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NM D&O 15-18 Gross Receipts Tax 2015-05-12

Could CSW deduct pond-liner sales to an industrial-revenue-bond project as government sales after buying the liners tax-free with a Type 6 construction-material NTTC?

Short answer: No. CSW bought the pond liners tax-free using a Type 6 NTTC, which identified them as construction material intended to become an ingredient or component of Intrepid's solar solution mine project. Section 7-9-54's government-sale deduction expressly excluded construction material, even though Intrepid acted for Eddy County's bond project. The liners' movability and seven-year recovery period did not change the threshold classification, and CSW did not prove every regulatory condition anyway. The $451,945.82 refund denial was upheld.

Apply this to your situation

This page answers the general question as of 2015. Ezel answers yours, under current New Mexico tax law, with citations.

Currency note: this ruling is from 2015
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This is a published Decision and Order of the New Mexico Administrative Hearings Office, an independent agency that adjudicates tax protests separately from the Taxation and Revenue Department. It resolves one taxpayer's protest on the specific facts and the law in effect when issued; different facts or later changes in the law can change the result, and another taxpayer should not assume it applies to their situation. A Decision and Order binds the parties to that protest and is not a general ruling or advisory opinion of the Department. This summary is informational only and is not legal or tax advice. Consult a licensed New Mexico tax professional about your specific situation.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page as a PDF) is the authoritative source for any reliance.
View original ruling (PDF)

Plain-English summary

CSW Contractors could not deduct its sale of pond liners to Intrepid's industrial-revenue-bond project because it had bought the liners tax-free with a Type 6 NTTC identifying them as construction material. Section 7-9-54 excluded construction material from the government-sale deduction.

CSW sought a $516,750.46 gross-receipts-tax refund for May through September 2012. The Department granted $64,804.64 and denied the remaining $451,945.82, principally because the pond liners were construction material and some receipts were for conceded taxable installation services.

The liners were part of Intrepid Potash's HB Solar Solution Mine Project near Carlsbad, funded with Eddy County industrial revenue bonds. The project used wells, pipelines, evaporation ponds, and a flotation plant to recover potash.

The Type 6 purchase fixed the intended construction use

Field Lining Systems sold and installed the liners for CSW. Field executed a Type 6 NTTC, and CSW paid no gross receipts tax on that purchase.

Type 6 applied to construction material incorporated as an ingredient or component of a construction project, with tax imposed on completion or the overall project. By accepting the certificate, CSW represented that the liners had that intended use.

The hearing officer found that CSW could not then characterize the same liners as non-construction property for its resale to Intrepid. Without the Type 6 transaction, CSW might have had a more credible classification argument, but its chosen tax-free purchase treatment controlled.

Government-agent status did not overcome the exclusion

Intrepid acted as a government agent for Eddy County's bond project and gave CSW a Type 9 NTTC. Section 7-9-54 generally allowed tangible-property sales to government and qualifying government agents.

But the statute expressly excluded construction material. Regulation 3.2.212.22 likewise allowed bond-project property only if it was not an ingredient or component of a construction project.

Because the Type 6 purchase established the liners' construction-material use, the later government-agent sale did not qualify.

Movability and depreciation did not change the threshold test

CSW proved that the liners were manufactured elsewhere, welded together at the New Mexico site, movable, and depreciated over seven years. It argued that those features fit regulatory criteria for deductible tangible property or movable fixtures.

The hearing officer read those criteria as applying only after property was found not to be construction material. They were not exceptions to the statutory construction-material definition.

CSW also presented no witness evidence that the liners did not increase the property's basis, one of the criteria it invoked. In any event, movability and recovery life could not undo the Type 6 treatment and incorporation into the evaporation-pond project.

Result: protest DENIED. The $451,945.82 partial refund denial remained.

The findings identify several unexplained dollar differences: the $13,042,289.52 liner contract, $749,931.65 tax charged, $9,188,282.50 cost asserted by the Department, and the smaller refund claim were not reconciled in the record. The signed decision is dated May 12, 2015 even though its opening says the hearing occurred May 13, 2015; both statements are preserved below.

What this means for you

Contractors using NTTCs in multi-step transactions

The certificate used on the first purchase can define and constrain the tax treatment of a later resale. Ensure the stated intended use remains consistent through the chain.

Industrial-revenue-bond projects

Government-agent status does not erase express exclusions from the government-sale deduction. Test construction material and construction services separately.

Sellers of liners, equipment, and movable property

Movability and short depreciation are not automatically decisive. First determine whether the property is intended to become an ingredient or component of the overall construction project.

Common questions

Q: What did the Type 6 NTTC represent?
A: That the liners were construction material intended for incorporation into a construction project.

Q: Did CSW pay tax when buying the liners from Field?
A: No.

Q: Why did Intrepid's government-agent status not create a deduction?
A: Section 7-9-54 expressly excluded sales of construction material.

Q: Did the seven-year depreciation period help?
A: No. It did not override the construction-material classification.

Q: Were installation services disputed?
A: No. CSW conceded that liner installation was a taxable service.

Q: How much refund remained denied?
A: $451,945.82.

Citations and references

Statutes and regulations:

  • NMSA 1978, §§ 7-9-54(A) and 7-9-51(B) — government sales and tax-free purchases of construction material
  • NMSA 1978, § 7-9-3.4(A)-(B) — construction and construction-material definitions
  • NMSA 1978, §§ 7-1-26(D) and 7-9-5 — refund limitation and taxable-receipts presumption
  • Regulations 3.2.212.22 and 3.2.1.11(I) NMAC — government bond projects, construction material, and fixture treatment

Case cited:

  • Wing Pawn Shop v. Taxation and Revenue Department, 1991-NMCA-024 — strict proof of a deduction

Source

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
CSW CONTRACTORS, INC. No. 15-18
TO ASSESSMENTS ISSUED UNDER LETTER
ID NOs. L1882541008, L0137710544, L1211452368 and L0674581456

DECISION AND ORDER

A formal hearing on the above-referenced protest was held on May 13, 2015, before

Monica Ontiveros, Hearing Officer. The Taxation and Revenue Department (“Department”) was

represented by Peter Breen, attorney for the Department. Tom Dillon, protest office supervisor,

appeared for the Department. Alicia Muniz, corporate income tax auditor, appeared and testified

for the Department. CSW Contractors, Inc. (“Taxpayer”) was represented by Marcus J. Mims,

CPA, from CliftonLarsonAllen. Appearing as witnesses for Taxpayer were Paul Wilmot,

technical engineer from Intrepid Potash-NM, and Rachel Sawyer, CPA, Director of Taxation from

Intrepid Potash-NM. The Exhibits introduced into the record are Exhibits 1-8 and A-H. In

addition to the pleadings and filings referred to in the Findings, the record contains the following:

Notice of Telephonic Scheduling Conference issued on March 12, 2014; Scheduling Order and

Notice Administrative Hearing issued on April 1, 2014; Notice of Reassignment of Hearing

Officer for Administrative Hearing issued on November 12, 2014; Pre-Hearing Statement filed on

November 24, 2014; Motion to Continue Formal Hearing filed on November 24, 2014; Response

to Motion to Continue Formal Hearing filed on November 24, 2014; Continuance Order,

Amended Scheduling Order, and Amended Notice of Administrative Hearing issued on November

26, 2014; Pre-Hearing Statement filed on April 15, 2015; Closing Statement by Taxpayer filed on
May 22, 2015; and Closing Response Statement filed by the Department on June 2, 2015. Based

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

FINDINGS OF FACT

  1. On January 10, 2013, Taxpayer applied for a refund in the amount of $516,750.46

for gross receipts taxes paid for tax periods May 1, 2012 through September 30, 2012.

  1. The Department granted a partial refund to Taxpayer in the amount of $64,804.64

on September 11, 2013.1 [Letter Id. No. L0484551120].

  1. The reasons provided by the Department for the partial denial of $451,945.82 were

that the rubber liners were used in a construction project and were construction material and some

of the receipts were for construction services. [Letter Id. No. L0484551120].

  1. Taxpayer filed a protest to the partial denial of the refund on January 29, 2014.

  2. On March 6, 2014, the Department requested a hearing in this matter.

  3. The Hearings Bureau set this matter originally for December 4, 2014 and upon

Taxpayer’s request, the hearing was continued to May 13, 2015.

  1. Taxpayer was founded in Phoenix, Arizona in 1982 and is a solution provider for

heavy civil construction projects. http://www.cswcontractors.com/about_us.asp.

  1. Taxpayer is incorporated in the state of Arizona and is in good standing in the state

of New Mexico.

https://portal.sos.state.nm.us/corps/(S(4uajitzbaggmfu0xn5mlsnx3))/Corplookup/Details.aspx?Nmscc=4385126 .

  1. Intrepid Potash - New Mexico LLC (“Intrepid”) is a wholly owned subsidiary of

Intrepid Potash, Inc. http://www.intrepid-hbproject.com/wp-content/uploads/2011/04/HB-Presentation-Website-

4.8.11.pdf.

1
The protest letter incorrectly states that partial refund amount was $64,304.64.

In the Matter of CSW Contractors, Inc.
page 2 of 13

  1. Intrepid mines for langbeinite or potash at its Carlsbad mine in Eddy County.

  2. On or about July 22, 2010, Eddy County approved the issuance and sale of $90

million in industrial revenue bonds issued for Intrepid’s recovery project (“project”).

http://www.abqjournal.com/biz/222115448540biz07-22-10.htm.

  1. The recovery project or the HB Solar Solution Mine Project is a solar solution mine

project to extract and produce potash remaining after completed conventional mining has

occurred. http://www.intrepid-hbproject.com/wp-content/uploads/2011/04/HB-Presentation-Website-4.8.11.pdf;

[Exhibit 2].

  1. The key project components were that it “Would use solution mining and solar

evaporation to extract potash from previously mined areas; Environmentally friendly; 12 to 18-

month construction phase including: Water supply wells and associated piping, 6 injection wells

and 5 extraction wells with 37 miles of pipeline (primarily on public land), 520 acres of

evaporation pods (on intrepid property), and A new flotation plant; and 28-year project lifespan.”

http://www.intrepid-hbproject.com/wp-content/uploads/2011/04/HB-Presentation-Website-4.8.11.pdf; [Exhibit 1,

pages 83-91].

  1. On June 15, 2012, the Department issued a Type 6 nontaxable transaction

certificate (“NTTC”) to Field Lining Systems, Inc. (“Field”). [Exhibit G].

  1. Field sold and installed the pond liners to Taxpayer, who in turn sold the pond

liners to Intrepid. [CD 05-03-15 00:59-1:00].

  1. The pond liners were manufactured in Houston and delivered to Intrepid in New

Mexico. [CD 05-03-15 1:03-1:04].

  1. The pond liners were welded together at the Intrepid site in New Mexico. [CD 05-

03-15 1:03-1:04].

In the Matter of CSW Contractors, Inc.
page 3 of 13

  1. The pond liners are movable. [CD 05-13-15 00:26].

  2. Field executed a Type 6 NTTC to Taxpayer for sale of the pond liners. [Exhibit

G].

  1. Taxpayer did not pay gross receipts tax to Field on the sale of the pond liners to

Taxpayer.

  1. Upon receiving the Type 6 NTTC from Field, Taxpayer agreed that the pond liners

were construction material that would become an ingredient or component of a construction

project that was either subject to gross receipt tax upon completion or the construction took place

on Indian tribal territory. [Exhibit A].

  1. The contract amount for the pond liners was $13,042,289.52. [Exhibit B].

  2. The total gross receipts tax charged on the pond liners was $749,931.65. [Exhibit

B].

  1. The amount of gross receipts tax charged on the pond liners is more than the

amount of gross receipts tax claimed for refund. No explanation was provided as to the difference

in the amount.

  1. The Department asserted that Taxpayer deducted $9,188,282.50, which represents

the cost of the pond liners during the refund tax period. [Exhibit H]. Again, no explanation was

provided as to the difference in the amounts, even though the Hearing Officer asked for an

explanation.

  1. On October 18, 2012, Intrepid executed a Type 9 NTTC to Taxpayer for the sale of

the pond liners.

  1. The pond liners were installed at Intrepid’s site near Carlsbad, New Mexico.

  2. Taxpayer does not dispute that the installation of the pond liners is a service and the

In the Matter of CSW Contractors, Inc.
page 4 of 13
receipts from the sale of the service are taxable.

  1. Intrepid funded the project with industrial revenue bonds.

http://www.abqjournal.com/biz/222115448540biz07-22-10.htm.

  1. The pond liners were sold to a government agent, Intrepid, on behalf of Eddy

County who issued the industrial revenue bonds.

  1. Taxpayer charged and collected gross receipts taxes on the sale of the pond liners to

Intrepid. [Exhibit H].

  1. The pond liners have a recovery period or are depreciated over a seven year period.

[Exhibit 3, page 2].

  1. The pond liners are tangible personal property that became an ingredient or

component part of a construction project.

  1. The construction project was managed by Intrepid and called HB Solar Solution

Mine Project.

  1. The pond liners became part of a construction project when Field executed a Type

6 NTTC to Taxpayer for the purchase of the pond liners.

DISCUSSION

The sole issue to be determined is whether the receipts from the sale of tangible personal

property or receipts from the sale of the pond liners to Intrepid are deductible under NMSA 1978,

Section 7-9-54 (2003). The Department argued that because Field executed a Type 6 NTTC to

Taxpayer, Taxpayer was foreclosed from then arguing that the pond liners were not part of the

construction project. Taxpayer argued that because it qualified for a deduction under Section 7-9-

54, that it was not relevant that it had been executed a Type 6 NTTC by Field.

Claim for Refund.

In the Matter of CSW Contractors, Inc.
page 5 of 13
Generally speaking, a claim for refund must be filed within three years from the end of the

calendar year in which the payment was originally due or the overpayment was made. NMSA

1978, §7-1-26 (D) (2007). The statute is fairly clear and states that: “...no credit or refund of any

amount may be allowed or made to any person ... (1) within three years of the end of the calendar

year in which: (a) the payment was originally due or the overpayment resulted from an

assessment…”. The alleged overpayments were made on July 31, 2012, August 31, 2012, and

September 30, 2012. The claim for refund was therefore timely filed.

Burden of Proof.

Pursuant to regulation 3.1.8.10(A) NMAC, Taxpayer has the burden of proof in this

matter. In addition thereto, it is presumed that “all receipts of a person engaging in business are

subject to the gross receipts tax.” NMSA 1978, §7-9-5 (2002). Therefore, Taxpayer’s receipts

from selling the pond liners to Intrepid are presumed to be gross receipts. The courts have held

that “where 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.

Gross Receipts.

Generally speaking, goods sold or services performed within the State of New Mexico are

taxable. The term“gross receipts” is broadly defined in Section 7-9-3.5(A)(1):

‘gross receipts’ means the total amount of money or the value of other
consideration received from selling property in New Mexico, from
leasing or licensing property employed in New Mexico, from granting a
right to use a franchise employed in New Mexico, from selling services
performed outside New Mexico, the product of which is initially used in
New Mexico, or from performing services in New Mexico. In an
exchange in which the money or other consideration received does not

In the Matter of CSW Contractors, Inc.
page 6 of 13
represent the value of the property or service exchanged, “gross receipts”
means the reasonable value of the property or services exchanged;

NMSA 1978, §7-9-3.5(A)(1) (2007). The term “construction” is defined extremely broadly and

means the “building, altering, repairing or demolishing in the ordinary course of business any: (e)

dam, reservoir, canal, ditch or similar facility.” NMSA 1978, §7-9-3.4(A)(1)(e) (2003). The term

“construction material” means “tangible personal property that becomes or is intended to become

an ingredient or component part of a construction project, but ‘construction material’ does not

include a replacement fixture when the replacement is not construction or a replacement part for a

fixture.” NMSA 1978, §7-9-3.4(B) (2003).

The applicable deduction is found in Section 7-9-54(A) which provides that

(r)eceipts from selling tangible personal property to the United States or
New Mexico or any governmental until or subdivision, agency,
department or instrumentality thereof may be deducted from gross
receipts or from governmental gross receipts. Unless contrary to federal
law, the deduction provided by this subsection does not apply to:

(3) receipts from selling construction material; or

No Gross Receipts Tax imposed on the Sale of the Pond Liners.

The first sale of the pond liners from Field to Taxpayer really determines, albeit

unwittingly for Taxpayer, whether the pond liners are tangible personal property that is intended

or is not intended to become an ingredient or component of a construction project. The pond

liners may only be deducted by Taxpayer under Section 7-9-54 if they are not “construction

material” that becomes an ingredient or component part of a construction project.

In this case, Field executed a Type 6 NTTC to Taxpayer for the purchase of the pond

liners. Taxpayer paid no gross receipts tax to Field on the sale of the pond liners. A Type 6

NTTC is used for transactions deductible under NMSA 1978, Section 7-9-51(2001). Transactions

In the Matter of CSW Contractors, Inc.
page 7 of 13
are deductible under Section 7-9-51(B) for purchases of construction material that is incorporated

as “an ingredient or component part of a construction project.” Section 7-9-51(B) also provides

that the construction project will be subject to “the gross receipts tax upon the upon its completion

or upon the completion of the overall construction project of which it is a part.”

When Field executed the Type 6 NTTC to Taxpayer and Taxpayer accepted the NTTC,

Taxpayer precluded the opportunity of asserting that the pond liners were not incorporated as an

ingredient or component part of a construction project. If Taxpayer had not requested and if Field

had not executed a Type 6 NTTC to Taxpayer for the purchase of the pond liners, Taxpayer may

have had a more credible argument as to why the liners were not part of an overall construction

project because they were not construction material. The pond liners are not deductible under

Section 7-9-54 because Taxpayer utilized a Type 6 NTTC for their purchase.

Sale to a Government or a Government Agent.

Taxpayer argues that the pond liners are deductible because they meet the requirements of

regulation NMAC 3.2.212.22. Regulation 3.2.212.22 interprets Section 7-9-54, and Section 7-9-

54 is clear that receipts from selling construction material are not deductible. Taxpayer argues

that it is immaterial that Taxpayer utilized a Type 6 NTTC on the first sale wherein, it was the

buyer of the pond liners. Taxpayer argues that what matters is that Taxpayer meets the criteria for

the deduction found in Section 7-9-54 and in regulation 3.2.212.22 NMAC. The main problem

with Taxpayer’s argument is that it fails to take into account the statutory language found within

Section 7-9-54 that provides that the deduction does not apply to receipts from selling construction

material. In addition, regulation 3.2.212.22(B) provides that “(r)eceipts from the sale of tangible

personal property to the private person who is acting as agent for the government with respect to

the bond project are deductible under Section 7-9-54 if the tangible personal property is not an

In the Matter of CSW Contractors, Inc.
page 8 of 13
ingredient or component part of a construction project.” (Emphasis added). By purchasing the

pond liners using a Type 6 NTTC, Taxpayer did not pay gross receipts tax on the transaction

because the pond liners were construction material whose intended use was an ingredient or

component of a construction project. Therefore it seems clear that so long as Taxpayer used a

Type 6 NTTC to purchase the pond liners, the intended use of the pond liners was to be an

ingredient or component of a construction project.

Now as for Taxpayer’s argument that the pond liners meet the requirements found in

regulation 3.2.212.22(B) NMAC for the exception to the definition of construction material;

specifically, that (1) the cost of the tangible personal property does not increase the basis; (2) the

tangible personal property is (a) not included in, or similar to, the list of structures and facilities

specifically itemized in the definition of construction at Section 7-9-3 NMSA 1978 (the correct

citation is Section 7-9-3.4); and (b) the property is depreciated as 3-year, 5-year, 7-year, 10-year or

15 year property, the Hearing Officer agrees with Taxpayer that some of these requirements have

been meet but at least one requirement has not been met. The Hearing Officer does not agree with

Taxpayer, however, that these requirements are exceptions to the definition of construction

material.

The requirements that Taxpayer cites to found in regulation 3.2.212.22(B) NMAC are not

exceptions to the definition of construction material, but are to be read assuming that the personal

tangible property is not construction material. Taxpayer argued, and the Department’s witness,

Alicia Muniz, confirmed that the Department had previously taken the position that so long as the

property had a short recovery period, the tangible was deductible if sold to a government agent or

the government regardless if the tangible personal property was construction material that became

ingredient or component part of a construction project. [CD 05-13-15 1:30-2:00]. The

In the Matter of CSW Contractors, Inc.
page 9 of 13
Department has since reversed this position on the sale of tangible personal property to a

government agent or the government and now the Department will not allow a deduction for

tangible personal property sold to a government agent or government if the property is

construction material. The Department’s current position is consistent with the Section 7-9-54 and

regulation 3.2.212.22(B) NMAC.

As for whether the pond liners meet the requirements under 3.2.212.22(B) NMAC, there

was no evidence presented at the hearing that the pond liners did not increase the basis of the

property. (Mr. Mims stated in his opening that the pond liners did not increase the basis of the

structure, but no witness testified to this fact. Ms. Rachel Sawyer, CPA testified only as to the

recovery life of the pond liners. [CD 05-03-15 1:08-1:27]) The Hearing Officer agrees with

Taxpayer that the liners are not listed on the list of structures or are similar to the list of structures

found in Section 7-9-3.4. The requirement that the pond liners have a short depreciated or

recovery life was met. Taxpayer submitted an opinion from the Hein & Associates LLP CPA firm

that indicates that the pond liners are depreciated over a seven year period. [Exhibit 3, page 2;

CD 05-03-15 1:16]. In addition the Department did not contest the depreciated or recovery life of

the pond liners. [CD 05-03-15 00:14]. However, irrespective of the liners meeting most of these

requirements found in regulation 3.2.212.22(B) NMAC, in the same regulation as the one cited by

Taxpayer, the regulation clearly provides that the pond liners are not deductible if they the

intended use of the pond liners was to be an ingredient or component of a construction project.

See regulation 3.2.212.22(D) NMAC

Fixtures.

Taxpayer also makes the point that the pond liners are not only depreciated over a short

recovery time, but they are also movable or not affixed to the property, and therefore are fixtures

In the Matter of CSW Contractors, Inc.
page 10 of 13
that were never intended to become an ingredient or component part of construction project. It

should be noted that fixtures tend have short depreciation lives. See I.R.C. §1245 property

(shorter cost recovery period property, 5 or 7 years) or §1250 property (longer cost recovery

period property, 39, 31.5 or 15 years). The most common example of §1245 property is

depreciable personal property, such as equipment. The most common examples of §1250 property

are buildings and building components, which generally are not §1245 property. Unfortunately,

determining the depreciation or recovery life of property is not the approach utilized in the Gross

Receipts and Compensating Tax Act for determining whether the deduction found in Section 7-9-

54 applies. The legislative scheme for taxing tangible personal property that may or may not be

construction material is to first determine whether the tangibles meet the definition of construction

material and then determine whether the construction material will become an ingredient or

component part of a construction project and therefore taxable on either the first transaction or the

second transaction.

This notion of which fixtures are taxable when sold to a government agent can be

unnecessarily tricky. Regulation 3.2.1.11(I)(1) NMAC provides that tangible personal property

that is sold as a fixture that is necessary or essential to the intended use of a construction project

and which is so firmly attached to the realty as to constitute a part of the construction project is

taxable and not deductible pursuant to Section 7-9-54, but the sale of the fixtures may qualify for

the deduction pursuant to Section 7-9-51. Regulation 3.2.1.11(I)(2) NMAC, then provides that

fixtures that are assembled (the implication that they must be movable) are not construction

material. This subparagraph of the regulation is in keeping with the distinction made in the same

regulation under paragraph (F) between prefabricated and modular units. (There is no doubt that

regulation 3.2.1.11(I) NMAC could be rewritten for better clarity.) Taxpayer was able to prove

In the Matter of CSW Contractors, Inc.
page 11 of 13
that the pond liners were welded in New Mexico and were movable. [CD 05-03-15 00:26; 1:03-

1:04]. However, these facts alone are insufficient to overcome the statutory requirement that the

fixtures cannot be part of a construction project.

In this case, because Taxpayer purchased the pond liners from Field using a Type 6 NTTC,

it is not material that the pond liners had a short depreciation or recovery life. By using a Type 6

NTTC for the purchase of the pond liners, Taxpayer was precluded from deducting the receipts

from the sale of the pond liners to Intrepid under Section 7-9-54. Therefore the pond liners do not

qualify for the deduction found under Section 7-9-54.

CONCLUSIONS OF LAW

A. Taxpayer filed a timely claim for refund for gross receipts tax principal paid on the

pond liners.

B. Jurisdiction lies over the parties and the subject matter of this protest.

C. The hearing was timely set as required by NMSA 1978, Section 7-1-24.1(A) (2013).

D. It is Taxpayer’s burden to come forward with evidence and legal argument to

establish that it was entitled to the refund.

E. Taxpayer utilized a Type 6 NTTC and paid no gross receipts tax on the purchase of

the pond liners.

F. The pond liners were resold to Intrepid and were taxable because the pond liners

were construction material that became an ingredient or component part of a construction project.

G. The pond liners do not meet the definition for deductible tangible personal property

found in regulation 3.2.212.22(B) NMAC.

H. The pond liners are not deductible pursuant to NSMA 1978, Section 7-9-54 (2003).

I. The claim for refund is denied.

In the Matter of CSW Contractors, Inc.
page 12 of 13
For the foregoing reasons, the Taxpayer's protest IS DENIED.

DATED: May 12, 2015

Monica Ontiveros
Monica Ontiveros
Hearing Officer
Taxation & Revenue Department
Post Office Box 630
Santa Fe, NM 87504-0630

In the Matter of CSW Contractors, Inc.
page 13 of 13

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