayer’s pay,

did not pay F.I.C.A. taxes, and did not make unemployment insurance contributions on behalf of

Taxpayer. There also is no evidence that David’s mother considered Taxpayer an employee. In fact,

since Taxpayer indicated that David’s mother told him about the necessity of doing the federal

In the Matter of the Protest of Christopher X. O’Connor, page 8 of 14
Schedule SE for the self-employed, it does not appear that David’s mother considered Taxpayer her

employee.

Moreover, while Taxpayer did not hold himself out as a person in business, Taxpayer

acknowledged that for federal income tax purposes, he reported himself as being self-employed and

engaged in business. These federal returns required Taxpayer to sign under penalty of perjury that

they were true and correct. Taxpayer also claimed exemptions from federal income tax premised on

being self-employed. Considering these facts and that five of the sevens factors under Regulation

3.2.105.7 (B) NMAC do not support that Taxpayer was an employee, Taxpayer did not meet his

burden of establishing he was entitled to the exemption from gross receipts tax of wages of an

employee under Section 7-9-17. See Wing Pawn Shop, ¶16

At a couple of points during the proceeding, Taxpayer complained that the Department

either failed to provide clear instructions that he might be subject to gross receipts tax or that if the

Department would have acted sooner to make it clear that he would be subject to gross receipts tax,

Taxpayer in turn would have resolved the matter much sooner. Regarding timing, all of the

Department’s assessments were issued timely under NMSA 1978, Section 7-1-18 (C) (in the case of

a non-filer of any required return, the Department has seven years from the end of the calendar year

in which the tax was due to issue an assessment). Regarding the absence of clear instructions and

directions, under New Mexico's self-reporting tax system, “every person is charged with the

reasonable duty to ascertain the possible tax consequences” of his or her actions. Tiffany

Construction Co. v. Bureau of Revenue, 1976-NMCA-127, ¶5, 90 N.M. 16. Taxpayer had a

responsibility to research the tax consequences of transitioning from an agency employee to

performing services directly for David, or consult with an appropriate tax professional about those

consequences. Consulting with a tax professional seems particularly pertinent when Taxpayer

In the Matter of the Protest of Christopher X. O’Connor, page 9 of 14
himself recognized an apparent contradiction between his legal status on his federal returns as self-

employed and his own personal belief that he was not in fact self-employed in business.

Taxpayer argued that the imposition of gross receipts tax was excessive given that he

already paid federal and state personal income taxes on the money earned from his care of David.

This argument essentially amounts to a claim of double taxation. Double taxation is not prohibited.

See New Mexico State Bd. of Pub. Accountancy v. Grant, 1956-NMSC-068, ¶11, 61 N.M. 287;

see also New Mexico Sheriffs & Police Ass'n v. Bureau of Revenue, 1973-NMCA-130, ¶12, 85 N.M.

565. Gross receipts are an excise tax on all the receipts of a person engaged in business. Gross

receipts is a distinct tax from personal income tax and there is no double taxation in having to pay

both taxes. See State ex rel. AG v. Tittmann, 1938-NMSC-005, 42 N.M. 76. (State may select subjects

of taxation so long as equal and uniform; state may impose an excise tax and a personal income tax).

Collection of gross receipts, in addition to other taxes, does not amount to impermissible double

taxation.

Taxpayer found the idea of passing on the incidence of gross receipts tax to David’s mother

unseemly. While many taxpayers choose to pass on the cost of the gross receipts tax to the

purchaser of their services, there is no requirement that a taxpayer do so. The incidence of gross

receipts tax falls on the person engaged in business. See Regulation 3.2.4.8 NMAC & Regulation

3.2.6.9 NMAC. Taxpayer is free to make the choice not to pass on the cost of gross receipt tax to

David’s mother. However, that choice does not relieve Taxpayer of his own obligation to pay the

gross receipts tax.

Taxpayer did not specifically address interest and penalty, but because Taxpayer asked for

abatement of all taxes, interest and penalty must be considered. When a taxpayer fails to make

timely payment of taxes due to the state, “interest shall be paid to the state on that amount from

In the Matter of the Protest of Christopher X. O’Connor, page 10 of 14
the first day following the day on which the tax becomes due...until it is paid.” NMSA 1978, § 7-1-

67 (2007) (italics for emphasis). Under the statute, regardless of the reason for non-payment of

the tax, the Department has no discretion in the imposition of interest, as the statutory use of the

word “shall” makes the imposition of interest mandatory. See Marbob Energy Corp., ¶22. The

language of Section 7-1-67 also makes it clear that interest begins to run from the original due date

of the tax until the tax principal is paid in full. The Department has no discretion under Section 7-1-

67 and must assess interest against Taxpayer from the time the 2008, 2009, 2010 and 2011 gross

receipts tax was due but not paid until Taxpayer satisfies the gross receipts tax principal.

Under NMSA 1978, Section 7-1-69 (2007), when a taxpayer fails to pay taxes due to the

State because of negligence or disregard of rules and regulations, but without intent to evade or

defeat a tax, by its use of the word “shall”, civil penalty must be added to the assessment. As

discussed above, the statute’s use of the word “shall” makes the imposition of penalty mandatory

in all instances where a taxpayer’s actions or inactions meets the legal definition of “negligence.”

Regulation 3.1.11.10 NMAC defines negligence in three separate ways: (A) “failure to

exercise that degree of ordinary business care and prudence which reasonable taxpayers would

exercise under like circumstances;” (B) “inaction by taxpayer where action is required”; or (C)

“inadvertence, indifference, thoughtlessness, carelessness, erroneous belief or inattention.”

Erroneous belief and inadvertent error meets the legal definition of “negligence” under the penalty

statute. See El Centro Villa Nursing Center v. Taxation and Revenue Department, 1989-NMCA-

070, ¶10, 108 N.M. 795. Here, Taxpayer’s failure to report and pay gross receipts taxes in 2008

and 2009 constituted negligence under all three prongs of Regulation 3.1.11.10 NMAC.

However, in instances where a taxpayer might otherwise fall under the definition of civil

negligence generally subject to penalty, Section 7-1-69 (B) provides a limited exception: “[n]o

In the Matter of the Protest of Christopher X. O’Connor, page 11 of 14
penalty shall be assessed against a taxpayer if the failure to pay an amount of tax when due

results from a mistake of law made in good faith and on reasonable grounds.” Further, in relevant

part to this protest, Regulation 3.1.11.11 (A) NMAC allows for abatement of penalty when a

“taxpayer proves that taxpayer was affirmatively misled by a department employee.” In 2010,

Taxpayer received a notice of amnesty for 2007 gross receipts taxes from the Department. When

Taxpayer spoke with the Department employee referenced in that notice, Taxpayer disclosed the

nature of his work with David. After this explanation, rather than enroll Taxpayer in the amnesty

program, the Department employee told Taxpayer that he would close out of the 2007 gross

receipts tax matter. While 2007 was not directly at issue in this protest, the fact the Department

employee in 2010 told Taxpayer that the dispute of 2007 gross receipts tax was resolved without

further action may have reasonably caused Taxpayer to conclude he was not subject to gross

receipts thereafter for this service to David. Therefore, Section 7-1-69 (B) and Regulation

3.1.11.11 (A) NMAC requires abatement of penalty in the annual reporting periods of 2010 and

2011, both of which post-dated Taxpayer’s conversation with that employee. With the exception

of the abatement in penalty in these two years, Taxpayer’s protest is denied.

CONCLUSIONS OF LAW

A. Taxpayer filed a timely, written protest to the assessments. Jurisdiction lies over the

parties and the subject matter of this protest. The hearing was timely set as required under NMSA

1978, Section 7-1-24.1 (A) (2013).

B. Taxpayer did not overcome the presumption of correctness that attached to the

assessments under NMSA 1978, Section 7-1-17 (C) (2007) and Archuleta v. O'Cheskey, 1972-

NMCA-165, ¶11, 84 N.M. 428.

In the Matter of the Protest of Christopher X. O’Connor, page 12 of 14
C. By performing services for David for direct monetary benefit, Taxpayer was a

person engaged in business under NMSA 1978, Section 7-9-4 (2002).

D. As a person engaged in business, all of Taxpayer’s receipts in 2008, 2009, 2010,

and 2011 are presumed subject to gross receipts tax under NMSA 1978, Section 7-9-5 (2002).

E. Taxpayer did not carry his burden to establish he was an employee subject to the

exemption under NMSA 1978, Section 7-9-17 because five of the seven criteria under Regulation

3.2.105.7 (A) NMAC were against Taxpayer and Taxpayer self-reported that he was a person in

business on his federal tax returns. See Wing Pawn Shop v. Taxation and Revenue Department,

1991-NMCA-024, ¶16, 111 N.M. 735.

F. Under NMSA 1978, Section 7-1-67 (2007), Taxpayer is liable for accrued interest

under the assessment. Interest continues to accrue until the tax principal is satisfied.

G. Under NMSA 1978, Section 7-1-69 (2007), Taxpayer is liable for civil negligence

penalty in 2008 and 2009 because Taxpayer’s inaction and inattention met the definition of civil

negligence under Regulation 3.1.11.10 NMAC.

H. However, because in 2010 he relied on the statements of a Department employee

closing out a gross receipts issue in 2007 to conclude that gross receipts taxes were not required

for the nursing services to David he performed, under Section 7-1-69 (B) and Regulation

3.1.11.11 (A) NMAC Taxpayer is entitled to abatement of civil negligence penalty in 2010 and

2011.

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

IN PART. Penalty is abated in 2010 and 2011. Taxpayer owes the remaining outstanding

balance under the assessments. As of the date of hearing, for 2008, Taxpayer owed $656.10 in gross

receipts tax, $131.22 in penalty, and $138.22 in interest for a total 2008 liability of $926.08. In 2009,

Taxpayer owed $731.87 in gross receipts tax, $146.38 in penalty, and $121.30 in interest for a total

In the Matter of the Protest of Christopher X. O’Connor, page 13 of 14
2009 liability of $999.55. In 2010, Taxpayer owed $565.06 in gross receipts tax and $71.19 in

interest for a total 2010 liability of $636.25. In 2011, Taxpayer owed $559.86 in gross receipts tax

and $50.40 in interest for a total 2011 liability of $610.26.

DATED: January 22, 2015.

Brian VanDenzen, Esq.
Chief Hearing Officer
Taxation & Revenue Department
Post Office Box 630
Santa Fe, NM 87504-0630

NOTICE OF RIGHT TO APPEAL

Pursuant to NMSA 1978, Section 7-1-25 (1989), the parties have the right to appeal this

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

the date shown above. See Rule 12-601 NMRA. If an appeal is not filed within 30 days, this

Decision and Order will become final. Either party filing an appeal shall file a courtesy copy of

the appeal with the Hearing Bureau contemporaneous with the Court of Appeals filing so that the

Hearing Bureau can begin to prepare the record proper.

In the Matter of the Protest of Christopher X. O’Connor, page 14 of 14