Was Louie Casias personally liable for Casias Trucking's tax lien after forming an LLC but never closing the sole-proprietor CRS account or registering the LLC?

Plain-English summary

Louie Casias remained personally liable for Casias Trucking's tax debt because the business stayed registered as his sole proprietorship. Forming Casias Trucking, LLC and occasionally adding “LLC” to documents did not transfer the Department account or tax obligations.

Casias registered Casias Trucking as a sole proprietorship in 1995 under a CRS number tied to his name and Social Security number. He formed an LLC in 2003 with CPA assistance but continued using the same CRS account.

The Department later audited the trucking business, assessed $526,533.25, and treated it as a sole proprietorship. Casias protested, then withdrew the protest after the Department agreed to an abatement of $270,677.45. The withdrawal stated that liability for the audited periods was conclusive and could not be protested again.

After further adjustments and accruals, the Department issued a tax lien in Casias's individual name. As of the March 2017 hearing, the balance was:

• $156,333.39 tax;
• $83,494.81 penalty; and
• $44,623.32 interest.

The total was $284,451.52.

The Department account never became an LLC account

The Department's entity-conversion process required a Business Tax Registration Update, closure of the existing account, opening a new account for the converted entity, and assignment of a new CRS number.

Casias could not recall whether he or his CPA filed the update. The CRS number never changed, and the Department continued to identify the taxpayer as a sole proprietor.

There was also no evidence showing which assets, rights, obligations, or liabilities transferred from the sole proprietorship to the LLC. In particular, nothing showed that the LLC assumed responsibility for New Mexico tax reporting and payment.

Sporadic “LLC” labels did not transfer liability

Casias produced some invoices, payment records, an NTTC, and return forms using the LLC designation. But other returns, tax payments, checks, NTTCs, federal Schedules C, the audit protest, and the later withdrawal omitted it.

The AHO found that occasionally adding “LLC” to the old business name did not close the sole-proprietor account, register a different taxpayer, or shift the debt. Data-entry staff's acceptance of returns bearing that label did not establish an entity conversion.

LLC protection did not cover Casias's own sole-proprietor debt

Section 53-19-13 generally made LLC debts the LLC's obligations, not a member's merely because of membership.

But the AHO found that this tax debt was never the LLC's debt. Casias incurred it personally as the registered sole proprietor. The statute also did not immunize a person from liability for that person's own acts or omissions.

The decision used novation principles as an analogy: substituting the LLC for Casias would have required agreement among the affected parties. The Department never agreed to discharge the sole proprietor and substitute the LLC.

Reliance on a CPA did not excuse Casias's failure to update the registration. The CPA did not testify, and a taxpayer could not transfer responsibility for learning and satisfying tax obligations merely by appointing an accountant.

The withdrawn protest made the assessment final

Casias also tried to challenge the underlying audit and penalty through the lien protest. The AHO held that the earlier withdrawal barred another protest because Casias had accepted conclusive liability for the audited periods.

Even without the withdrawal language, a new assessment protest filed more than three years later would have been untimely.

Result: protest DENIED. The lien met statutory requirements, and Casias remained personally liable for $284,451.52 as of the hearing.

What this means for you

Sole proprietors forming an LLC

Entity formation alone does not update New Mexico tax registration. Follow the Department's account-closing and new-registration process and retain proof of the effective change.

Businesses using an old CRS number after conversion

Using “LLC” on selected documents does not necessarily change who the registered taxpayer is. Make the entity name, CRS account, federal reporting, contracts, bank accounts, and tax filings consistent.

Taxpayers settling or withdrawing a protest

Read the finality language carefully. Casias's withdrawal made liability conclusive and prevented him from reopening the audit when the Department later filed a lien.

Common questions

Q: Did Casias legally form an LLC?
A: Yes, in 2003. The problem was that he did not prove the Department account or tax obligations were transferred to it.

Q: Why was the lien issued in Casias's name?
A: The Department's records showed Casias Trucking as his sole proprietorship, and a sole proprietor is personally responsible for the business debt.

Q: Did putting “LLC” on returns notify the Department sufficiently?
A: No. The required registration update, account closure, new account, and new CRS number did not occur.

Q: Could CPA reliance protect Casias?
A: No. The decision held that he remained responsible for determining and satisfying the tax consequences of his actions.

Q: Could he challenge the original assessment during the lien protest?
A: No. His earlier withdrawal made the liability conclusive, and a new assessment protest would also have been untimely.

Q: What balance did the AHO uphold?
A: $284,451.52 as of March 15, 2017.

Citations and references

Statutes and regulation:

• NMSA 1978, § 53-19-13 — LLC debts and limits on member liability
• NMSA 1978, § 7-1-24 — assessment protest deadline
• NMSA 1978, §§ 7-1-21 and 7-1-38 — collection authority and tax liens
• Regulation 3.1.1.15(A)(1) NMAC — taxpayer registration and identification systems

Cases cited:

• Beebe v. Fouse, 27 N.M. 194 (1921) — novation requires mutual agreement to substitute an obligation or party
• Tiffany Construction Co. v. Bureau of Revenue, 1976-NMCA-127 — taxpayer's duty to determine tax consequences
• El Centro Villa Nursing Center v. Taxation & Revenue Department, 1989-NMCA-070 — accountant appointment does not eliminate taxpayer responsibility

Source

• Listing: New Mexico Decisions & Orders
• Decision post: Louie Casias
• Decision PDF: D&O 17-25

Original ruling text

STATE OF NEW MEXICO
ADMINISTRATIVE HEARINGS OFFICE
TAX ADMINISTRATION ACT

IN THE MATTER OF THE PROTEST OF
LOUIE CASIAS No. 17-25
TO NOTICE OF CLAIM OF TAX LIEN ISSUED UNDER LETTER
ID NO. L1687629360

DECISION AND ORDER

A formal hearing in the above-referenced protest was held March 15, 2017, before Chris

Romero, Hearing Officer, in Santa Fe, New Mexico. The Taxation and Revenue Department

(Department) was represented by Mr. Richard Pener, Staff Attorney. Ms. Veronica Galewaler,

Auditor, appeared and testified on behalf of the Department. Taxpayer Louie Casias (Taxpayer)

appeared in person and was represented by Mr. Wayne G. Chew (counsel). The Hearing Officer

took notice of all documents in the administrative file. Taxpayer Exhibits 1 – 8 and Department

Exhibits A – G, and I – FF were admitted. Although admitted, the Hearing Officer gave no

weight to Department Exhibits P and Q finding that there was insufficient foundation upon

which to find that the information contained therein was trustworthy and reliable. The

Department and the Taxpayer filed written closing arguments and the record closed on April 17,

2017. Based on the evidence and arguments presented, IT IS DECIDED AND ORDERED AS

FOLLOWS:

FINDINGS OF FACT

1. In or about 1986, Taxpayer began a trucking business which he called Casias

Trucking. [Testimony of Mr. Casias].

2. Taxpayer registered Casias Trucking with the Department on or about February 8,

3. Casias Trucking was assigned CRS No. 02-274438-00-0. The business was registered as
   the sole proprietorship of Taxpayer and associated with Taxpayer’s name and social security

number. [Testimony of Ms. Galewaler; Dept. Exs. K; M].

3. In 2003, Taxpayer established Casias Trucking, LLC (“LLC”). The LLC was

established with the advice and assistance of Taxpayer’s certified public accountant. Taxpayer

was the sole member of the LLC. [Testimony of Mr. Casias; Taxpayer Ex. 1].

4. At all relevant times, the Department had a process for assigning new CRS

numbers for taxpayers converting from one form of business entity to another. The process

required that the Taxpayer submit a Business Tax Registration Update form. The process then

required that the business close its existing account and open a new account as the converted

entity at which time the business received a new CRS number. Adherence to the required

procedure was necessary for Taxpayer to update its registration to reflect a conversion from a

sole proprietorship to a limited liability company. [Testimony of Ms. Galewaler; Dept. Ex. L].

5. CRS numbers do not change unless the Department recognizes a modification to

the business entity utilizing its update process. The CRS number for Casias Trucking never

changed to reflect any conversion in business entity from the time of its initial registration

through the dates at issue in the protest. Therefore, at all relevant times, Taxpayer was registered

as a sole proprietor. [Testimony of Ms. Galewaler].

6. Taxpayer relied wholly on his CPA to maintain books and records and prepare all

necessary documents, including tax returns and reports for Taxpayer’s business activities.

Taxpayer’s reliance extended to the submission of any necessary documents to effectuate a

business tax registration update stemming from the conversion of his business from a sole

proprietorship to an LLC. [Testimony of Mr. Casias].

In the Matter of the Protest of Louie Casias
Page 2 of 17

7. Taxpayer had no recollection of whether or not he or his CPA ever submitted a

Business Tax Registration Update to the Department. [Testimony of Mr. Casias].

8. Taxpayer could not recall whether, or to what extent, business assets may have

been transferred from his sole proprietorship to his LLC. [Testimony of Mr. Casias].

9. At all relevant times, Taxpayer’s business was engaged in the intrastate

transportation of road construction materials including sand, gravel, and asphalt. [Testimony of

Mr. Casias].

10. Beginning in 2003, Taxpayer began to make inconsistent representations

regarding the legal entity of his business. Taxpayer provided a handful of examples of

transactions where his business was acknowledged as an LLC, or represented itself as an LLC by

use of the “LLC” designation. [Testimony of Mr. Casias; Taxpayer Exs. 2; 3; 4; 5; 6].

11. Examples provided were: a receipt for payment made for goods or services dated

December 14, 2006 [Taxpayer Ex. 2]; an invoice for services provided by Taxpayer’s CPA on

October 31, 2006 [Taxpayer Ex. 3]; copy of payment voucher to Taxpayer by Lafarge Southwest

Inc. on November 1, 2012 [Taxpayer Ex. 4.1; 4.3]; copy of an invoice to Taxpayer from

Caterpillar Financial Services Corporation dated November 20, 2008 [Taxpayer Ex. 4.2]; sales

order forms from Utility Trailer Interstate dated May 25, 2008 and February 8, 2008 [Taxpayer

Ex. 5.1; 5.2]; a Nontaxable Transaction Certificate issued June 12, 2003 [Taxpayer Ex. 6]; and a

sample of New Mexico Weight Distance Tax and New Mexico Gross Receipts Tax return forms

[Taxpayer Ex. 7].

12. To the extent a revenue processing agent would have received a return or payment

displaying an LLC designation, the revenue processing agent would be unlikely to conduct any

In the Matter of the Protest of Louie Casias
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follow up because that agent’s primary responsibility is data entry consisting of keying in the

CRS number, return information, and payment information. [Testimony of Ms. Galewaler].

13. In contrast, there were also several examples of how the Taxpayer did not

represent his business as an LLC as seen in various submissions to the Department, including

returns, reports, and payments to the Department. Examples in which the Taxpayer failed to

utilize an LLC designation included New Mexico Weight Distance Tax returns, CRS-1 returns,

and checks to the Department for payment of taxes due. [Testimony of Mr. Casias; Dept. Exs. O;

R; S; T; U; V; W; X; Y; Z; AA; BB; CC; DD; and EE.].

14. Various Nontaxable Transaction Certificates executed to the Taxpayer also

omitted the LLC designation. [Testimony of Mr. Casias; Dept. Ex. O].

15. Taxpayer’s CPA prepared Taxpayer’s federal income tax returns, including

Taxpayer’s Schedules C for tax years 2006 – 2010. Those Schedule Cs omitted any reference to

Taxpayer’s business as an LLC. [Testimony of Mr. Casias; Taxpayer Ex. 8].

16. In a previous administrative proceeding involving Taxpayer and the Department

held March 6 and 7, 2012, a finding was made in the Decision and Order (No 12-24) that Mr.

Louie Casias was the sole owner and proprietor of Casias Trucking. [Dept. Ex. I].

17. The Department audited Taxpayer’s business in reference to the reporting and

payment of gross receipts tax. The audit began on December 20, 2011 and concluded on January

17, 2013. [Testimony of Mr. Casias; Testimony of Ms. Galewaler; Dept. Ex. G].

18. The audit identified Taxpayer’s business as a sole proprietorship. This was

consistent with the manner in which the Taxpayer registered with the Department to conduct

business. [Testimony of Ms. Galewaler; Dept. Ex. G].

In the Matter of the Protest of Louie Casias
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19. The Department issued an assessment in the amount of $526,533.25 on June 24,

2013 under Letter Id. No. L0500699600. [Testimony of Ms. Galewaler; Dept. Ex. C]. The

assessment was addressed to Casias Trucking and did not contain an LLC designation. [Dept.

Ex. C].

20. Taxpayer filed, by and through his attorney, a protest to the assessment under

Letter Id. No. L0500699600. Taxpayer’s CRS number as provided in the protest was 02-274438-

00-0. The protest referred to the Taxpayer as Casias Trucking and omitted any reference to the

LLC. [Testimony of Mr. Casias; Dept. Ex. E].

21. The protest to the assessment issued under Letter Id. No. L0500699600 was

withdrawn on or about June 4, 2014, by and through, Taxpayer’s attorney, with Taxpayer’s

authorization. Taxpayer’s CRS number, as provided on the withdrawal was 02-274438-00-0. The

withdrawal referred to the Taxpayer as Casias Trucking and omitted any reference to the LLC.

[Testimony of Mr. Casias; Dept. Ex. F; N].

22. Prior to the withdrawal, or as a condition thereof, the original assessment was

reduced from $526,533.25 to $271,596.15. [Dept. Exs. C; D]. The reduction represented the

amount of an abatement of $270,677.45. The remaining amount due after the abatement was

$255,855.80. [Testimony of Ms. Galewaler; Dept. Ex. N].

23. In withdrawing the protest, Taxpayer agreed that the withdrawal represented

conclusive liability for the taxes for the periods ending March 2006 through September 2011 and

Taxpayer agreed that he could not further protest taxes for the periods at issue. [Testimony of

Galewaler; Dept. Ex. F].

24. Taxpayer ceased business operations in or about 2014. [Testimony of Mr. Casias].

In the Matter of the Protest of Louie Casias
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25. On August 22, 2016, the Department issued a Notice of Claim of Tax Lien under

Letter ID No. L1687629360. The notice asserted a total amount due of $271,596.15 that

consisted of $156,384.39 in tax, $82,328.81 in penalty, and $32,882.95 interest stemming from

the assessment under Letter ID. No. L0500699600, adjusted for abatements, credits, and accrual

of interest and penalty. [Dept. Ex. D].

26. The lien was issued in the name of Louie Casias rather than Casias Trucking.

When a lien is issued for taxes due from a sole proprietorship, it is issued in the name of the

individual rather than the name under which the individual did business. [Testimony of Ms.

Galewaler].

27. Taxpayer, by and through his attorney, filed a protest of the Notice of Tax Lien

under Letter ID No. L1687629360. The protest bears the date of September 30, 2016. [Dept. Ex.

A].

28. Taxpayer’s protest was acknowledged by the Department on October 7, 2016

under Letter ID. No. L1821474352.

29. The Department submitted a Hearing Request to the Administrative Hearings

Office on November 22, 2016.

30. On November 23, 2016, the Administrative Hearings Office entered a Notice of

Telephonic Scheduling Conference setting a scheduling conference to occur on December 9,

2016.

31. On December 9, 2016, the Administrative Hearings Office entered a Scheduling

Order and Notice of Administrative Hearing which established various deadlines and set a

hearing on the merits for March 15, 2017.

In the Matter of the Protest of Louie Casias
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32. The parties did not object that the Scheduling Hearing of December 9, 2016

satisfied the 90-day hearing requirement.

33. On December 21, 2016, the Department filed a Certificate of Service.

34. On February 7, 2017, the Department filed its Preliminary Witness and Exhibit

List.

35. On February 9, 2017, the Department filed its Motion to Extend Time for

Completion of Discovery and Filing Motions and Motion to Compel Responses to Discovery.

36. On February 21, 2017, the Administrative Hearings Office entered an Order

Granting Motion to Compel and Extending Discovery and Motions Deadlines.

37. On February 28, 2017, Taxpayer filed a Certificate of Service.

38. On March 8, 2017, Taxpayer filed his Preliminary Witness and Exhibit List.

39. On March 8, 2017, the Department filed its portion of a Prehearing Statement.

40. On March 13, 2017, the parties filed a Joint Prehearing Statement.

41. A hearing on the merits occurred on March 15, 2017 at 1 p.m.

42. On March 31, 2017, the Department filed its timely Motion to Dismiss Protest

and Closing Argument.

43. On April 17, 2017, the Taxpayer filed an untimely Response to Motion to Dismiss

Protest and Closing Argument. The Hearing Officer nevertheless considered the Taxpayer’s

position and arguments despite its untimely filing.

44. As of March 15, 2017, Taxpayer’s liability was $156,333.39 in tax, $83,494.81 in

penalty, and $44,623.32 in interest for a total of $284,451.52. [Testimony of Ms. Galewaler;

Dept. Ex. FF].

In the Matter of the Protest of Louie Casias
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DISCUSSION

The issues in this protest are whether Taxpayer is personally responsible for the tax

liability of his business, and to what extent the Taxpayer may protest the assessment that was

subject of a previous protest and withdrawal.

Personal Liability for Taxes Due

Taxpayer asserted that he should not be personally liable for the tax liability of his

business, Casias Trucking, or Casias Trucking, LLC, because responsibility for the liability rests

solely with the limited liability company he formed in 2003. [Taxpayer Ex. 1]. Although there

may be various benefits to operating a business through a limited liability company, the primary

benefit Taxpayer seeks in the present matter derives from NMSA 1978, Sec. 53-19-13 which

provides:

Except as otherwise provided in the Limited Liability Company
Act, the debts, obligations and liabilities of a limited liability
company, whether arising in contract, tort or otherwise, shall be
solely the debts, obligations and liabilities of the limited liability
company. No member or manager of a limited liability company
and no other person with authority pursuant to the Limited
Liability Company Act to wind up the business or affairs of the
limited liability company following its dissolution, shall be
obligated personally for any debt, obligation or liability of the
limited liability company solely by reason of being a member or
manager of the limited liability company or having authority
pursuant to the Limited Liability Company Act to wind up the
company's business and affairs following its dissolution. A person
may be liable for any act or omission performed in his capacity as
a manager of a limited liability company if there is a basis for
liability. Nothing in this section shall be construed to immunize
any person from liability for the consequences of his own acts or
omissions for which he otherwise may be liable. (Emphasis added)

In this case, the Taxpayer organized Casias Trucking, LLC in 2003. The evidence

suggested the intent for Casias Trucking, LLC to assume the ownership and operation of Casias

In the Matter of the Protest of Louie Casias
Page 8 of 17
Trucking, the sole proprietorship. However, there was little evidence that Casias Trucking, LLC

fully assumed the assets, rights, obligations, or liabilities of Casias Trucking, the sole

proprietorship. For example, Taxpayer could not specify which, if any assets had ever transferred

from Casias Trucking, the sole proprietorship, to Casias Trucking, LLC. There was also no

evidence to establish any act by the LLC to assume any obligations or liabilities of Casias

Trucking, the sole proprietorship, including the responsibility of reporting and paying taxes to

the State.

In that regard, the Taxpayer registered his business with the Department as Casias

Trucking, a sole proprietorship, and was assigned a CRS number. Taxpayer then proceeded to

report and pay taxes under the assigned CRS number. At some point after establishing Casias

Trucking, LLC, the Taxpayer, without formally updating his registration, began sporadically

inserting in his tax returns the “LLC” designation behind the name of his business which he

claimed he then submitted to the Department. This was insufficient to transfer liability from

Casias Trucking, the sole proprietorship, to Casias Trucking, LLC.

The Department has established Regulation 3.1.1.15 (A) (1) NMAC that requires that the

secretary of the Department develop and maintain systems “for the registration and identification

of taxpayers who are subject to taxes and tax acts listed in Section 7-1-2 NMSA 1978 and

taxpayers shall comply therewith.” (Emphasis added). The use of the word “shall” as provided in

this regulation indicates that the provision is 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 provision is mandatory absent clear indication to the contrary).

At all relevant times, the Department had a process for assigning new CRS numbers

when taxpayers converted a business from one form of business entity to another, such as sole
In the Matter of the Protest of Louie Casias
Page 9 of 17
proprietorships to LLCs. The system required that the business close its existing account and

open a new account as the converted entity at which time the business would receive a new CRS

number. This would effectively obligate the new entity for reporting and payment of taxes.

In this protest, there was no evidence to establish that the Taxpayer attempted to comply

with the method required for updating its registration to reflect a conversion from Casias

Trucking, the sole proprietorship, to Casias Trucking, LLC. Rather, the Taxpayer merely inserted

the “LLC” designation behind the existing name of the sole proprietorship. Taxpayer never

closed the existing account or opened a new account designating Casias Trucking, LLC as the

taxpayer. Although, Taxpayer asserted that he provided notice of the LLC to the Department by

simply adding the “LLC” designation to a sample of his tax return filings, as illustrated in

Taxpayer Ex. 7, the Hearing Officer was not convinced that notice alone, in the manner

provided, was sufficient to shift a tax liability from Casias Trucking to Casias Trucking, LLC.

Moreover, although the records contained in Taxpayer Exhibit 7 utilize the LLC

designation throughout, the Hearing Officer noted that none of the exhibits are signed. The

absence of a signature is notable because taxpayers are required to declare that the return is

signed under penalty of perjury and that the person signing the return has examined it and

affirms that it is correct and complete to the best of the signor’s knowledge.

In contrast, the Department has also provided returns with copies of checks. Those

records illustrate that from September of 2003 through January of 2007, the Taxpayer continued

to submit returns and payments to the Department as Casias Trucking, minus the LLC

designation, under the same CRS number as Casias Trucking, the sole proprietorship. The

Taxpayer also submitted payments to the Department on checks indicating that the check was

drawn on the account in Taxpayer’s individual name, with the added notation “DBA Casias
In the Matter of the Protest of Louie Casias
Page 10 of 17
Trucking”. Although not all such documents overlap with the periods subject of the audit, the

documents do illustrate how Taxpayer represented itself to the Department in the years following

the establishment of Casias Trucking, LLC.

Taxpayer correctly pointed out the language in NMSA 1978, Sec. 53-19-13 which

provides that “the debts, obligations and liabilities of the limited liability company…shall be

solely the debts, obligations and liabilities of the limited liability company” and that “[n]o

member of the limited liability company…shall be obligated personally for any debt, obligation

or liability of the limited liability company[.]”

However, the evidence fails to establish that the tax obligation at issue in this protest was

that of Casias Trucking, LLC. Rather, the evidence established that Casias Trucking, the sole

proprietorship, incurred the obligation to report and pay taxes in New Mexico when it registered

to do business on February 8, 1995, and there was never any update to the Taxpayer’s

registration that would have effectively substituted the LLC for the sole proprietorship. In other

words, the liability for which the Mr. Casias now seeks personal immunity was not incurred by

the LLC. Rather, the liability was incurred by Mr. Casias as the sole proprietor of Casias

Trucking. There was a lack of evidence upon which to find that the LLC incurred Mr. Casias’

personal tax obligation.

Although neither Taxpayer nor the Department refer to the legal concept of novation, it is

instructive in this case. The Court in Beebe v. Fouse, 27 N.M. 194, 196 (1921) stated “[a]

novation, then, as understood in modern law, is a mutual agreement, between all parties

concerned, for the discharge of a valid existing obligation by the substitution of a new valid

obligation on the part of the debtor or another, or a like agreement for the discharge of a debtor

to his creditor by the substitution of a new creditor.”
In the Matter of the Protest of Louie Casias
Page 11 of 17
In this case, Taxpayer established a relationship with the Department in which it was

mutually agreed that in exchange for the privilege of doing business in New Mexico, Taxpayer

would report and pay applicable taxes. The taxpayer was Mr. Casias as sole proprietor of Casias

Trucking. The Department assented by virtue of assigning the Taxpayer with a unique CRS

number under which returns and payments would be made. Casias Trucking, LLC was not a

party to this arrangement because it did not exist.

Taxpayer essentially asserts that a novation occurred because Casias Trucking, LLC

substituted for Casias Trucking, the sole proprietorship. However, novation requires more than

what the Taxpayer provided in this scenario. Novation requires the mutual agreement, between

all parties concerned, for the discharge of a valid existing obligation by the substitution of a new

valid obligation on the part of the debtor or another. The evidence failed to demonstrate any

agreement by the Department for Casias Trucking, LLC to substitute for Casias Trucking, the

sole proprietorship, for any tax reporting or payment obligations arising from Taxpayer’s

business activities.

Accordingly, the Hearing Officer was not persuaded that Casias Trucking, LLC incurred

the liabilities or obligations of Casias Trucking, the sole proprietorship. Therefore, the Hearing

Officer must refer to the final sentence of the statute upon which the Taxpayer relies. The last

sentence of NMSA 1978, Sec. 53-19-13 provides that “[n]othing in this section shall be

construed to immunize any person from liability for the consequences of his own acts or

omissions for which he otherwise may be liable.” In this case, Taxpayer personally incurred the

tax liability of Casias Trucking, the sole proprietorship, and NMSA 1978, Sec. 53-19-13 does not

immunize him from personal liability.

In the Matter of the Protest of Louie Casias
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Taxpayer claims that he relied heavily on the advice of his certified public accountant

who was not called upon to testify in this matter. However, that reliance cannot excuse

Taxpayer’s inaction in taking appropriate steps to assure that it was Casias Trucking, LLC that

incurred state tax liability for the privilege of doing business in New Mexico, rather than Casias

Trucking, the sole proprietorship. It is the Taxpayer’s duty under Tiffany Const. Co., Inc. v.

Bureau of Revenue, 1976-NMCA-127, 90 N.M. 16, to ascertain the tax consequences of his

actions. A taxpayer cannot “abdicate this responsibility [to learn of tax obligations] 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.

Protest of underlying assessment is precluded under the terms of withdrawal

The second issue Taxpayer asserted was that he is entitled to protest the underlying audit

and assessment, including penalty, because the withdrawal on the previous protest was effective

only as to Casias Trucking, LLC.

The evidence established that Casias Trucking, the sole proprietorship, was audited for

the period between January 1, 2006 and September 30, 2011. The audit resulted in an assessment

of $526,533.25 for the periods from March 31, 2006 to September 30, 2011. The assessment was

addressed to Casias Trucking, the sole proprietorship, and the Taxpayer protested the

assessment. The protest was ultimately resolved without the need for a hearing. Taxpayer

withdrew the protest with the Department agreeing to abate more than 50 percent of the

assessment in the amount of $270,677.45.

The Taxpayer withdrew the protest and agreed that the withdrawal was conclusive as to

the liability for taxes and acknowledged that another protest could not be filed for the years at

issue. Taxpayer made no claims at the time that Casias Trucking, LLC should be responsible for
In the Matter of the Protest of Louie Casias
Page 13 of 17
the tax liability in lieu of Taxpayer in his personal capacity as sole proprietor of Casias Trucking.

The audit clearly referred to Casias Trucking as a sole proprietorship. It made no reference to

Casias Trucking, LLC.

Both the Taxpayer’s protest and withdrawal reference Casias Trucking, not Casias

Trucking, LLC. Although Taxpayer might view the omission of the LLC designation as

insignificant, it is also the Taxpayer who urges the Hearing Officer to give significant weight to

its use in various tax returns filed with the Department. It is illogical that the Hearing Officer

should give weight to Taxpayer’s use of the LLC designation for one purpose, but then disregard

the absence of the LLC designation for other purposes.

The Hearing Officer was persuaded that the underlying audit, assessment, protest, and

withdrawal, were in reference to Casias Trucking, the sole proprietorship, not the LLC.

Accordingly, it was appropriate for the Notice of Claim of Tax Lien to be issued to Mr. Casias. If

Taxpayer intended to assert that the LLC was the actual party in interest, then it was incumbent

on the Taxpayer to address that issue at the time it arose. Rather, Taxpayer remained silent for

years until the Department commenced efforts to collect the outstanding tax liability. Only then,

did the Taxpayer claim, as if it had always been evident, that the real party in interest was the

LLC.

Mr. Casias’ effort to re-protest the assessment, including penalty, is precluded by the

terms and conditions of the withdrawal. Even if the withdrawal were silent on the Taxpayer’s

right to protest, the protest would still be untimely more than three years following the Notice of

Assessment of Taxes and Demand for Payment. See NMSA 1978, Section 7-1-24. Whether

referring to Casias Trucking, the sole proprietorship, or Casias Trucking, LLC, Mr. Casias, in his

In the Matter of the Protest of Louie Casias
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capacity as sole proprietor or member of the LLC, had actual notice of the assessment against

Casias Trucking at the time it was issued.

The Hearing Officer was persuaded that Mr. Casias, as sole proprietor of Casias

Trucking, was the appropriate individual identified in the Notice of Claim of Tax Lien. As sole

proprietor, Mr. Casias, is solely liable for the debts of the business because there is no legal

distinction between the sole proprietorship and its owner. “The universal rule is that the sole

proprietor is personally responsible for the activities of the business.” Georgantas v. Country

Mut. Ins. Co., 570 N.E.2d 870, 873 (Ill.App. 1991).

The Taxpayer’s protest should be denied. Taxpayer’s outstanding liability as of March

15, 2017 was $156,333.39 in tax, $83,494.81 in penalty, and $44,623.32 in interest for a total of

$284,451.52.

CONCLUSIONS OF LAW

1. The Taxpayer filed a timely written protest to Notice of Claim of Tax Liens issued

under Letter ID Nos. L1687629360, and jurisdiction lies over the parties and the subject matter of

this protest.

2. A hearing was timely held in accordance with NMSA 1978, Sec. 7-1B-8 (A).

3. The Taxpayer is precluded from protesting the audit or assessment underlying the

Notice of Claim of Tax Lien under Letter ID Nos. L1687629360 by virtue of withdrawing his

previous protest in which he admitted conclusive tax liability.

4. The Taxpayer did not satisfy the terms of his protest withdrawal and the Department

was authorized to enforce collection. See NMSA 1978, Sec. 7-1-21; NMSA 1978 Sec. 7-1-38.

5. The Notice of Claim of Tax Lien satisfied the statutory requirements of NMSA

1978, Sec. 7-1-38.
In the Matter of the Protest of Louie Casias
Page 15 of 17
For the foregoing reasons, the Taxpayer's protest is DENIED.

DATED: May 30, 2017

Chris Romero
Hearing Officer
Administrative Hearings Office
P.O. Box 6400
Santa Fe, NM 87502

NOTICE OF RIGHT TO APPEAL

Pursuant to NMSA 1978, Section 7-1-25 (2015), 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. If an appeal is not timely filed with the Court of Appeals within 30 days, this

Decision and Order will become final. Rule of Appellate Procedure 12-601 NMRA articulates

the requirements of perfecting an appeal of an administrative decision with the Court of Appeals.

Either party filing an appeal shall file a courtesy copy of the appeal with the Administrative

Hearings Office contemporaneous with the Court of Appeals filing so that the Administrative

Hearings Office may begin preparing the record proper. The parties will each be provided with a

copy of the record proper at the time of the filing of the record proper with the Court of Appeals,

which occurs within 14 days of the Administrative Hearings Office receipt of the docketing

statement from the appealing party. See Rule 12-209 NMRA.

In the Matter of the Protest of Louie Casias
Page 16 of 17
In the Matter of the Protest of Louie Casias
Page 17 of 17