Could Pete’s Top Quality Landscape receive the reduced weight distance tax rate for one-way haulers based on testimony that at least half its truck miles were empty, without trip records?

Plain-English summary

Pete’s Top Quality Landscape did not prove that its trucks qualified for New Mexico's reduced weight distance tax rate for one-way haulers. Testimony estimating that at least half the miles were empty could not replace the required trip and mileage records.

The Department originally assessed $103,489.33 weight distance tax, $20,697.87 penalty, $28,696.85 interest, and a separate $4,000 underreporting penalty for periods from December 2003 through June 2009.

After offsets and additional accruals, the amount outstanding at the September 2017 hearing was $156,747.55, plus later interest.

The business regularly hauled landscape materials

Pete’s Top Quality Landscape installed landscaping and hauled sand, gravel, and other materials.

Owner Sandra Vigil testified that the company's trucks normally made one-way deliveries or pickups and were empty on the outgoing or return leg. She estimated that at least 50% of the miles were traveled without a load.

The trucks stayed within 150 miles of the business, so the company did not keep driver logs. It said it usually relied on fuel tickets to record mileage.

The reduced rate required at least 45% documented empty miles

Section 7-15A-6(B) reduced the ordinary weight distance tax to two-thirds when:

• the vehicle was customarily used for one-way hauling;
• at least 45% of its annual mileage was traveled empty of all load; and
• the owner made a sworn application, supplied information required by the Department, and obtained the classification.

Regulation 3.12.6.11 required vehicle-specific trip mileage records showing loaded and empty miles, plus itineraries with trip origins, destinations, and routes.

No supporting records were produced

The company presented no field tickets, fuel receipts, registrations, trip mileage records, itineraries, invoices, or other records proving loaded and empty mileage.

It submitted unsworn written statements from customers and vendors, but those people did not testify and the AHO questioned whether they had personal knowledge of the subject matter.

The audit itself had found that the company did not maintain vehicle-specific fuel statements capable of calculating loaded and empty miles.

The explanation for the missing records was not credible

Vigil testified that the company had given relevant records to the Department during the audit, failed to retain copies, and did not get them back.

But in sworn discovery responses only weeks before the hearing, the company identified invoices, fuel receipts, books, and vehicle mileage and weight records as exhibits and said they would be available for inspection at its place of business.

Counsel later said the requested documents would be submitted at the hearing. None were produced.

The AHO found those recent representations irreconcilable with the hearing testimony and concluded that the company simply did not maintain or possess records establishing the reduced rate.

The recordkeeping regulation was valid

The company argued that Regulation 3.12.6.11 imposed requirements beyond the statute.

The AHO rejected that argument. The Weight Distance Tax Act required taxpayers to preserve records for four years and authorized the Department to specify how mileage must be reported.

The regulation identified reasonable methods for substantiating loaded and empty miles and fell within the Department's statutory authority. It did not add an irrelevant condition or nullify the reduced rate.

A seven-year hearing delay did not cancel the liability

The company protested in August 2010, but the Department did not request a hearing until April 2017.

The AHO called the delay disconcerting but held that tardiness by public officers did not defeat tax enforcement. The company did not establish prejudice caused by the delay.

Because the audit found underreporting exceeding 25%, the Department had six years under Section 7-1-18(D) to assess. The June 8, 2010 assessment was timely, and collection was still within the applicable ten-year period.

Result: protest DENIED. At the hearing, Pete’s Top Quality Landscape owed $82,906.32 tax, $24,697.87 penalty, and $49,143.36 interest, totaling $156,747.55, plus later-accruing interest.

Text note: The final order prints the pre-offset penalty as “$26,602.12.96.” Finding 44 states $26,602.12, and the stated offset and final penalty use that amount. This summary follows the internally consistent finding and calculation.

What this means for you

One-way haulers

Track loaded and empty miles by vehicle. An owner's estimate or general description of normal routes is not a substitute for trip-level evidence.

Local carriers without federal driver logs

An exemption from keeping a particular driver log does not eliminate state tax records. Map mileage, odometer or hubometer readings, vehicle-specific logs, and itineraries were identified as possible proof.

Businesses supplying records in an audit

Retain copies of everything provided to the Department. Later claims about missing records may fail if pleadings, discovery answers, or the audit narrative contradict them.

Taxpayers with old pending protests

Document actual prejudice from delay. The passage of time alone did not erase a timely assessment or overcome the presumption that it was correct.

Common questions

Q: What empty-mile percentage was required?
A: At least 45% of the vehicle's mileage for the registration year.

Q: What did the owner estimate?
A: At least 50% of the company's truck miles were empty.

Q: Why was that estimate insufficient?
A: The company produced no reliable vehicle-specific records showing loaded and empty miles.

Q: What records could support the reduced rate?
A: Trip mileage records using map mileage, odometer or hubometer readings, or vehicle-specific logs, plus trip origins, destinations, and routes.

Q: Was the Department's recordkeeping regulation valid?
A: Yes. The AHO held it reasonably implemented statutory reporting and retention requirements.

Q: Did the seven-year delay void the assessment?
A: No. The assessment was timely, collection remained within the statutory period, and the company did not prove prejudice.

Q: How much remained due at the hearing?
A: $156,747.55, plus interest accruing after September 25, 2017.

Citations and references

Statutes and regulations:

• NMSA 1978, §§ 7-15A-3 and 7-15A-6(B) — weight distance tax and reduced one-way-hauler rate
• NMSA 1978, §§ 7-15A-8(B) and 7-15A-9(D) — mileage reporting and four-year record retention
• NMSA 1978, § 7-15A-16 — underreported mileage or weight penalty
• NMSA 1978, §§ 7-1-10, 7-1-17(C), 7-1-18(D), and 7-1-19 — records, assessment presumption, and limitations periods
• NMSA 1978, §§ 7-1-67 and 7-1-69 — interest and penalty
• NMSA 1978, § 9-11-6.2(A), (B)(1), and (G) — Department regulatory authority
• Regulations 3.12.6.7(A), 3.12.6.10, and 3.12.6.11 NMAC — empty miles, reporting, and required records
• Regulation 3.1.6.12 NMAC — unsubstantiated statements do not rebut an assessment

Cases cited:

• New Mexico Taxation & Revenue Department v. Casias Trucking, 2014-NMCA-099 — taxpayer must present countervailing evidence or legal argument
• MPC Ltd. v. New Mexico Taxation & Revenue Department, 2003-NMCA-021 — unsubstantiated assertions do not overcome an assessment
• Kmart Properties, Inc. v. Taxation & Revenue Department, 2006-NMCA-026 — official tardiness does not defeat enforcement of a public right
• Rainbo Baking Co. of El Paso, Texas v. Commissioner of Revenue, 1972-NMCA-139 — limits on a regulation's ability to add statutory requirements
• Gonzales v. Educational Retirement Board, 1990-NMSC-024 — agency may not impose unreasonable or irrelevant requirements

Source

• Listing: New Mexico Decisions & Orders
• Decision post: Pete’s Top Quality Landscape LLC
• Decision PDF: D&O 17-44

Original ruling text

STATE OF NEW MEXICO
ADMINISTRATIVE HEARINGS OFFICE
TAX ADMINISTRATION ACT

IN THE MATTER OF THE PROTEST OF
PETE’S TOP QUALITY LANDSCAPE LLC No. 17-44
TO THE ASSESSMENT ISSUED UNDER
LETTER ID NO. L0062305344

DECISION AND ORDER

A protest hearing occurred in the above captioned matter on September 25, 2017 before

Chris Romero, Esq., Hearing Officer, in Santa Fe, New Mexico. Mr. Wayne G. Chew, Esq.

(Wayne G. Chew, P.C.) appeared representing Pete’s Top Quality Landscape, L.L.C.

(“Taxpayer”). Ms. Sandra Vigil, owner, appeared and testified on behalf of Taxpayer. Staff

Attorney, Mr. David Mittle, appeared representing the Taxation and Revenue Department of the

State of New Mexico (“Department”). Protest Auditor, Ms. Veronica Galewaler, appeared as a

witness for the Department. Staff Attorney, Ms. Luciane Yeh, also appeared as an observer in

training for the Department. Taxpayer Exhibit 1 and Department Exhibits A and B 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 June 8, 2010, the Department assessed Taxpayer the amounts of $103,489.33

in weight distance tax, $20,697.87 in penalty, and $28,696.85 in interest. The assessment also

included a separately stated penalty of $4,000 for weight distance tax underreporting. The total

amount due under the assessment was $156,884.05 under Letter ID No. L0062305344 for the

reporting periods from December 31, 2003 to June 30, 2009.

2. On August 19, 2010, the Department’s Protest Office received Taxpayer’s Formal
   Protest. The protest was executed by Sandra Vigil on August 16, 2010.

3. On August 19, 2010, the Department acknowledged the receipt of Taxpayer’s

protest.

4. There was no outward activity in Taxpayer’s protest from August 19, 2010 until

April 4, 2017.

5. On April 4, 2017, the Department requested a hearing in the matter subject of

Taxpayer’s protest. The Department’s request brought Taxpayer’s protest to the attention of the

Administrative Hearings Office for the first time. Before that date, the Administrative Hearings

Office had no knowledge of Taxpayer’s protest nor any statutory obligation to set a hearing.

6. On April 5, 2017, the Administrative Hearings Office issued a Notice of

Administrative Hearing setting a hearing on the merits of Taxpayer’s protest for April 26, 2017.

7. On April 7, 2017, Ms. Vigil requested a continuance of the hearing on the merits

scheduled for April 26, 2017.

8. On April 10, 2017, the Department indicated that it did not oppose Taxpayer’s

request for a continuance.

9. On April 14, 2017, the Administrative Hearings Office issued an Amended Notice

of Administrative Hearing setting a hearing on the merits of Taxpayer’s protest for June 16,

2017.

10. On May 18, 2017, the Administrative Hearings Office filed a Notice of

Reassignment of Hearing Officer for Administrative Hearing which reassigned the matter to the

undersigned Hearing Officer.

11. On May 22, 2017, Ms. Vigil requested a continuance of the hearing on the merits

scheduled for June 16, 2017.

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12. On May 23, 2017, the Department indicated that it did not oppose Taxpayer’s

second request for a continuance.

13. On May 31, 2017, the Administrative Hearings Office issued a Second Amended

Notice of Administrative Hearing setting a hearing on the merits of Taxpayer’s protest for July 5,

2017.

14. On June 20, 2017, Taxpayer filed a Motion to Vacate Hearing Setting. The

motion represented Taxpayer’s third request for a continuance and the initial entry of appearance

of Taxpayer’s counsel of record.

15. On June 29, 2017, the Department indicated that it did not oppose Taxpayer’s

third request for a continuance.

16. On June 30, 2017, the Administrative Hearings Office issued an Order Granting

Continuance, Scheduling Order, and Notice of Administrative Hearing which in addition to

establishing various deadlines, set a hearing on the merits of Taxpayer’s protest for September

25, 2017.

17. On July 5, 2017, the Department filed a Certificate of Service specifying that is

served its First Set of Interrogatories and Request for Production of Documents on Taxpayer.

18. On August 11, 2017, Taxpayer filed a Certificate of Service specifying that is

served its Answers to the Taxation and Revenue Department’s First Set of Interrogatories and

Request for Production of Documents on the Department.

19. On August 23, 2017, the Department filed Department’s Motion to Compel

Production. The motion included a copy of the Answers to the Taxation and Revenue

Department’s First Set of Interrogatories and Request for Production of Documents.

20. On September 6, 2017, the Administrative Hearings Office entered its Order

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Compelling Taxpayer’s Production of Documents.

21. On September 6, 2017, after entry of the Order Compelling Taxpayer’s

Production of Documents, Taxpayer filed a Response to the Department’s Motion to Compel

Production.

22. On September 6, 2017, the parties filed a Joint Prehearing Statement.

23. On September 12, 2017, the Department filed Department’s Notice of

Noncompliance that asserted Taxpayer’s failure to comply with the Order Compelling

Taxpayer’s Production of Documents.

24. Taxpayer is registered in the State of New Mexico to engage in business.

[Testimony of Ms. Vigil].

25. Taxpayer has been engaged in business for 35 years. [Testimony of Ms. Vigil].

26. Taxpayer performs landscape installation services and hauls landscape materials,

including sand and gravel. [Testimony of Ms. Vigil].

27. Ms. Vigil is a member of the limited liability company through which Taxpayer

engages in business. She shares ownership of the business with her spouse. [Testimony of Ms.

Vigil].

28. In normal circumstances, Taxpayer delivers or picks up materials on a one-way

basis meaning that Taxpayer’s trucks are regularly empty during their outgoing or returning trips

from Taxpayer’s place of business. [Testimony of Ms. Vigil].

29. Taxpayer estimates that at least 50 percent of the miles its trucks travel are empty

of all load. [Testimony of Ms. Vigil].

30. Taxpayer’s trucks are registered in the State of New Mexico. [Testimony of Ms.

Vigil].

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31. Taxpayer usually relies on fuel tickets to record the number of miles its trucks

travel. [Testimony of Ms. Vigil].

32. Since Taxpayer’s vehicles do not travel beyond 150 miles from its center of

business, it does not maintain driver’s logs. [Testimony of Ms. Vigil; Department Ex. B-3].

33. The Department performed an audit of Taxpayer’s weight distance tax reporting

in 2009. [Testimony of Ms. Vigil; Testimony of Ms. Galewaler; Department Ex. B].

34. Taxpayer described providing all requested documentation, including its field

tickets, fuel receipts, and registrations to the individual’s performing the audit for the

Department at or near that time. [Testimony of Ms. Vigil].

35. Taxpayer did not retain copies of the field tickets, fuel receipts, registrations, or

other records that may have been relevant to its protest. [Testimony of Ms. Vigil].

36. The Department’s audit determined that Taxpayer underreported its weight

distance tax by more than 25 percent during all years within the audit period eventually giving

rise to the assessment. [Testimony of Ms. Galewaler; Taxpayer Ex. B-7].

37. Taxpayer protested the assessment and described several attempts to follow up

with the Department regarding the status of its protest, or to retrieve documents that Ms. Vigil

may have provided to the Department. [Testimony of Ms. Vigil].

38. Taxpayer Exhibits 1.A – 1.I represent Taxpayer’s efforts to prove that it only

provides one-way hauling services and represent the statements of individuals purporting to have

knowledge regarding Taxpayer’s hauling practices. [Testimony of Ms. Vigil; Taxpayer Exs. 1.A

– 1.I].

39. With the exception of Taxpayer Exhibit 1.B, which was executed by Peter Vigil,

Jr., all other statements are from customers or vendors who have engaged in business with

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Taxpayer. [Testimony of Ms. Vigil; Taxpayer Exs. 1.A – 1.I].

40. Ms. Galewaler is the Department’s protest auditor. She reviewed the file and did

not see any documents that may have been provided by Taxpayer to the Department that would

have established entitlement to a reduced rate for one-way haulers, including invoices, bills, or

fuel receipts. [Testimony of Ms. Galewaler].

41. Despite assertions that documents had been provided to the Department, the audit

narrative indicated that Taxpayer did not maintain vehicle-specific fuel statements containing

information pertinent to calculating the numbers of miles traveled with or without load.

[Testimony of Ms. Galewaler; Dept. Ex. B-2 – B.4].

42. Ms. Galewaler indicated that Ms. Vigil agreed to send her additional documents

relevant to the application of the one-way haul rate. Ms. Vigil did not provide any additional

documents. [Testimony of Ms. Galewaler].

43. Taxpayer failed to maintain appropriate records to establish entitlement to a one-

way haul rate. [Testimony of Ms. Galewaler; Dept. Ex. B].

44. As of the date of the hearing, Taxpayer’s weight distance tax liability was

$144,579.96 less an offset in the amount of $61,673.64, for a total of $82,906.32. Taxpayer’s

weight distance tax penalty was $26,602.12 less an offset in the amount of $1,904.25, for a total

penalty of $24,697.87. Taxpayer’s weight distance tax interest was $49,854.41 less an offset in

the amount of $711.05, for a total of $49,143.36. Therefore, the total outstanding liability was

$156,747.55. [Testimony of Ms. Galewaler; Dept. Ex. A-1].

DISCUSSION

Although Taxpayer protested the overall assessment of weight distance tax, penalty, and

interest, the only issues addressed by Taxpayer’s evidence and argument concerned: 1) whether

In the Matter of the Protest of
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it should be entitled to the reduced rate afforded to one-way haulers under NMSA 1978, Sec. 7-

15A-6; and 2) what records were lawfully required for establishing such entitlement. However,

prior to addressing the substance of Taxpayer’s protest, the Hearing Officer will briefly address

the delay in bringing Taxpayer’s protest to hearing.

Significance of Delay and Statute of Limitations

By the time the Department’s Hearing Request was filed with the Administrative

Hearings Office on April 4, 2017, Taxpayer’s protest had been pending more than six years. A

Notice of Administrative Hearing was promptly entered and served on the parties on April 5,

2017, setting a hearing on the merits of Taxpayer’s protest for April 26, 2017. After several

unopposed requests to continue by Taxpayer, the hearing on the merits in this protest occurred

more than seven years from the date that Taxpayer’s protest was initially received and

acknowledged by the Department.

Although disconcerting, the delay from 2010 to 2017 does not impair the Department’s

efforts to collect an outstanding liability in this case. New Mexico courts have applied the

general rule of tardiness in administrative hearings under the Tax Administration Act: the

“tardiness of public officers in the performance of statutory duties is not a defense to an action

by the state to enforce a public right or to protect public interests.” See Kmart Props., Inc. v.

Taxation & Revenue Dep't, 2006-NMCA-026, 139 N.M. 177, 131 P.3d 27; See also Matter of

Ranchers-Tufco Limestone Project, 1983-NMCA-126, 100 N.M. 632, 674 P.2d 522. Collection

of taxes is the enforcement of a public right and interest which the Department has an obligation

to administer under the rationale of Kmart.

Taxpayer justifiably expressed a general frustration with the delay, but it stopped short of

asserting prejudice. Even had Taxpayer claimed prejudice, there was simply no evidence upon

In the Matter of the Protest of
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which the assertion could be sustained. See In re Ranchers-Tufco Limestone Project Joint

Venture. The only evidence in the record to even remotely suggest prejudice was that Taxpayer

was no longer in possession of any records upon which its protest could rely. However, Taxpayer

did not attribute its lack of records to the delay, as will be addressed more thoroughly in the

discussion regarding the merits of Taxpayer’s protest.

The Department’s efforts to collect the assessed tax are also within the applicable statute

of limitations. NMSA 1978, Section 7-1-18 (D) provides “[i]f a taxpayer in a return understates

by more than twenty-five percent the amount of liability for any tax for the period to which the

return relates, appropriate assessments may be made by the department at any time within six

years from the end of the calendar year in which payment of the tax was due.” In this case, the

evidence established that the assessment arose from an audit in which the Department concluded

that Taxpayer underreported its liability by more than 25 percent, which provided the

Department with six years to assess Taxpayer from the end of the calendar year in which the tax

was due. Because the earliest reporting period at issue in this protest ended on December 31,

2003, the date on which the tax was due for that period was January 31, 2004. See NMSA 1878,

Sec. 7-15A-9. Consequently, the end of the calendar year in which the tax was due was

December 31, 2004. Six years from that date, which represented the deadline under the statute of

limitations, was December 31, 2010. The assessment in this protest, dated June 8, 2010, was

timely and within the period required by Section 7-1-18 (D). Taxpayer’s protest was thereafter

acknowledged on August 19, 2010.

NMSA 1978, Section 7-1-19 then provides that “[n]o action or proceeding shall be

brought to collect taxes administered under the provisions of the Tax Administration Act and due

under an assessment or notice of the assessment of taxes after the later of either ten years from

In the Matter of the Protest of
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the date of such assessment or notice or, with respect to undischarged amounts in a bankruptcy

proceeding, one year after the later of the issuance of the final order or the date of the last

scheduled payment.” In the present matter, the Department remains within the ten-year period

provided by Section 7-1-19 because the assessment was issued less than 10 years ago.

Therefore, Taxpayer was not prejudiced by the delay observed in the present matter nor

was the Department prohibited from pursuing Taxpayer for payment of an assessed tax liability.

Presumption of Correctness and Burden of Proof

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

presumed to be correct. Consequently, Taxpayer has the burden to overcome the assessment and

show it was entitled to an abatement of tax, penalty and interest under the Weight Distance Tax

Act. See Archuleta v. O'Cheskey, 1972-NMCA-165, ¶11, 84 N.M. 428. Accordingly, it is

Taxpayer’s burden to present some countervailing evidence or legal argument to show that it is

entitled to an abatement, in full or in part, of the assessment issued against it. See N.M. Taxation

& Revenue Dep't v. Casias Trucking, 2014-NMCA-099, ¶8. “Unsubstantiated statements that the

assessment is incorrect cannot overcome the presumption of correctness.” See MPC Ltd. v. N.M.

Taxation & Revenue Dep't, 2003-NMCA-21, ¶13, 133 N.M. 217; See also Regulation 3.1.6.12

NMAC.

Seeking the reduced rate afforded to a one-way hauler is analogous to claiming a

deduction or exemption of tax that otherwise would be owed. Case law addressing a taxpayer’s

burden when claiming a deduction is persuasive in considering whether Taxpayer is entitled to

the reduced rate. “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

In the Matter of the Protest of
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the taxpayer.” Wing Pawn Shop v. Taxation and Revenue Department, 1991-NMCA-024, ¶16,

111 N.M. 735 (internal citation omitted); See also TPL, Inc. v. N.M. Taxation & Revenue Dep't,

2003-NMSC-7, ¶9, 133 N.M. 447.

Weight Distance Tax Act and the One-Way Haul Rate

The Weight Distance Tax Act (“WDTA”) imposes a tax on all registered vehicles with a

declared weight in excess of 26,000 pounds that travel on state highways. See NMSA 1978, Sec.

7-15A-3 (1988).

The rates to be imposed under the WDTA are provided at NMSA 1978, Section 7-15A-6

(2004) which also authorizes a reduced rate for vehicles that qualify as one-way haulers. Section

7-15A-6 (B) states as follows in reference to the reduced one-way haul rate at issue in this

protest:

B. All motor vehicles for which the tax is computed under
Subsection A of this section shall pay a tax that is two-thirds of the
tax computed under Subsection A of this section if:

(1) the motor vehicle is customarily used for one-way haul;

(2) forty-five percent or more of the mileage traveled by the motor
vehicle for a registration year is mileage that is traveled empty of
all load; and

(3) the registrant, owner or operator of the vehicle attempting to
qualify under this subsection has made a sworn application to the
department to be classified under this subsection for a registration
year and has given whatever information is required by the
department to determine the eligibility of the vehicle to be
classified under this subsection and the vehicle has been so
classified.

If the registrant, owner or operator of the vehicle can satisfy the one-way haul rate

criteria, then the applicable rate shall be established at two-thirds of the base tax rate established

under Subsection A. The central issue raised by Taxpayer is whether it should be entitled to the

In the Matter of the Protest of
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Page 10 of 22
reduced rate afforded to one-way haulers and what records were necessary to establish that

entitlement.

Various regulations address one-way haulers for the purposes of Section 7-15A-6 (B).

Regulation 3.12.6.7 NMAC provides definitions for empty miles, loaded miles, and one-way

haulers. Regulation 3.12.6.7 (A) NMAC provides that “empty miles” means the “number of

miles traveled on New Mexico roads when the vehicle or vehicle combination is transporting no

load whatsoever.”

Regulations 3.12.6.10 and 3.12.6.11 NMAC respectively impose the methods by which

one-way haulers are to report miles traveled and the records they are required to maintain. With

concern for records, Regulation 3.12.6.11 states:

3.12.6.11 ONE-WAY HAULERS - REQUIRED RECORDS:

One-way haulers shall maintain the following records on a
reporting period basis. All records shall be referenced by vehicle
unit number:

A. Vehicle trip mileage records for each vehicle operated in New
Mexico. The mileage records shall reflect the total empty miles
and the total loaded miles traveled on New Mexico roads. Accurate
trip mileage records indicating empty and loaded miles may
include:

(1) accurate map mileage for each trip;

(2) hubometer or odometer readings; or

(3) vehicle-specific log books.

B. Vehicle itineraries including the origin and destination point of
each trip, and the routes taken.

The problem for Taxpayer in this protest arose in its inability to produce any type of

records, either described in the regulation or otherwise, which will be discussed in more detail

In the Matter of the Protest of
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below. Instead, Taxpayer relied entirely on the testimony of Ms. Vigil to establish that it should

qualify for the one-way hauler rate under the WDTA. In an effort to complement Ms. Vigil’s

testimony, Taxpayer also proffered unsworn, written statements of individuals who were neither

called to testify in this matter, nor whose statements the Hearing Officer found to be reliable

because it was questionable whether any of the declarants had personal knowledge regarding the

subject matter of their own statements. [Taxpayer Ex. 1].

Lack of Records to Establish Entitlement to One-Way Haul Rate

Taxpayer attempted to explain why it could not produce any records to establish its

entitlement to the reduced one-way hauler rate. Ms. Vigil asserted that Taxpayer previously

provided all relevant records to the Department, but erred by not retaining copies for itself.

Taxpayer also alleged that the Department never returned its documents. Although, Taxpayer

does not explicitly accuse the Department of losing or destroying its records, the insinuation is

evident.

However, despite Taxpayer’s suggestion, the contents of the administrative file contradict

Taxpayer’s explanation of events. As recently as September 6, 2017, counsel for Taxpayer

expressed its intention to introduce the following records at the hearing in this protest:

“[i]nvoices and bills for materials sold and delivered in the year in issue. Fuel receipts, books and

records which reflect mileage and weight of vehicles.” See Joint Prehearing Statement, Page 5

(Exhibit Lists – Para. 2.a.) (filed 9/6/2017). The Joint Prehearing Statement did not indicate that

Taxpayer’s records, upon which it intended to rely at the hearing, were not in its possession.

There is more. The Department conducted discovery in this matter, which eventually

gave rise to filing Department’s Motion to Compel Production on August 23, 2017 (hereinafter

“Motion to Compel”). As an attachment to its Motion to Compel, the Department provided

In the Matter of the Protest of
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Taxpayer’s Answers to Taxation and Revenue Department’s First Set of Interrogatories and

Request for Production of Documents (hereinafter “Answers and Responses”). See Motion to

Compel, TRD Exhibit A-0001 – A-0010. The final page of the Answers and Responses, as

attached to the Motion to Compel, was the Verification of Ms. Vigil. She verified that, being

duly sworn and upon oath, the Answers and Responses were “true and correct to the best of [her]

knowledge and belief.” The verification was executed on August 11, 2017 before a Notary

Public of the State of New Mexico.

Turning to the Answers and Responses, Interrogatory No. 7 requested that Taxpayer

“identify all exhibits that [it] will or may introduce into evidence at the formal hearing in this

matter.” Taxpayer’s answer, verified to be true and correct to the best of Ms. Vigil’s knowledge,

stated “[i]nvoices and bills for materials sold and delivered in year in issue. Fuel receipts, books

and records which reflect mileage and weight of vehicles.” See Motion to Compel, TRD Exhibit

A-0006.

Similarly, Interrogatory No. 8 requested that Taxpayer “fully explain why the Audit

Assessment should not be assessed” and that Taxpayer “be specific as to dates, persons with

knowledge, records or documents that support that [Taxpayer] should not be assessed.” The

Taxpayer’s answer, verified to be true and correct to the best of Ms. Vigil’s knowledge, stated

“[i]nvoices and bills reflect sales of landscape materials delivered to customer. The customer

normally does not require pick-up of materials to return facility.” See Motion to Compel, TRD

Exhibit A-0007.

Requests for Production Nos. 1, 2, 3, and 8, then requested all documents which

Taxpayer specifically relied upon, referenced, identified, or for which it indicated an intention to

introduce into evidence at the hearing. This request would include the documents referenced in

In the Matter of the Protest of
Pete’s Top Quality Landscape, L.L.C.
Page 13 of 22
Taxpayer’s answers to Interrogatories 7 and 8. In response to the request for production, verified

to be true and correct to the best of Ms. Vigil’s knowledge, Taxpayer clearly represented that the

documents “will be available for inspection at Taxpayer’s place of business.” See Motion to

Compel, TRD Exhibit A-0007 – A-0009 (Response Nos. 1, 2, 3, and 8).

The responses prompted the Department to file its Motion to Compel. The Taxpayer

responded to the Motion, albeit after the Motion to Compel had been granted, and stated

“Taxpayer has satisfied the request for production of documents by the Department and will

submit requested documents at the hearing set for September 25, 2017 at 10 a.m.” See Response

to Department’s Motion to Compel Production (filed 9/6/2017). Consistent with all prior

representations, the response suggested that the documents were within Taxpayer’s possession or

control.

At no time that is evident from the pleadings contained in the administrative file, did

Taxpayer ever suggest the possibility that it was not in possession or control of its own records.

In contrast, Taxpayer plainly represented in the weeks preceding the hearing in this matter that it

possessed all relevant records and they were available for inspection at its place of business.

Taxpayer’s counsel then seemed to reaffirm Taxpayer’s representations when he stated that

Taxpayer would “submit requested documents at the hearing[.]” See Response to Department’s

Motion to Compel Production.

However, in absolute and inexplicable contradiction, Ms. Vigil then testified at the

hearing that Taxpayer did not actually possess records because the Department purportedly lost,

destroyed, or even perhaps continued to retain them despite her requests for their return.

Regrettably, Ms. Vigil’s testimony was not credible. The events to which she testified, which

supposedly resulted in the misplacement, destruction, or even misappropriation of Taxpayer’s

In the Matter of the Protest of
Pete’s Top Quality Landscape, L.L.C.
Page 14 of 22
records, were completely contradicted by reference to Taxpayer’s own pleadings in the

administrative file.

It was obvious that Taxpayer did not maintain or possess any records to establish its

entitlement to the reduced one-way haul rate. This conclusion was consistent with the remarks

contained in the original audit, more than seven years preceding the hearing, indicating that

Taxpayer simply did not maintain records sufficient to establish an entitlement to the reduced

rate for one-way haulers. [Dept. Ex. B]. At the time of the hearing in this protest, the evidence

established that nothing had changed. Taxpayer still could not provide any records sufficient to

establish an entitlement to the one-way haul rate.

Legality of Record Keeping Regulations

Taxpayer argued that despite its lack of records, the Department’s record keeping

regulations exceed what is required by NMSA 1978, Sec. 7-15A-6 (B). Accordingly, Taxpayer

argues it should not be penalized for its lack of records, because it has nevertheless provided

evidence to meet the minimum requirements of the statute. The regulation to which this

argument is directed is Regulation 3.12.6.11 NMAC.

Taxpayer’s argument fails to persuade. The Department is empowered and directed by

law to issue regulations in order to accomplish its statutory obligations of administering the tax

laws of this state. See NMSA 1978, Sec. 9-11-6.2 (A). In doing so, the Department is afforded

the presumption that any regulation, ruling, instruction, or order is a proper implementation of

the law. See NMSA 1978, Sec. 9-11-6.2 (G). Thus, Regulation 3.12.6.11 is presumed to be a

proper implementation of the law.

However, the Department may only promulgate regulations that interpret and exemplify

the statutes to which they relate. See NMSA 1978, Section 9-11-6.2 (B) (1). Therefore, the

In the Matter of the Protest of
Pete’s Top Quality Landscape, L.L.C.
Page 15 of 22
question is whether Regulation 3.12.6.11 NMAC interprets or exemplifies Section 7-15A-6, or

whether it exceeds the requirements of what the statute permits, or imposes unreasonable or

irrelevant requirements.

In deciding whether a regulation interprets or exemplifies a statute, a regulation may not

abridge or otherwise limit the scope of the related statutory enactment. See, Rainbo Baking Co.

of El Paso, Tex. v. Comm’r of Revenue, 1972-NMCA-139,¶¶ 10-12, 84 N.M. 303, 305-306. In

Rainbo Baking Co., the court held that the Commissioner of Revenue may not promulgate a

regulation that would nullify a deduction authorized by the Legislature. In Rainbo, the

Commissioner promulgated a regulation that required a nontaxable transaction certificate to be in

the possession of the buyer at the time of an audit, which contradicted the statute which only

required the buyer to have in its possession a nontaxable transaction certificate. Consequently,

the Court ruled that a regulation may not add a requirement that the Legislature has not also

authorized or imposed.

In Gonzales v. Educ. Retirement Bd., 1990-NMSC-024, 109 N.M. 592, 788 P.2d 348, the

Court held that the Educational Retirement Board could not enact a regulation that was

“unreasonable or irrelevant.” In Gonzales, the Board, by regulation, required a member who was

requesting an award of disability benefits to hold no property interest in a bus contract. The

Court said that there was nothing within the statutory grant of authority to award disability

benefits which authorized the Board to refuse to accept an application for disability if the

applicant continued to have a property interest in a bus contract. The Court held that the Board

did not have the “statutory power to create unreasonable or irrelevant requirements within the

application process before it considers the application.” Gonzales, 109 N.M. at 594, 788 P.2d at

350. Thus, the Board’s regulation was held to create an unreasonable or irrelevant requirement.

In the Matter of the Protest of
Pete’s Top Quality Landscape, L.L.C.
Page 16 of 22
Turning to Taxpayer’s argument in this case, the Legislature has repeatedly recognized

the importance of records to the administration of its tax laws. In addition to the general

requirements that taxpayers maintain records pursuant to Section 7-1-10, the WDTA contains

additional references relevant to the maintenance of records. Section 15A-9 D requires:

All registrants, owners or operators required to pay the weight
distance tax shall preserve the records upon which the periodic
payments required by Subsections A and B of this section are
based for four years following the period for which a payment is
made. Upon request of the department, the registrant, owner or
operator shall make the records available to the department at the
owner's office for audit as to accuracy of computations and
payments. If the registrant, owner or operator keeps the records at
any place outside this state, the department or the department's
authorized agent may examine them at the place where they are
kept. The department may make arrangements with agencies of
other jurisdictions administering motor vehicle laws for joint audits
of any such registrants, owners or operators.

(Emphasis Added)

It is unlikely that the Legislature would impose a requirement on taxpayers to retain

records, if it also intended that taxpayers be entitled to qualify for the reduced one-way hauler

rate based merely on verbal representations, which Taxpayer seeks in the present matter.

The Legislature has also empowered the Department to establish the method by which all

taxpayers are to report total mileage traveled in New Mexico, which is an essential element of

establishing entitlement to the one-way haul rate. Section 7-15A-8 (B) provides as follows:

Registrants, owners and operators of all motor vehicles to which
the tax applies shall report to the department, in the manner
required by the department, the total mileage traveled in New
Mexico and the total mileage traveled in all states during the tax
payment period applicable to that registrant, owner or operator.

When read together, Sections 7-15A-9 (D) and 7-15A-8 (B) embody the Legislature’s

grant of authority to establish the manner in which information is to be reported to the

In the Matter of the Protest of
Pete’s Top Quality Landscape, L.L.C.
Page 17 of 22
Department and the records that must be retained to substantiate those reports.

The Department’s promulgation of Regulation 3.12.6.11 comes well within that grant of

authority. The regulation does not impose additional requirements, but instead places all

taxpayers on notice of the types of records the Department and taxpayer alike may rely upon in

administering the WDTA. Taxpayer’s arguments that the Department has exceeded its authority

in Regulation 3.12.6.11 is rejected. In contrast, Regulation 3.12.6.11 represents a proper

implementation of the law which neither imposed unreasonable nor irrelevant requirements on

Taxpayer in this protest.

Taxpayer had the burden of rebutting the presumption of correctness that attached to the

assessment, as well as the burden to establish entitlement to the reduced rate afforded to one-way

haulers. Taxpayer offered no records whatsoever, instead relying exclusively on Ms. Vigil’s

testimony and the unsworn statements of individuals whose personal knowledge was

questionable. It then attempted to shift responsibility for its failure to maintain records to the

Department with a recitation of events that was easily contradicted by its own pleadings. In

conclusion, the evidence in support of Taxpayer’s protest was inadequate and unreliable.

Contrary to the rule propounded by Casias, Taxpayer failed to present some countervailing

evidence or legal argument to show that it is entitled to an abatement, in full or in part, of the

assessment issued against it. Taxpayer instead relied completely on unsubstantiated statements

which cannot overcome the presumption of correctness. See MPC Ltd., 2003-NMCA-21, ¶13.

Because Taxpayer did not present evidence or argument to rebut the presumption of

correctness as applied to the assessment of interest or penalty in this protest, but instead specified

that it was only asserting an entitlement to the reduced rate for one-way haulers, the Hearing

Officer will not address arguments that Taxpayer did not raise. Therefore, the Hearing Officer

In the Matter of the Protest of
Pete’s Top Quality Landscape, L.L.C.
Page 18 of 22
will not address the imposition of penalty or interest, except to reiterate that Taxpayer did not

rebut the presumption of correctness that attached to the assessment.

For the reasons discussed herein, Taxpayer’s protest should be DENIED.

CONCLUSIONS OF LAW

A. Taxpayer filed a timely written protest to the assessment issued under Letter ID

No. L0062305344 and jurisdiction lies over the parties and the subject matter of this protest.

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

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

argument to establish that it was entitled to an abatement. Taxpayer did not meet its burden.

C. Under Section 7-1-67, Taxpayer is liable for interest under the assessment.

D. Under Section 7-1-69, Taxpayer is liable for penalty in failing to report or pay

weight distance tax when due or in the accurate amount for the periods covered by the

assessment.

E. Under Section 7-15A-16, Taxpayer is liable for penalty by virtue of

underreporting mileage or weight for the periods covered by the assessment.

F. Taxpayer did not establish an entitlement to a reduced rate for one-way haulers

under NMSA 1978, Sec. 7-15A-6 (B).

For the foregoing reasons, Taxpayer’s protest IS DENIED. As of the date of the hearing,

Taxpayer’s weight distance tax liability was $144,579.96 less an offset in the amount of

$61,673.64, for a total of $82,906.32. Taxpayer’s weight distance tax penalty was $26,602.12.96

less an offset in the amount of $1,904.25, for a total penalty of $24,697.87. Taxpayer’s weight

distance tax interest was $49,854.41 less an offset in the amount of $711.05, for a total of

$49,143.36. Therefore, Taxpayer’s total outstanding liability was $156,747.55. Taxpayer shall be

In the Matter of the Protest of
Pete’s Top Quality Landscape, L.L.C.
Page 19 of 22
liable for the total outstanding balance as of September 25, 2017, plus interest accruing since that

date until the assessment is paid in full.

DATED: October 12, 2017

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

In the Matter of the Protest of
Pete’s Top Quality Landscape, L.L.C.
Page 20 of 22
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
Pete’s Top Quality Landscape, L.L.C.
Page 21 of 22
CERTIFICATE OF SERVICE

On October 12, 2017, a copy of the foregoing Decision and Order was mailed to the parties

listed below in the following manner:

In the Matter of the Protest of
Pete’s Top Quality Landscape, L.L.C.
Page 22 of 22