My tax preparer told me I didn't owe New Mexico gross receipts tax — if that advice was wrong, can the penalty be waived because I relied on a professional?

Plain-English summary

Hilario Leos and Christina Luchetti-Leos (now Luchetti-Rael), a married couple doing business as C&R Nutritional Club, sold dietary supplements in New Mexico. They did not report or pay gross receipts tax on that business for 2010-2012, and in July 2016 the Department assessed gross receipts tax, penalty, and interest (about $13,522 against the couple and $6,863 against C&R). They did not dispute the tax — the only issue was whether the penalty and interest could be abated.

Their explanation: they relied on Yolanda Chavez of Loyalty Tax Service, who prepared their income taxes and told them they owed no New Mexico gross receipts tax — only income tax — because they bought their products in California and paid California sales tax. (That reasoning is wrong: New Mexico gross receipts tax is on the seller's receipts from selling in New Mexico, regardless of where the goods were purchased.) Ms. Chavez was not a CPA or licensed accountant, cited no legal authority, and the taxpayers never investigated her credentials.

Hearing Officer Chris Romero denied the protest:

• Interest is mandatory. Under Section 7-1-67, interest "shall" be paid from the day after the tax was due until it is paid; the Department has no discretion to abate it (Marbob Energy), regardless of the taxpayers' good faith.
• The negligence penalty is mandatory. Under Section 7-1-69, the penalty applies whenever the failure to pay meets the definition of negligence in Regulation 3.1.11.10 NMAC — here, the erroneous belief that no gross receipts tax was owed. It applies even to unintentional mistakes (El Centro Villa Nursing).
• Reliance on this preparer was not "reasonable reliance on a competent accountant." Regulation 3.1.11.11(D) abates the penalty only for reliance on competent tax counsel or an accountant after full disclosure. There was no evidence Ms. Chavez was competent or licensed. Citing the persuasive AHO decision Red Mesa Construction (No. 03-03), the Hearing Officer held that reliance on a tax professional must be "active and informed, not passive and unaware": a taxpayer who never checks a preparer's qualifications cannot show it was reasonable to rely on that person. The good-faith-mistake-of-law escape in Section 7-1-69(B) failed for the same reason (C & D Trailer Sales).
• Self-reporting duty. New Mexico's tax system is self-reporting, so "every person is charged with the reasonable duty to ascertain the possible tax consequences" of their actions (Tiffany Construction), and a taxpayer cannot "abdicate this responsibility merely by appointing an accountant" (El Centro Villa). Free Department guidance (FYI-105) was available.

Result: the protest was denied. The taxpayers owe the 2012 penalty and interest, and the 2010-2011 amounts remain governed by the Short Term Payment Plans they had signed (the Hearing Officer found it unnecessary to decide whether those plans could be undone, since no abatement was warranted anyway).

What this means for you

Small-business owners who use a tax preparer

Hiring a preparer does not shift your legal responsibility for getting New Mexico tax right, and if the preparer is wrong, you — not they — owe the tax, interest, and penalty. If you want the preparer's advice to protect you from a negligence penalty, the preparer must be competent (ideally a CPA or licensed accountant), and you must be able to show you actually vetted their qualifications and gave them full disclosure of your facts.

Resellers of out-of-state goods

Paying sales tax in another state when you buy inventory does not exempt you from New Mexico gross receipts tax on your New Mexico sales. Gross receipts tax is imposed on the seller's receipts from doing business in New Mexico. Assuming otherwise is exactly the "erroneous belief" that triggers a negligence penalty here.

Accountants and tax professionals

Regulation 3.1.11.11(D) reliance is a real defense, but it has teeth: the adviser must be competent and the reliance active and informed. Because New Mexico does not license tax preparers, "she held herself out as a tax service" is not enough. Document the adviser's credentials and the full disclosure behind the advice if you want to preserve the abatement argument.

Common questions

Q: My preparer gave me bad advice. Doesn't that get the penalty waived?
A: Only if the preparer was competent (typically a licensed accountant) and you reasonably and actively relied on their advice after full disclosure. Relying on an unlicensed preparer whose qualifications you never checked does not qualify.

Q: I bought my products in another state and paid that state's sales tax. Do I still owe New Mexico gross receipts tax on my sales here?
A: Yes. New Mexico gross receipts tax is on your receipts from selling in New Mexico, independent of any tax you paid when buying the inventory elsewhere.

Q: Can the interest at least be removed?
A: No. Interest under Section 7-1-67 is mandatory and the Department has no authority to abate it, regardless of the reason for the late payment.

Citations and references

Statutes:

• § 7-1-67 NMSA 1978 — interest on unpaid tax is mandatory and runs from the day after the due date until paid
• § 7-1-69 NMSA 1978 — civil negligence penalty (2% per month, capped at 20%); subsection (B) excuses only a good-faith mistake of law on reasonable grounds
• § 7-1-17(C) NMSA 1978 — a Department assessment is presumed correct; taxpayer bears the burden to overcome it
• § 7-9-4 NMSA 1978 — gross receipts tax applies to anyone engaging in business in New Mexico
• § 7-9-3.5 NMSA 1978 — gross receipts include amounts received from selling property or services in New Mexico
• § 7-1B-8(A) NMSA 1978 — a protest hearing must be held within 90 days

Regulations:

• Regulation 3.1.11.10 NMAC — defines negligence, including an erroneous belief and inaction where action is required
• Regulation 3.1.11.11(D) NMAC — penalty abatement for reasonable reliance on competent tax counsel or an accountant after full disclosure

Cases and decisions cited:

• Marbob Energy Corp. v. N.M. Oil Conservation Comm'n, 2009-NMSC-013, 146 N.M. 24 — the word "shall" makes a provision mandatory absent a clear contrary indication
• El Centro Villa Nursing Center v. Taxation & Revenue Dep't, 1989-NMCA-070, 108 N.M. 795 — the negligence penalty applies even to inadvertent error, and a taxpayer cannot abdicate its self-reporting duty by appointing an accountant
• Tiffany Construction Co. v. Bureau of Revenue, 1976-NMCA-127, 90 N.M. 16 — every person has a duty to ascertain the possible tax consequences of their actions
• C & D Trailer Sales v. Taxation & Revenue Dep't, 1979-NMCA-151, 93 N.M. 697 — penalty upheld absent reliance on an informed consultation
• Archuleta v. O'Cheskey, 1972-NMCA-165, 84 N.M. 428 — the taxpayer bears the burden to overcome an assessment
• Chevron U.S.A., Inc. v. State ex rel. Dep't of Taxation & Revenue, 2006-NMCA-050, 139 N.M. 498 — agency regulations are presumed proper and given substantial weight
• In re Protest of Red Mesa Construction, No. 03-03 (AHO) — persuasive: reliance on a tax professional must be active and informed, not passive and unaware

Source

• Listing: New Mexico Decisions & Orders
• Decision post: Hilario Leos & Christina Luchetti-Leos and C&R Nutritional Club
• Decision PDF: D&O 16-57

Original ruling text

STATE OF NEW MEXICO
ADMINISTRATIVE HEARINGS OFFICE
TAX ADMINISTRATION ACT

IN THE MATTER OF THE PROTEST OF No. 16-57
HILARIO LEOS & CHRISTINA LUCHETTI-LEOS
C&R NUTRITIONAL CLUB
TO ASSESSMENTS ISSUED UNDER LETTERS
ID NOs. L1112215088 and L1011551792

DECISION AND ORDER

A protest hearing occurred in the above captioned matter on November 30, 2016 at 1:00

p.m. before Chris Romero, Esq., Hearing Officer, in Santa Fe, New Mexico. Hilario Leos and

Christina Luchetti-Leos, now known as Christina Luchetti-Rael, appeared pro se for themselves

and C&R Nutritional Club (“Taxpayers”). Staff Attorney, Melinda Wolinsky, appeared

representing the Taxation and Revenue Department of the State of New Mexico (“Department”).

Protest Auditor, Nicholas Pacheco, appeared as a witness for the Department. Taxpayers’

Exhibits 1 through 6 and Department’s Exhibits A through E were admitted into the record

without objection, and are described in the Administrative Exhibit Log. Based on the evidence

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

FINDINGS OF FACT

1. On July 20, 2016, the Department assessed Taxpayers Hilario Leos and Christina

Luchetti-Leos the amounts of $10,009.71 in gross receipts tax, $2,001.95 in penalty, and

$1,510.05 in interest for a total amount due of $13,521.71 under Letter ID No. L1112215088 for

the reporting periods from January 1, 2010 through December 31, 2012.

2. On July 20, 2016, the Department assessed Taxpayer C&R Nutritional Club the

amounts of $5,223.24 in gross receipts tax, $1,044.64 in penalty, and $595.53 in interest for a
total amount due of $6,863.41 under Letter ID No. L1011551792 for the reporting periods from

January 1, 2012 through December 31, 2012.

3. Taxpayer Christina M. Luchetti-Rael entered into a Short Term Payment Plan on

August 23, 2016. [Department Ex. A]. Taxpayer Hilario Leos entered into a Short Term

Payment Plan on August 23, 2016. Despite the date of his signature erroneously indicating

August 22, 2016, Mr. Leos executed the plan on August 23, 2016. [Department Ex. B].

Department Ex. A and Department Ex. B shall hereinafter be referred to collectively as “Short

Term Payment Plans”.

4. The Short Term Payment Plans included the assessments for the periods from

January 1, 2010 through December 31, 2011. [Taxpayer Ex. 1].

5. The Short Term Payment Plans provided that by signing the agreements, the

Taxpayers admitted conclusive liability for the taxes included in the plans, including penalty and

interest, and agreed that the principal, interest, and penalty were not subject to future protest.

[Department Ex. B; Department Ex. C].

6. Taxpayers asserted they did not read the Short Term Payment Plans and were

unaware of the conditions imposed with reference to future protests. Taxpayers claimed they

were encouraged by an employee of the Department to execute the plans because the Department

would allegedly view them in a more favorable light because they were making efforts to satisfy

their tax liability.

7. On September 8, 2016, Taxpayers timely protested the assessments. Taxpayers’

protest was limited to penalty and interest only. Taxpayer’s did not protest the underlying gross

receipts tax principal. [Department Ex. D].

In the Matter of the Protest of
Hilario Leos & Christina Luchetti-Leos and
C&R Nutritional Club
Page 2 of 12

8. Despite the provisions of the Short Term Payment Plans, Taxpayers’ intentions

were to protest penalty and interest for the periods included in the plans in addition to the

reporting periods in 2012 which were not subject of the plans. [Department Ex. D].

9. On September 21, 2016, the Department acknowledged the receipt of a valid

protest with respect to the 2012 assessments. By separate correspondence also dated September

21, 2016, the Department asserted that there was no right of protest with respect to the periods

subject of the Short Term Payment Plans because the Taxpayers waived such right by executing

the plans.

10. On November 2, 2016, the Department requested a hearing in this matter with

respect to the above-captioned letter ID numbers covering 2010, 2011, and 2012. The Hearing

Request indicated an amount of controversy consistent with penalty and interest for 2012 only.

11. On November 3, 2016, the Administrative Hearings Office issued Notice of

Administrative Hearing, scheduling this matter for November 30, 2016.

12. A hearing on the merits occurred on November 30, 2016 within 90 days of the

protest.

13. Taxpayers expressed the desire to call as a witness the Department employee who

they claimed encouraged them to execute the Short Term Payment Plans. However, Taxpayers

did not subpoena the witness to appear and testify and consequently, the witness was not present

to testify at the hearing. Effort was nevertheless made to have the witness appear voluntarily by

telephone but her telephonic appearance could not be arranged.

14. Taxpayers Hilario Leos and Christina Luchetti-Leos were married during the

relevant periods of time and did business as C & R Nutritional Club.

In the Matter of the Protest of
Hilario Leos & Christina Luchetti-Leos and
C&R Nutritional Club
Page 3 of 12

15. During the relevant periods of time, they were engaged in the business of

promoting and selling dietary supplements and derived income from such business in New

Mexico.

16. During the relevant periods of time, the Taxpayers were not aware of their

obligations to report gross receipts from business income or pay gross receipts taxes under the

Gross Receipts and Compensating Tax Act.

17. Taxpayers utilized and relied on Yolanda Chavez, doing business as Loyalty Tax

Service, to assist with preparing and filing their federal and state income taxes during the

relevant periods of time. Taxpayers began utilizing her services in 2009.

18. Ms. Chavez, as provided in the correspondence included in the Taxpayers’

protest, seemed to claim that Taxpayers were not required to pay New Mexico gross receipts

taxes because they purchased their products in California and consequently paid sales tax in

California. Ms. Chavez suggested that income derived from reselling the products in New

Mexico only obligated the Taxpayers to report the proceeds from such activity as income for

income tax purposes. Ms. Chavez provided no legal authority in her correspondence to support

her opinion.

19. Taxpayers asserted that Ms. Chavez did not inform them of any gross receipts tax

obligations.

20. Neither Ms. Chavez, nor Loyalty Tax Service, are registered with the State of

New Mexico as a certified public accountant or registered public accountant.

21. Taxpayers made no independent inquiry of Ms. Chavez regarding her credentials

or otherwise investigated her qualifications.

In the Matter of the Protest of
Hilario Leos & Christina Luchetti-Leos and
C&R Nutritional Club
Page 4 of 12

22. The evidence was insufficient to find that Ms. Chavez was a competent tax

accountant.

23. As of the date of hearing, the outstanding amounts in protest for 2012 were

$359.02 in interest, and $573.62 in penalty, for a total amount of $932.64. [Department Ex. E].

24. The Department asserted that only 2012 was subject to protest.

DISCUSSION

Anyone engaging in business in New Mexico is subject to the gross receipts tax. See

NMSA 1978, Section 7-9-4. Gross receipts tax applies to the total amount of money received

from selling property or services in New Mexico. See NMSA 1978, Section 7-9-3.5. In this

protest, Taxpayers were engaged in selling dietary supplements in New Mexico. Therefore, the

Taxpayers were subject to the gross receipts tax. Taxpayers did not protest the assessed tax

principal. The only issues in this protest are whether the civil negligence penalty and interest

assessed as a result of the failure to timely pay the tax may be abated.

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

are presumed correct. Unless otherwise specified, for the purposes of the Tax Administration Act,

“tax” is defined to include interest and civil penalty. See NMSA 1978, §7-1-3 (X) (2013). Under

Regulation 3.1.6.13 NMAC, the presumption of correctness under Section 7-1-17 (C) extends to

the Department’s assessment of penalty and interest. See Chevron U.S.A., Inc. v. State ex rel. Dep't

of Taxation & Revenue, 2006-NMCA-50, ¶16, 139 N.M. 498, 503 (agency regulations interpreting

a statute are presumed proper and are to be given substantial weight). Taxpayers have the burden to

overcome the assessments. See Archuleta v. O'Cheskey, 1972-NMCA-165, ¶11, 84 N.M. 428, 431.

In the Matter of the Protest of
Hilario Leos & Christina Luchetti-Leos and
C&R Nutritional Club
Page 5 of 12
Taxpayers requested leniency from the Department with respect to the imposition of

penalty and interest. Taxpayers asserted that they relied on the competence of Yolanda Chavez

of Loyalty Tax Service in forming their belief that they had satisfied their tax reporting

obligations for 2010, 2011, and 2012, and for that reason, interest and penalty should be abated

as to all three years.

Despite the good faith intentions of the Taxpayers in this case, 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 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. v. N.M.

Oil Conservation Comm'n, 2009-NMSC-013, ¶22, 146 N.M. 24, 32 (use of the word “shall” in a

statute indicates the provision is mandatory absent clear indication to the contrary). The language of

the statute also makes it clear that interest begins to run from the original due date of the tax and

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

67 and must assess interest against Taxpayers from the time the tax was due but not paid until the

tax principal liability is satisfied. Therefore, the assessment of interest is mandatory and Department

is without legal authority to abate it despite the Taxpayers’ good faith intentions.

With concern for penalty, 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,

NMSA 1978 Section 7-1-69 (2007) requires that

there shall be added to the amount assessed a penalty in an amount equal
to the greater of: (1) two percent per month or any fraction of a month

In the Matter of the Protest of
Hilario Leos & Christina Luchetti-Leos and
C&R Nutritional Club
Page 6 of 12
from the date the tax was due multiplied by the amount of tax due but not
paid, not to exceed twenty percent of the tax due but not paid.

(italics added for emphasis).

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 meet the legal definition of

“negligence” even if, like here, Taxpayers actions or inactions were unintentional.

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.” In this

case, Taxpayers were negligent under Regulation 3.1.11.10 (A), (B) & (C) NMAC in 2010, 2011,

and 2012 because of their inaction in failing to pay gross receipts tax when due resulting from their

erroneous belief that the income derived from their business venture did not give rise to gross

receipts tax obligations.

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 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 (D) NMAC (emphasis added) allows for abatement of penalty

when a “taxpayer proves that the failure to pay a tax… was caused by reasonable reliance on the

advice of competent tax counsel or accountant as to the taxpayer’s liability after full disclosure

of all relevant facts.” Black’s Law Dictionary, 22 (9th ed. 2009), defines “accountant” as “a

person authorized under applicable law to practice public accounting.”

In the Matter of the Protest of
Hilario Leos & Christina Luchetti-Leos and
C&R Nutritional Club
Page 7 of 12
Here, Taxpayers relied on the advice of Yolanda Chavez of Loyalty Tax Service to assist

them in satisfying their tax obligations. However, there was no evidence that Ms. Chavez was a

competent accountant as that term is utilized in Regulation 3.1.11.11 (D) NMAC. There was no

evidence presented to suggest that Ms. Chavez is a CPA or other licensed accounting

professional through the State of New Mexico Regulation and Licensing Department, nor is there

any indication that Ms. Chavez identifies herself as a CPA on her letterhead or the signature line

of her letter to the Department. [Department Ex. D]. Ms. Chavez did not appear to testify, and

her letter admitted into the record as part of Taxpayers’ protest in Department Ex. D is silent as

to her credentials. Taxpayers made no separate inquiry into Ms. Chavez’s credentials and simply

assumed she was qualified based on the fact that she held herself out as providing a tax service.

Despite Taxpayers’ sincerity, they were not diligent in determining whether Ms. Chavez

was qualified, credentialed, or competent in the area of New Mexico gross receipts tax. Because

tax preparers are not a licensed or regulated industry in New Mexico, without more specific

information about Ms. Chavez’ particular credentials, there is insufficient evidence on this record

to make a competency determination.

Although Decisions and Orders of the Administrative Hearings Office and its

predecessor, the Administrative Hearings Bureau, are not precedential, one previous Decision

and Order of the Hearings Bureau is highly persuasive in this matter given its similar facts. In the

Matter of the Protest of Red Mesa Construction, No. 03-03, the taxpayer had no knowledge

about the qualifications of the accounting service it used but assumed that the accounting service

was competent simply because the accounting service held itself out as a tax preparer. In

rejecting that taxpayer’s claim for abatement of civil negligence penalty in that matter, the

hearing officer stated that “[a] taxpayer’s reliance on a tax professional must be active and
In the Matter of the Protest of
Hilario Leos & Christina Luchetti-Leos and
C&R Nutritional Club
Page 8 of 12
informed—not passive and unaware—in order to support a finding that the taxpayer’s failure to

pay tax was not negligent…” In other words, without actively investigating the person’s base of

competency, a taxpayer cannot determine whether the person is “competent” or whether it is

“reasonable” to rely on the advice of that person for the purposes of Regulation 3.1.11.11 (D)

NMAC.

That logic extends to the facts of this protest: without some active consideration of Ms.

Chavez’s qualifications and competency, it was not “reasonable” for Taxpayers to rely

exclusively on her in assuming that they had satisfied their tax obligations under the Gross

Receipts and Compensating Tax Act. Therefore, Regulation 3.1.11.11 (D) NMAC does not

provide a basis to abate penalty in this matter.

Moreover, without evidence of a detailed consultation with Ms. Chavez about the nature

of their business, her credentials, and her experience with the New Mexico Gross Receipts and

Compensating Tax Act, Taxpayers did not demonstrate that they made a mistake of law in good

faith and on reasonable grounds under Section 7-1-69 (B). See C & D Trailer Sales v. Taxation

and Revenue Dep’t, 1979-NMCA-151, ¶8-9, 93 N.M. 697 (penalty upheld where there was no

evidence that the taxpayer “relied on any informed consultation” in deciding not to pay tax).

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. Generally, a taxpayer

cannot “abdicate this responsibility merely by appointing an accountant as its agent in tax matters.”

El Centro Villa Nursing Center v. Taxation and Revenue Department, 1989-NMCA-070, ¶14, 108

N.M. 795. Although the task may seem formidable, the Department provides a variety of

publications available at no cost intended to provide general guidance on various topics, including
In the Matter of the Protest of
Hilario Leos & Christina Luchetti-Leos and
C&R Nutritional Club
Page 9 of 12
gross receipts taxes. See FYI-105 Gross Receipts & Compensating Taxes: An Overview at

www.tax.newmexico.gov/forms-publications.aspx.

The Department did not allege that the Taxpayer’s inaction was with the intent to evade or

defeat a tax. In contrast, there was no dispute that the issue giving rise to this protest was the

result of Taxpayer’s inadvertence, erroneous belief, or inattention. In other words, Taxpayers

conduct was not in bad faith or with bad intentions. Yet, El Centro Villa Nursing established that

the civil negligence penalty is appropriate for inadvertent error and Regulation 3.1.11.11 (D)

NMAC does not provide grounds for abatement of the penalty in this case. Therefore, Taxpayers

have not overcome the presumption of correctness and failed to establish that they are entitled to

an abatement of penalty in this matter.

As previously discussed, Taxpayers’ intentions when presenting their protest were to seek

abatement of interest and penalty with respect to 2010, 2011, and 2012. However, the reporting

periods for 2010 and 2011 were subject of the Short Term Payment Plans. Consequently, the

Department asserted the contractual provisions of the Short Term Payment Plans precluded protest

of principal, interest, or penalty for those years.

The Hearing Officer declines to make a finding on the question of whether Taxpayers can

withdraw from the Short Term Payment Plans because such ruling is moot in light of the

substantive analysis above. That is, Taxpayers failed to establish any substantive basis to allow

abatement of penalty and interest for any of the years in which they sought relief. Moreover,

having already determined that the Taxpayers are not entitled to abatement of interest or penalty,

permitting the Short Term Payment Plans to be set aside as Taxpayers suggest would not provide

the relief they desire. In contrast, Taxpayers would forfeit the benefits of the Short Term Payment

Plans while remaining liable for the unpaid principal, interest, and penalty now subject of the
In the Matter of the Protest of
Hilario Leos & Christina Luchetti-Leos and
C&R Nutritional Club
Page 10 of 12
plans. This could create a scenario that is more detrimental, rather than beneficial, to Taxpayers’

interests.

Taxpayers are therefore liable for the assessed penalty and interest for 2012 and shall

continue to adhere to the terms and conditions provided in the Short Term Payment Plans

addressing 2010 and 2011. Taxpayers’ protest is denied.

CONCLUSIONS OF LAW

A. Taxpayers filed a timely written protest to the assessments issued under Letter ID

Nos. L1112215088 and L1011551792 and jurisdiction lies over the parties and the subject matter

of this protest.

B. The hearing on the merits conducted on November 30, 2016 met the 90-day

hearing requirement of NMSA 1978, Section 7-1B-8(A) (2015).

C. Pursuant to NMSA 1978, Section 7-1-17(C) (2007), the Department’s assessment

is presumed to be correct, and it is Taxpayers’ burden to come forward with evidence and legal

argument to establish that they were entitled to an abatement.

D. Under Section 7-1-67, Taxpayers are liable for interest under the assessments.

E. Taxpayers were negligent in failing to report gross receipts and pay gross receipts

taxes when due for the tax years covered by the assessments. Consequently, the assessment of

penalty was proper.

F. The Taxpayers failed to establish non-negligence under 3.1.11.11 (D) NMAC and

El Centro Villa Nursing Center v. Taxation and Revenue Department, 1989-NMCA-070, ¶14, 108

N.M. 795; therefore, penalty was properly assessed.

In the Matter of the Protest of
Hilario Leos & Christina Luchetti-Leos and
C&R Nutritional Club
Page 11 of 12
G. As of the date of hearing, the outstanding amounts in protest for 2012 were

$359.02 in interest, and $573.62 in penalty, for a total amount of $932.64.

H. The amounts due for 2010 and 2011 are established in the Short Term Payment

Plans.

For the foregoing reasons, Taxpayers’ protest IS DENIED.

DATED: December 16, 2016

Chris Romero
Hearing Officer
Administrative Hearings Office
Post Office Box 6400
Santa Fe, NM 87502

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
Hilario Leos & Christina Luchetti-Leos and
C&R Nutritional Club
Page 12 of 12