Were James Szenasi's resale NTTCs timely when he received the audit letter on its printed deadline after an unexpectedly extended trip and obtained certificates days later?

Plain-English summary

James Szenasi timely obtained resale NTTCs because the 60-day period began when he actually received the audit letter after an unexpectedly extended trip, not on an unproven mailing date. The AHO abated all 2009, 2010, and 2011 gross-receipts-tax assessments, including penalty and interest.

Szenasi taught courses at federal facilities in Los Alamos and Albuquerque through two companies. The companies resold his instruction to the federal government and collected and paid gross receipts tax on those resales.

The Department audited Szenasi and issued a letter stating that August 26, 2014 was his deadline to obtain NTTCs. The companies' certificates would cover every assessed receipt if timely.

The taxpayer did not ignore his mail

Szenasi left his Arizona home on June 23 expecting to travel for less than 30 days. His post office said short-term forwarding was unavailable, so he placed his mail on hold.

Near the end of July, he unexpectedly agreed to teach a course in Washington, D.C., extending the trip. He returned home on August 25 and picked up the held mail the next day.

Szenasi immediately contacted the Department and both companies. Despite the intervening Labor Day holiday, he obtained NTTCs on September 3 and September 5.

The Department did not prove an earlier notice date

The Department argued that notice occurred when it mailed the correctly addressed letter, probably in June. But it did not know the mailing date. The document was printed June 24 and dated June 27, while the Department's online correspondence log did not show mailing.

A properly addressed mailed letter normally creates a receipt presumption. The specific facts can rebut that presumption, and the party relying on service by mail must prove mailing.

Szenasi documented that he was away, had arranged a mail hold, experienced an unexpected extension, returned when claimed, and acted immediately. The Department did not show an earlier delivery or negligent or willful delay in collecting the mail.

The certificates fell within 60 days of actual notice

The AHO found that notice occurred on August 26, when Szenasi received the letter. Both September certificates were comfortably within 60 days.

The parties agreed that the receipts qualified for the service-for-resale deduction if the certificates were timely and that the NTTCs covered the total assessments. Timely certificates were conclusive proof of the deduction under Section 7-9-43.

Evidence that the two companies resold Szenasi's services and paid tax on those resales further supported the transaction description, though the AHO did not need to decide equitable recoupment.

Result: protest GRANTED. The three assessments were abated in full; no gross receipts tax, penalty, or interest remained.

What this means for you

Taxpayers traveling during an audit

Use forwarding when available, otherwise document mail holds, travel dates, itinerary changes, and the exact date notices are collected. Act immediately after receipt.

Service providers selling through intermediaries

Obtain resale NTTCs when transactions occur. Keep contracts and buyer records showing that the service was resold in the ordinary course and the resale was taxable.

Taxpayers disputing presumed mailed notice

Specific evidence matters: correspondence logs, envelopes, post-office records, travel receipts, and prompt follow-up can rebut the ordinary receipt presumption.

Common questions

Q: Why did Szenasi not receive the audit letter earlier?
A: He placed mail on hold for a trip that was unexpectedly extended by a Washington teaching assignment.

Q: When did the AHO find notice occurred?
A: August 26, 2014, when Szenasi collected and read the held mail.

Q: When were the NTTCs obtained?
A: September 3 and September 5, 2014.

Q: Did the Department prove when it mailed the letter?
A: No. It showed print and document dates but no definitive mailing date.

Q: Did the NTTCs cover all three years?
A: Yes. The parties agreed they covered the totality of the assessments.

Q: What was abated?
A: All assessed tax, penalty, and interest for 2009 through 2011.

Citations and references

Statutes and regulations:

• NMSA 1978, §§ 7-9-43 and 7-9-48 — 60-day NTTC rule and service-for-resale deduction
• NMSA 1978, § 7-1-9 — notice mailed to the last known address
• NMSA 1978, §§ 7-1-17, 7-1-67, and 7-1-69 — assessment presumption, interest, and penalty
• Regulation 3.2.1.18(A) NMAC — New Mexico services generally subject to gross receipts tax

Cases cited:

• Myers v. Kapnison, 1979-NMCA-085 — burden to prove service by mail
• Garmond v. Kinney, 1978-NMSC-043 — ordinary presumption that a properly addressed mailed letter is received
• Cordova v. State, 2005-NMCA-009 — case-specific adequacy of notice
• DeArmond v. Halliburton, 2003-NMCA-148 — facts rebutting presumed mailed notice
• MPC Ltd. v. New Mexico Taxation and Revenue Department, 2003-NMCA-021 — burden shift after rebutting an assessment

Source

• Listing: New Mexico Decisions & Orders
• Decision post: James Szenasi
• Decision PDF: D&O 15-25

Original ruling text

STATE OF NEW MEXICO
ADMINISTRATIVE HEARINGS OFFICE
TAX ADMINISTRATION ACT

IN THE MATTER OF THE PROTEST OF
JAMES SZENASI, No. 15-25
TO THE ASSESSMENTS ISSUED UNDER
LETTER ID NOS. L1952892880, L0208062416, and L1281804240

DECISION AND ORDER

A formal hearing on the above-referenced protest was held June 18, 2015, before Hearing

Officer Dee Dee Hoxie. The Taxation and Revenue Department (Department) was represented by Ms.

Elena Morgan, Staff Attorney. Ms. Milagros Bernardo, Auditor, also appeared on behalf of the

Department. Mr. James Szenasi (Taxpayer) appeared for the hearing and represented himself. Ms.

Jauwaun Fleuriot appeared by telephone as a witness for the Taxpayer. The Hearing Officer took

notice of all documents in the administrative file. Based on the evidence and arguments presented,

IT IS DECIDED AND ORDERED AS FOLLOWS:

FINDINGS OF FACT

1. On December 10, 2014, the Department assessed the Taxpayer for gross receipts tax, penalty,

and interest for the tax period of January 1, 2009 through December 31, 2009. The

assessment was for $2,702.62 tax, $540.53 penalty, and $459.25 interest.

2. On December 10, 2014, the Department assessed the Taxpayer for gross receipts tax, penalty,

and interest for the tax period of January 1, 2010 through December 31, 2010. The

assessment was for $1,991.03 tax, $398.21 penalty, and $259.49 interest.

3. On December 10, 2014, the Department assessed the Taxpayer for gross receipts tax, penalty,

and interest for the tax period of January 1, 2011 through December 31, 2011. The

assessment was for $2,251.52 tax, $450.30 penalty, and $212.11 interest.

4. On March 9, 2015, the Taxpayer filed a formal protest letter.
5. On March 27, 2015, the Department filed a Request for Hearing asking that the Taxpayer’s

protest be scheduled for a formal administrative hearing.

6. On March 27, 2015, the Hearings Bureau issued a notice of hearing. The hearing date was

set within ninety days of the protest.

7. On March 30, 2015, the Taxpayer requested a continuance of the hearing.

8. On April 23, 2015, the request for continuance was granted, and the delay of the hearing was

attributable to the Taxpayer.

9. On April 23, 2015, the Hearings Bureau sent amended notices of hearing.

10. On May 27, 2015, the Taxpayer requested that his witnesses be allowed to appear by phone.

11. On June 15, 2015, the request was granted as to one out-of-state witness and denied as to an

in-state witness.

12. During 2009, 2010, and 2011, the Taxpayer was providing services in New Mexico by

teaching courses at the federal facilities in Los Alamos and in Albuquerque.

13. The Taxpayer contracted with two companies to provide course instruction in New Mexico

and in other areas. The companies then resold the Taxpayer’s services to the federal

government.

14. The companies were collecting and paying gross receipts taxes on the Taxpayer’s services

performed in New Mexico when they were resold to the federal government.

15. In 2014, the Department selected the Taxpayer for audit.

16. The Department sent the Taxpayer a letter (the 60-day letter) advising of the audit and giving

the Taxpayer 60 days to obtain any applicable nontaxable transaction certificates (NTTCs).

17. The 60-day letter indicated that the deadline for obtaining NTTCs was August 26, 2014.

18. The Taxpayer lives in Arizona, but travels extensively throughout the summer months.

James Szenasi
Letter ID Nos. L1952892880, L0208062416, and L1281804240
page 2 of 8

19. On June 23, 2014, the Taxpayer left his home in Arizona with plans to travel in Colorado and

New Mexico for the next several weeks, but was expecting to return to his home within 30

days.

20. Before leaving home, the Taxpayer contacted his local post office about forwarding his mail.

The post office advised that they would not forward mail for periods of less than 30 days.

The post office advised that the Taxpayer could place a hold on his mail. The Taxpayer did

so.

21. Toward the end of July 2014, the Taxpayer was called upon to take over instruction on a

course that had been scheduled at the beginning of August in Washington, D.C.

22. The Taxpayer agreed to take over the course and changed his plans. The Taxpayer did not

return home at the end of July. The Taxpayer instead went to Washington, D.C. and taught a

course there.

23. The Taxpayer finally returned home in the evening on August 25, 2014.

24. On August 26, 2014, the Taxpayer went to the post office and picked up his mail.

25. The Taxpayer received the 60-day letter on August 26, 2014. The Taxpayer immediately

contacted the Department and the companies for which he was providing his services.

26. The Taxpayer obtained NTTCs from both companies. One was issued to the company and

executed to the Taxpayer on September 3, 2014, and one was issued and executed on

September 5, 2014.

27. The Department rejected the NTTCs as they were not obtained by August 26, 2014 and

assessed the Taxpayer.

James Szenasi
Letter ID Nos. L1952892880, L0208062416, and L1281804240
page 3 of 8
DISCUSSION

The issue to be decided is whether the Taxpayer is liable for the tax, penalty and interest as

assessed. This issue hinges upon whether the Taxpayer’s acceptance and submission of the NTTCs

was timely.

Burden of Proof.

Assessments by the Department are presumed to be correct. See NMSA 1978, § 7-1-17. Tax

includes, by definition, the amount of tax principal imposed and, unless the context otherwise

requires, “the amount of any interest or civil penalty relating thereto.” NMSA 1978, § 7-1-3. See

also El Centro Villa Nursing Ctr. v. Taxation and Revenue Department, 1989-NMCA-070, 108 N.M.

795. Therefore, the assessment issued to the Taxpayer is presumed to be correct, and it is the

Taxpayer’s burden to present evidence and legal argument to show that he is entitled to an

abatement.

NTTCs.

Services performed within the State of New Mexico are subject to the gross receipts tax. See

3.2.1.18 (A) NMAC (2003). “Receipts from selling a service for resale may be deducted from gross

receipts…if the sale is made to a person who delivers a nontaxable transaction certificate to the

seller. The buyer delivering the nontaxable transaction certificate must resell the service in the

ordinary course of business and the resale must be subject to the gross receipts tax[.]” NMSA 1978,

§ 7-9-48 (emphasis added). A taxpayer may deduct certain gross receipts only when they are

provided with NTTCs from buyers. See NMSA 1978, § 7-9-43 (2011). A taxpayer should be in

possession of NTTCs when the receipts from the transaction are due, but may also produce NTTCs

within 60 days of when the taxpayer is notified that NTTCs are required. See id. If a taxpayer has

not obtained NTTCs “within sixty days from the date that the notice requiring possession of these

nontaxable transaction certificates is given” then the deductions are disallowed. Id.

James Szenasi
Letter ID Nos. L1952892880, L0208062416, and L1281804240
page 4 of 8
It was undisputed that the Taxpayer’s receipts would be deductible if the NTTCs were

allowed. It was undisputed that the NTTCs would cover the totality of the assessments.

Notice.

The Taxpayer argues that notice was given when he received the 60-day letter on August 26,

2014. The Department argues that notice was given when the letter was mailed to the Taxpayer at

the correct address, which probably occurred sometime in June 2014. The Department argues that

holding that notice was given as of date of receipt would allow a taxpayer to benefit from ignoring or

refusing to read his/her mail.

The Department did not know the actual mailing date of the letter, but was able to determine

that the 60-day letter was printed on June 24, 2014. The 60-day letter was actually dated June 27,

2014, and Ms. Bernardo explained that this was probably done to allow for when the letter would be

mailed. However, there was no definitive proof of when the letter was mailed. The party relying on

service by mail has the burden of proving that the mailing was done. See Myers v. Kapnison, 1979-

NMCA-085, ¶ 8, 93 N.M. 215. The Taxpayer pointed out that the Department has a website that

allows taxpayers to view a log of correspondence and when it was sent. The Taxpayer pointed out

that the log on the website did not show that the 60-day letter was mailed. However, it is clear that

the 60-day letter was mailed at some point since the Taxpayer received it when he picked up his mail

on August 26, 2014.

Generally, notice is effective if it is mailed to the correct last known address. See NMSA

1978, § 7-1-9. “A properly addressed letter that is mailed is presumed to be received.” Garmond v.

Kinney, 1978-NMSC-043, ¶6, 91 N.M. 646. Generally, actual notice is not required and notice is

presumed when it was given by means reasonably calculated to apprise the parties. See Maso v.

State, 2004-NMSC-028, ¶ 10, 136 N.M. 161. See also Cordova v. State, 2005-NMCA-009, 136

N.M. 713. However, a party may rebut the presumption that notice sent in a properly addressed letter

James Szenasi
Letter ID Nos. L1952892880, L0208062416, and L1281804240
page 5 of 8
was received. See State Farm Fire and Casualty Co. v. Price, 1984, NMCA-036, ¶ 24, 101 N.M.

438. Moreover, the adequacy of notice is not determined by the information available to the sender

at the time of the mailing and the specific facts of each case should be considered in determining

whether notice was given. See Cordova, 2005-NMCA-009 at ¶ 24. See also DeArmond v.

Halliburton, 2003-NMCA-148, ¶ 15, 134 N.M. 630 (holding that the specific facts of the case refuted

the presumption of notice by mailing). The purpose of sending notice is to apprise the parties of the

impending action and to afford them an opportunity to make objections. See Maso v. State, 2004-

NMSC-028, ¶ 10.

The particular facts and circumstances of this case show that the Taxpayer was not negligent

or willfully dilatory in picking up his mail. The Taxpayer tried to obtain mail forwarding service

before his trip, but was advised that it was unavailable for the time that he was originally planning to

be gone. The Taxpayer provided documentation to show that he was actually away from home from

June 23, 2014 to August 26, 2014. The Taxpayer’s trip was unexpectedly lengthened when he was

asked to take over a previously scheduled training in Washington, D.C. The Taxpayer acted

immediately and expediently when he received the notice on August 26, 2014. Despite the fact that

the Labor Day holiday occurred a few days after he received the notice, he was able to obtain NTTCs

on September 3rd and 5th.

The companies for which the Taxpayer worked also provided information to the Department

indicating that they were reselling the Taxpayer’s services and were paying gross receipts tax on

those resales. Ms. Fleuriot confirmed this as to her company in her testimony. See New Mexico

Taxation and Revenue Dep’t. v. Case Manager, No. 32,940 mem. op. at ¶ 20 (N.M. Ct. App. April

29, 2015) (non-precedential) (holding that a timely but flawed NTTC followed by an untimely but

correct NTTC did not entitle the Department to collect the same gross receipts tax on the same

transaction twice). An assessment may also be abated when another person paid the amount of the

James Szenasi
Letter ID Nos. L1952892880, L0208062416, and L1281804240
page 6 of 8
tax “on behalf of the taxpayer on the same transaction; provided that the requirements of equitable

recoupment are met.” NMSA 1978, § 7-1-28 (F) (2013). However, based on the facts of this case, it

is not necessary to determine if equitable recoupment applies.

Given the particular facts and circumstances of this case, the Taxpayer successfully rebutted

the presumption that the notice was given prior to August 26, 2014. The burden shifted to the

Department to show that notice was given prior to that date or to show that the Taxpayer was

negligent or willfully tardy in picking up the properly sent notice. See MPC Ltd. v. New Mexico

Taxation and Revenue Dep’t., 2003-NMCA-021, ¶ 13, 133 N.M. 217. The Department failed to

rebut the Taxpayer’s evidence. The Taxpayer was given notice that NTTCs were required when he

received the 60-day letter on August 26, 2014. The NTTCs were obtained within 60 days of that

date. See NMSA 1978, § 7-9-43. Therefore, the NTTCs were timely and are conclusive proof that

the Taxpayer was entitled to deduct his sales from gross receipts. See id. Consequently, the

Taxpayer does not owe gross receipts tax.

The Taxpayer also made arguments regarding the timeliness of some of the assessments.

Those arguments are moot given that the Taxpayer prevailed on other issues.

CONCLUSIONS OF LAW

A. The Taxpayer filed a timely written protest to the Notices of Assessment of 2009, 2010,

and 2011 gross receipts taxes issued under Letter ID numbers L1952892880, L0208062416, and

L1281804240, and jurisdiction lies over the parties and the subject matter of this protest.

B. The Taxpayer was given notice that possession of NTTCs was required when he

received the 60-day letter on August 26, 2014. See NMSA 1978, § 7-9-43. See Maso v. State, 2004-

NMSC-028, ¶ 10, 136 N.M. 161. See also Cordova v. State, 2005-NMCA-009, ¶24, 136 N.M. 713.

See also DeArmond v. Halliburton, 2003-NMCA-148, ¶ 15, 134 N.M. 630.

James Szenasi
Letter ID Nos. L1952892880, L0208062416, and L1281804240
page 7 of 8
C. The Taxpayer obtained NTTCs within 60 days of August 26, 2014. Therefore, the

NTTCs were timely and were conclusive evidence that the Taxpayer was entitled to deduct those

sales from his gross receipts. See NMSA 1978, § 7-9-43.

D. The Taxpayer overcame the presumption of correctness and the burden shifted to the

Department to establish that the assessments were correct. See NMSA 1978, § 7-1-17. See also

MPC Ltd. v. New Mexico Taxation and Revenue Dep’t., 2003-NMCA-021, ¶ 13, 133 N.M. 217.

E. The Department failed to rebut the Taxpayer’s evidence. See MPC Ltd. v. New

Mexico Taxation and Revenue Dep’t., 2003-NMCA-021.

F. As the Taxpayer was entitled to deduct the gross receipts, no gross receipts taxes were

owed and penalty and interest do not apply. See NMSA 1978, §§ 7-9-43, 7-1-69, and 7-1-67.

For the foregoing reasons, the Taxpayer's protest is GRANTED and the assessments are

hereby ABATED IN FULL.

DATED: July 20, 2015.

Dee Dee Hoxie
DEE DEE HOXIE
Hearing Officer
Administrative Hearings Office
Post Office Box 6400
Santa Fe, NM 87502

James Szenasi
Letter ID Nos. L1952892880, L0208062416, and L1281804240
page 8 of 8