Did a California teleradiology company prove that stipends and cash collection guarantees from New Mexico hospitals were nontaxable compensation only for out-of-state availability?

Plain-English summary

Online Radiology did not prove that hospital stipends and cash collection guarantees were nontaxable compensation solely for remote, out-of-state availability. Its only witness lacked firsthand knowledge of the company's audited operations, so the assessment presumption remained unrebutted.

The California-based company contracted with rural New Mexico hospitals to provide on-site radiology during specified hours and remote teleradiology at other times. Hospitals transmitted images to California, which then routed them to radiologists for interpretation.

Online Radiology billed patients, insurers, or other responsible parties directly for radiology services. The hospitals separately guaranteed minimum revenue through stipends or cash collection guarantees when patient collections fell short.

The original assessment totaled $309,185.49: $187,922.79 gross receipts tax, $39,076.28 GRT penalty, $21,959.64 GRT interest, $46,693 compensating tax, $7,846.85 compensating-tax penalty, and $5,686.93 compensating-tax interest.

The contracts covered more than remote reads

Online Radiology argued that the stipends induced it to serve rural hospitals and compensated after-hours coverage provided from outside New Mexico. It described the payments as compensation for “services not performed” unless coverage was needed.

But the contracts also described other compensated obligations, including medical directorship and interventional support services. A later agreement said the guarantee represented the company's monthly cost to provide the contracted services, including a reasonable profit margin.

The record therefore did not establish that the stipend was separable from services performed in New Mexico or from the broader contractual coverage package.

The accountant could not replace an operational witness

Online Radiology called one witness: a senior state-and-local-tax manager from REDW, the accounting firm hired for audit defense. He was knowledgeable about tax and accounting but had no relationship with Online Radiology during the audited years and no firsthand knowledge of its clinical operations.

His testimony about where radiologists worked, how images moved, what the stipends paid for, and how the business operated relied on information supplied by people who did not testify. The AHO found that hearsay admissible in an administrative hearing but gave it little weight on non-accounting facts.

The decision identified doctors and other company personnel who could have testified in person, by phone, or by video about the actual services and locations. None appeared.

The burden never shifted to the Department

The Department had allocated approximately 65 percent of stipend receipts to New Mexico. Its own evidentiary presentation was also limited, but it retained the statutory presumption that the assessment was correct until Online Radiology produced reliable countervailing evidence.

Because the company's evidence did not establish what services the stipends purchased or where those services were performed, the burden never shifted to the Department to re-prove its allocation.

This was an evidence ruling, not a categorical holding that every teleradiology stipend is taxable. A better-supported record could present a different allocation or characterization question.

Compensating tax was not contested at the hearing

The assessment also contained compensating tax, penalty, and interest. The hearing addressed only gross receipts tax, so the compensating-tax portion remained undisturbed.

Result: protest DENIED. The final order upheld the original assessment components, $16,088.86 of additional interest accrued through the hearing, and further interest until payment. The outstanding liability was $325,274.35 as of the hearing date.

What this means for you

Telemedicine and remote-service providers

Document the location, timing, and nature of each contracted service. A general assertion that personnel were on call outside the state may not establish how a bundled guarantee should be sourced.

Businesses receiving minimum-revenue guarantees

Review every obligation the payment supports. Medical directorship, on-site support, availability, administration, and profit protection may make a stipend broader than payment for one remote service.

Taxpayers preparing for an evidentiary hearing

Call witnesses with firsthand operational knowledge. An outside adviser can explain tax calculations but may not prove historical business facts learned from others.

Businesses challenging an allocation

Provide transaction data, staffing schedules, service logs, contract-cost models, and testimony supporting an alternative percentage. Without countervailing evidence, the assessment presumption controls.

Common questions

Q: Were the remote image interpretations performed in New Mexico?
A: Online Radiology asserted that images were routed from California to radiologists located elsewhere in the United States, but its witness lacked firsthand knowledge sufficient to prove that operational fact for the audited periods.

Q: What did the stipends compensate?
A: The contracts referred to after-hours coverage, medical directorship, interventional support, financial inducement, service costs, and a reasonable profit margin. The record did not isolate the payment among those items.

Q: Why did the Department's 65% allocation stand?
A: Online Radiology failed to rebut the assessment with reliable firsthand evidence, so the Department never acquired the burden to re-establish its calculation.

Q: Did the AHO hold that all teleradiology stipends are taxable?
A: No. It held that this taxpayer's proof was insufficient to show its stipends were nontaxable or differently allocated.

Q: Why was the compensating tax upheld?
A: The company did not address that portion at the hearing; only gross receipts tax was litigated.

Q: What amount was due at the hearing?
A: $325,274.35, consisting of the original assessment plus $16,088.86 of accrued interest.

Citations and references

Statutes and regulation:

• NMSA 1978, § 7-9-3.5(A)(1) — gross receipts definition
• NMSA 1978, §§ 7-9-4 and 7-9-5 — gross receipts tax and taxable-receipts presumption
• NMSA 1978, §§ 7-9-3.3 and 7-9-3(M) — engaging in business and service
• NMSA 1978, §§ 7-1-17(C) and 7-1-3(X) — assessment presumption and tax definition
• Regulation 3.1.6.13 NMAC — penalty-and-interest presumption

Cases cited:

• MPC Ltd. v. New Mexico Taxation & Revenue Department, 2003-NMCA-021 — burden shifts only after the taxpayer rebuts the assessment presumption
• Chavez v. City of Albuquerque, 1997-NMCA-111 — administrative action needs some evidence admissible under ordinary evidence rules
• Anaya v. New Mexico State Personnel Board, 107 N.M. 622 (Ct. App. 1988) — legal-residuum rule in administrative proceedings

Source

• Listing: New Mexico Decisions & Orders
• Decision post: Online Radiology
• Decision PDF: D&O 19-17

Original ruling text

1 STATE OF NEW MEXICO
2 ADMINISTRATIVE HEARINGS OFFICE
3 TAX ADMINISTRATION ACT

4 IN THE MATTER OF THE PROTEST OF
5 ONLINE RADIOLOGY
6 TO ASSESSMENT ISSUED UNDER
7 LETTER ID NO. L0097690416

8 v. Case Number 18.03-056A
9 D&O No. 19-17

10 NEW MEXICO TAXATION AND REVENUE DEPARTMENT

11 DECISION AND ORDER

12 On March 26, 2019, Hearing Officer Chris Romero, Esq., conducted an administrative

13 hearing on the merits of the tax protest of Online Radiology (“Taxpayer”) pursuant to the Tax

14 Administration Act and the Administrative Hearings Office Act. Mr. Wade Jackson, Esq., and

15 Ms. Suzanne Wood Bruckner, Esq., appeared for Taxpayer and were accompanied by Mr. James

16 Ortiz of REDW, LLC, who appeared as Taxpayer’s only witness.

17 Staff Attorney, Mr. Peter Breen, Esq., appeared representing the opposing party in the

18 protest, the Taxation and Revenue Department (“Department”). Mr. Breen was accompanied by

19 Department auditor and witness, Ms. Milagros Bernardo, and Ms. Angelica Rodriguez who did

20 not testify, but observed for training purposes.

21 Taxpayer Exhibits 1 – 10 and 12 – 13, and Department Exhibits A, B, C and D were

22 admitted into the evidentiary record.

23 In summary, the totality of Taxpayer’s evidence was insufficient to rebut the presumption

24 that receipts characterized as stipends or cash collection guarantees were not taxable under the

25 Gross Receipts and Compensating Tax Act.

26 IT IS DECIDED AND ORDERED AS FOLLOWS:

27 FINDINGS OF FACT

In the Matter of the Protest of Online Radiology
Page 1 of 16.
1 1. On October 23, 2017, the Department issued a Notice of Assessment of Taxes and

2 Demand for Payment under Letter ID No. L0097690416 in the total amount of $309,185.49. The

3 assessment was comprised of gross receipts tax in the amount of $187,922.79, gross receipts tax

4 penalty in the amount of $39,076.28, gross receipts tax interest in the amount of $21,959.64,

5 compensating tax in the amount of $46,693.00, compensating tax penalty in the amount of

6 $7,846.85, and compensating tax interest in the amount of $5,686.93. [Administrative File]

7 2. On January 20, 2018, Taxpayer, by and through Mr. Jamie Fridley, CPA (REDW,

8 LLC) executed a formal protest of the assessment that was subsequently received in the

9 Department’s protest office on January 24, 2018. [Administrative File]

10 3. The Department acknowledged Taxpayer’s protest on January 29, 2018 under

11 Letter ID No. L1907202864. [Administrative File]

12 4. On March 14, 2018, the Department filed a Hearing Request with the

13 Administrative Hearings Office in which it requested a scheduling hearing. [Administrative File]

14 5. On March 15, 2018, the Administrative Hearings Office entered a Notice of

15 Telephonic Scheduling Hearing which set an initial scheduling hearing for April 13, 2018.

16 [Administrative File]

17 6. On April 16, 2018, the Administrative Hearing Office entered a Scheduling Order

18 and Notice of Administrative Hearing which in addition to other various deadlines set a hearing

19 on the merits of Taxpayer’s protest for October 30, 2018. [Administrative File]

20 7. On September 13, 2018, Taxpayer’s counsel of record entered their appearance

21 and moved to continue the hearing set for October 30, 2018. The Department did not oppose

22 Taxpayer’s motion. [Administrative File]

In the Matter of the Protest of Online Radiology
Page 2 of 16.
1 8. On September 18, 2018, the Administrative Hearings Office entered a

2 Continuance Order, Amended Scheduling Order and Notice of Administrative Hearing which

3 among establishing various deadlines, continued the merits hearing to February 28, 2019.

4 [Administrative File]

5 9. On January 9, 2019, Taxpayer filed a Motion for Partial Summary Judgment and

6 a Motion to Compel. [Administrative File]

7 10. On February 7, 2019, Taxpayer filed Taxpayer’s Prehearing Statement.

8 [Administrative File]

9 11. On February 8, 2019, the Department filed Department’s Prehearing Statement.

10 [Administrative File]

11 12. On Saturday, February 23, 2019, the Hearing Officer received notice that he was

12 appointed to serve on the Judicial Nominating Committee that was scheduled to convene on

13 February 28, 2019. The Hearing Officer inquired through his assistant as to whether the matter

14 could be continued without the parties enduring any hardship or prejudice. Neither party

15 expressed objection or concern. [Administrative File]

16 13. On February 26, 2019, the Administrative Hearings Office entered a Continuance

17 Order and Amended Notice of Administrative Hearing. The hearing was continued to March 26,

18 2019. [Administrative File]

19 14. On February 27, 2019, the Administrative Hearings Office entered an Order

20 Denying Motion for Partial Summary Judgment. [Administrative File]

21 15. On February 28, 2019, the Department filed its Response to Motion for Partial

22 Summary Judgment. [Administrative File]

In the Matter of the Protest of Online Radiology
Page 3 of 16.
1 16. REDW, LLC is an accounting firm specializing in a wide range of accounting

2 services. [Direct Examination of Mr. Ortiz]

3 17. Mr. James Ortiz is employed by REDW, LLC as a senior manager in its tax

4 department. His specialty is state and local tax and his practice focuses on multistate sales and

5 use tax, multistate income tax, credits and incentives. [Direct Examination of Mr. Ortiz]

6 18. Taxpayer engaged REDW, LLC to perform audit defense services in the form of

7 tax consulting. [Direct Examination of Mr. Ortiz] REDW, LLC did not represent Taxpayer

8 during any year giving rise to the audit. [Cross Examination of Mr. Ortiz]

9 19. Other than his work for Taxpayer, by and through REDW, LLC, Mr. Ortiz has no

10 other relationship or association with Taxpayer. [Response to Hearing Officer’s question]

11 20. Taxpayer is headquartered in California and is engaged in the business of

12 providing radiology services for rural health care facilities having a need for such services, but

13 not having the demand or resources necessary to maintain a fulltime radiology group. [Direct

14 Examination of Mr. Ortiz]

15 21. Taxpayer has agreements to provide radiology services to Carlsbad Medical

16 Center, LLC [Taxpayer Exs. 1 – 2], Roswell Hospital Corporation, doing business as Eastern

17 New Mexico Medical Center [Taxpayer Exs. 4 – 6], and Rehoboth McKinley Christian Health

18 Care Services [Taxpayer Ex 8]. [Direct Examination of Mr. Ortiz]

19 22. With regard for each facility, Taxpayer contracted to: (1) provide on-site

20 radiology services during specified hours; and (2) to be available for remote services, or

21 teleradiology, during all other times. [Direct Examination of Mr. Ortiz; Taxpayer Ex. 1.4 (Para.

22 1.0.4); Taxpayer Ex. 4.18 (Para. 2.9); Taxpayer Ex. 8.1 – 8.2 (Para. 1.1 (b)]

In the Matter of the Protest of Online Radiology
Page 4 of 16.
1 23. Accordingly, Taxpayer’s revenue under its contracts was derived from two

2 distinct sources: (1) revenue from providing on-site radiology services at facilities in New

3 Mexico; (2) revenue generated from a stipend or cash collections guarantee derived, at least in

4 part, from being available for and providing remote radiology services from locations outside of

5 New Mexico, for facilities inside New Mexico. [Direct Examination of Mr. Ortiz]

6 24. In reference to remote teleradiology services, when a health care facility had a

7 need for radiology services at a time when it did not have a radiologist present on-site, the

8 facility’s agreement with Taxpayer permitted it to transmit images to Taxpayer’s primary

9 location in California, which would then re-transmit the images to a radiologist for evaluation.

10 That radiologist would typically be located anyplace in the United States. [Direct Examination of

11 Mr. Ortiz]

12 25. Taxpayer’s contracts with each facility provided that Taxpayer was to directly bill

13 patients, insurers, or other responsible parties for radiology services provided. Consequently,

14 Taxpayer was not entitled to directly bill any of the facilities for radiology services. [Direct

15 Examination of Mr. Ortiz]:

16 a. Taxpayer’s agreement with Carlsbad Medical Center stated in relevant

17 part “Neither Facility nor [Taxpayer] shall charge the other for Services Provided pursuant to the

18 Agreement.” [Direct Examination of Mr. Ortiz; Taxpayer Ex. 1.1]

19 b. Taxpayer’s agreement with Roswell Hospital Corporation, doing business

20 as Eastern New Mexico Medical Center stated in relevant part “Facility and [Taxpayer] shall

21 make their own independent charges for Services to patients, and each shall independently bill

22 for and collect the charges due to them.” [Taxpayer Ex. 4.1]

In the Matter of the Protest of Online Radiology
Page 5 of 16.
1 c. Taxpayer’s agreement with Rehoboth McKinley Christian Health Care

2 Services stated in relevant part that “[Taxpayer] shall be responsible for, and solely entitled to,

3 billing and collection of all charges for the Coverage Services provided by the Radiologists

4 hereunder to patients at the Facility.” [Taxpayer Ex. 8.4]

5 26. In addition to revenue generated from patient billing, each facility also guaranteed

6 a specific amount of revenue in the form of a “cash collections guarantee” or a “stipend”:

7 a. Taxpayer’s agreement with Carlsbad Medical Center provided that

8 “Facility shall provide [Taxpayer] the cash collections guarantee set forth herein, subject to all

9 the terms and conditions of the Agreement, including but not limited to, [Taxpayer]’s obligations

10 to timely bill and collect for the Services.” [Direct Examination of Mr. Ortiz; Taxpayer Ex. 1.15

11 (Para. 4.1.4)] The amount of the cash collections guarantee, also referred to as a stipend, is

12 intended to compensate Taxpayer for afterhours coverage and other contractual obligations

13 incurred by Taxpayer, including a medical directorship and provision of interventional support

14 services. [Taxpayer Ex. 1.4 (Para. 1.0.5); Direct Testimony of Mr. Ortiz]

15 b. Taxpayer’s agreement with Roswell Hospital Corporation, doing business

16 as Eastern New Mexico Medical Center similarly provided that “Facility shall provide

17 [Taxpayer] the cash collections guarantee set forth herein, subject to all the terms and conditions

18 of the Agreement, including but not limited to, [Taxpayer]’s obligations to timely bill and collect

19 for the Services.” [Taxpayer Ex. 4.23 (Para. 3.1.1.4)]

20 c. The underlying basis for the cash collections guarantee is best explained

21 as follows: “The parties have determined that [Taxpayer] will require financial assistance from

22 Facility to induce [Taxpayer] to enter into the Agreement. Facility agrees to provide financial

23 assistance to [Taxpayer], so that [Taxpayer] will agree to provide the necessary Services that

In the Matter of the Protest of Online Radiology
Page 6 of 16.
1 Facility requires for the performance of essential patient care functions.” [Direct Examination of

2 Mr. Ortiz; Taxpayer Ex. 4.37]

3 d. Taxpayer’s subsequent contract with Eastern New Mexico Medical

4 Centers remained consistent with prior contracts but provided further elaboration in reference to

5 the elements for which the cash collections guarantee would compensate. It stated, “This is the

6 amount that [Taxpayer] has attested represents [Taxpayer]’s cost to provide the Services each

7 month, including, if applicable, a reasonable profit margin, as set forth in the pro forma

8 submitted by [Taxpayer]. When multiplied by twelve, this amount is the Annual Cash

9 Collections Guaranteed Amount.” [Direct Examination of Mr. Ortiz; Taxpayer Ex. 6.14]

10 e. The receipts of Rehoboth McKinley Christian Health Care Services are

11 not at issue in the protest because Taxpayer did not receive a stipend from that facility. [Direct

12 Examination of Mr. Ortiz]

13 27. The Department auditor’s audit narrative concluded that “[Taxpayer] received the

14 stipend, which is a cash collection guarantee, from CMC and ENMMC. Per the terms of the

15 contracts with these clients, if [Taxpayer]’s cash collections for a month are less the minimum

16 guarantee amount, the clients will pay [Taxpayer] for the difference. The stipend did not tie to

17 any specific reads performed by the radiologists.” [Direct Examination of Mr. Ortiz; Taxpayer

18 Ex. 10.4]

19 28. The Department made an allocation of all stipend payments finding that

20 approximately 65 percent of such payments should have been allocated to New Mexico.

21 [Testimony of Ms. Bernardo; Department Ex. B-59]

In the Matter of the Protest of Online Radiology
Page 7 of 16.
1 29. Although Ms. Bernardo would have determined that the allocation should have

2 been closer to, or equal to 100 percent, she made no adjustments to the assessment. [Testimony

3 of Ms. Bernardo]

4 30. As of the date of the hearing, Taxpayer’s total outstanding liability was

5 $325,274.35 consisting of the amounts originally assessed plus accrued interest from the date of

6 the assessment through the date of the hearing. [Department Ex. D-1]

7 DISCUSSION

8 The primary issue in dispute in this protest is whether Taxpayer’s receipts, either

9 characterized as a cash collections guarantee or stipend, are subject to gross receipts tax under

10 NMSA 1978, Section 7-9-3.5 (A) (1). The parties tend to use the terms “stipend” and “cash

11 collections guarantee interchangeably.

12 Taxpayer contends that they are not taxable as gross receipts because they were not

13 receipts from performing services in New Mexico, but instead represented compensation for

14 making itself available for on-call, after-hours services, in addition to providing a financial

15 incentive for Taxpayers to contract with rural New Mexico health care facilities to provide

16 radiology services. The Department, on the other hand, contends that those types of receipts are

17 fully taxable as services performed in New Mexico.

18 Although the assessment giving rise to this protest also included compensating tax and

19 the interest and penalty associated with that compensating tax, the only issue addressed at the

20 hearing concerned the assessment of gross receipts tax.

21 Presumption of Correctness

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

23 presumed correct and Taxpayer has the burden to overcome the assessment. See Archuleta v.

In the Matter of the Protest of Online Radiology
Page 8 of 16.
1 O’Cheskey, 1972-NMCA-165, ¶11, 84 N.M. 428. Unless otherwise specified, for the purposes of

2 the Tax Administration Act, “tax” is defined to include interest and civil penalty. See NMSA 1978,

3 Section 7-1-3 (X) (2013). Under Regulation 3.1.6.13 NMAC, the presumption of correctness

4 under Section 7-1-17 (C) extends to the Department’s assessment of penalty and interest. See

5 Chevron U.S.A., Inc. v. State ex rel. Dep’t of Taxation & Revenue, 2006-NMCA-50, ¶16, 139 N.M.

6 498, 503 (agency regulations interpreting a statute are presumed proper and are to be given

7 substantial weight).

8 Therefore, it is Taxpayer’s burden to present countervailing evidence or legal argument

9 to establish entitlement to an abatement, in full or in part, of the assessment issued in the protest.

10 See N.M. Taxation & Revenue Dep’t v. Casias Trucking, 2014-NMCA-099, ¶8. When a taxpayer

11 presents sufficient evidence to rebut the presumption, the burden shifts to the Department to

12 show that the assessment is correct. See MPC Ltd. v. N.M. Taxation & Revenue Dep't, 2003-

13 NMCA-21, ¶13, 133 N.M. 217.

14 The assessment in this protest arises from the application of the Gross Receipts and

15 Compensating Tax Act, in which New Mexico imposes a gross receipts tax for the privilege of

16 engaging in business, on the receipts of any person engaged in business in New Mexico. See

17 NMSA 1978, Section 7-9-4 (2002).

18 The term “gross receipts” is broadly defined at NMSA 1978, Section 7-9-3.5 (A) (1) (2007),

19 to mean:

20 the total amount of money or the value of other consideration received
21 from selling property in New Mexico, from leasing or licensing
22 property employed in New Mexico, from granting a right to use a
23 franchise employed in New Mexico, from selling services performed
24 outside New Mexico, the product of which is initially used in New
25 Mexico, or from performing services in New Mexico.

In the Matter of the Protest of Online Radiology
Page 9 of 16.
1 “Engaging in business” is defined as “carrying on or causing to be carried on any activity

2 with the purpose of direct or indirect benefit.” See NMSA 1978, Section 7-9-3.3 (2003). There is

3 a statutory presumption that all receipts of a person engaged in such business are taxable. See NMSA

4 1978, Section 7-9-5 (2002).

5 The term “service” is defined to mean “all activities engaged in for other persons for a

6 consideration, which activities involve predominantly the performance of a service as

7 distinguished from selling or leasing property.” See NMSA 1978, Section 7-9-3 (M).

8 Taxpayer’s position in this protest fails due to insufficient evidence to rebut the presumption

9 of correctness of the relevant assessment. Although the Hearing Officer found the evidence on both

10 sides to be scant, the Department carries no burden until a taxpayer rebuts the presumption of

11 correctness. It is only at that point which the burden shifts to the Department to reestablish the

12 correctness of its assessment. In this protest, the burden never shifted, and the Department was

13 entitled to rely on its presumption.

14 The Hearing Officer found both the quantity and quality of evidence to be insufficient.

15 Taxpayer’s solitary witness, although quite knowledgeable in his field, simply lacked personal, first-

16 hand knowledge of Taxpayer’s business operations during the periods of time relevant to the

17 protest. This observation is in no way intended to be critical of Mr. Ortiz, who demonstrated an

18 exceptional breadth of knowledge. However, he was not necessarily the most qualified witness to

19 discuss Taxpayer’s business practices and operations during the periods of time preceding his

20 involvement in this protest.

21 In fact, the Hearing Officer observed that a considerable amount of Mr. Ortiz’ testimony

22 relied on information he obtained from sources that were not called upon to testify, which by

23 definition, is hearsay. See Rule 11-801(C) NMRA (defining “hearsay” as “a statement that (1) the

In the Matter of the Protest of Online Radiology
Page 10 of 16.
1 declarant does not make while testifying at the current trial or hearing, and (2) a party offers in

2 evidence to prove the truth of the matter asserted in the statement”).

3 Although the Department never raised this as an objection, perhaps because the rules of

4 evidence do not apply, and hearsay is generally admissible in administrative proceedings, excessive

5 hearsay can diminish the credibility of any witness because that witness is required to rely on the

6 accuracy and trustworthiness of others, not present to answer under oath for themselves. Mr. Ortiz is

7 an employee of REDW, LLC, an accounting firm. His testimony was well-received on matters

8 relevant to accounting. However, he was also called upon to discuss Taxpayer’s business operations

9 which was a matter that would have been more appropriately addressed by a witness having

10 personal knowledge in that subject matter. Yet, no one other than Mr. Ortiz and counsel appeared

11 on behalf of Taxpayer in this matter.

12 The consequence was a palpable void in Taxpayer’s case which should have been occupied

13 by a witness having personal, first-hand knowledge pertaining to the extent of Taxpayer’s relevant

14 business operations in or relating to New Mexico. That witness may have been Dr. Alix Vincent or

15 Dr. Samuel Salen. Their names appear throughout Taxpayer’s exhibits, yet they did not appear in

16 person, by telephone, or by videoconference, all of which are available to enhance a party’s ability

17 to appear, participate and present their case. See Regulation 22.600.3.10 NMAC.

18 Dr. Vincent, Dr. Salen, or perhaps another witness having personal, first-hand knowledge,

19 could have elaborated on a variety of issues that may have been relevant to consideration of

20 Taxpayer’s protest, including the sorts of services that were, or perhaps were not performed in New

21 Mexico in exchange for the stipends or cash collection guarantees, how those receipts were

22 determined, or how they might be affected by other sources of income such as direct patient billing

23 for services performed in New Mexico.

In the Matter of the Protest of Online Radiology
Page 11 of 16.
1 For example, testimony and argument asserted that the stipend was intended to induce

2 Taxpayer to contract with rural health care providers in New Mexico by compensating it for the

3 costs it incurred for providing after-hours, out-of-state, on-call coverage. None of the stipend

4 payments, it argued, should have been allocated to New Mexico or be subject to gross receipts tax

5 because “the stipend payment is a payment for services not performed” [Rec. 00:12:30].

6 Yet, Taxpayer’s exhibits seem to reveal that the stipend was also intended to compensate

7 Taxpayer for other functions as well, including a medical directorship and interventional support

8 services. Perhaps a witness with personal knowledge could have lent additional evidentiary support

9 to counsel’s argument or clarified why the Hearing Officer should view after-hours coverage in

10 isolation from other duties the stipend was intended to compensate. See e.g. Taxpayer Ex. 1.4

11 (Paras. 1.0.5 a – f)

12 Another example arises from Mr. Ortiz’ testimony that when a medical facility required

13 after-hours radiology services, it would transmit the images to Taxpayer in California, which would

14 then re-transmit the images to a radiologist that might be situated anywhere in the United States,

15 except New Mexico. Yet, it was obvious that Mr. Ortiz’ testimony relied on hearsay and lacked the

16 sort of foundation that might establish the testimony as trustworthy and reliable. A better source of

17 that evidence would once again be Dr. Vincent or Dr. Salen, or anyone having personal knowledge

18 not based on hearsay.

19 Mr. Ortiz’ effort to essentially stand in place for the Taxpayer was admirable, but he could

20 not ultimately substitute for the Taxpayer. The resulting quandary is that although Mr. Ortiz’

21 testimony was credible in matters for which he had personal, first-hand knowledge, his testimony in

22 reference to non-accounting issues was of little weight, as it relied exclusively on hearsay.

In the Matter of the Protest of Online Radiology
Page 12 of 16.
1 The legal residuum rule requires that an agency’s administrative decision be “supported

2 by some evidence that would be admissible under the rules” of evidence. See Chavez v. City of

3 Albuquerque, 124 N.M. 239, 241, 1997 NMCA 111, 947 P.2d 1059, 1061 (N.M. Ct. App. 1997).

4 As the New Mexico Court of Appeals explained in Anaya v. New Mexico State Personnel Board,

5 107 N.M. 622, 626, 762 P.2d 909, 913 (N.M. Ct. App 1988),

6 [t]he legal residuum rule does not require that all evidence
7 considered by the administrative agency be legally admissible
8 evidence, but only “that an administrative action be supported by
9 some evidence that would be admissible in a jury trial” Duke City
10 Lumbar Co. v. New Env’tl Improvement Bd., 101 N.M. at 295, 681
11 P.2d at 721.

12 Mr. Ortiz’ testimony on all matters for which he did not possess personal knowledge falls

13 short of satisfying the legal residuum rule. This would essentially encompass all non-accounting

14 issues, including the nature and location of services Taxpayer provided in consideration for its

15 stipend or cash collection guarantee payments.

16 Taxpayer should note that nothing stated herein should be construed as criticism of Mr.

17 Jackson, Ms. Bruckner, or Mr. Ortiz. They were diligent and thorough. Yet their best efforts could

18 not overcome the void created by Taxpayer’s absence. The entirety of Taxpayer’s case in chief, not

19 including opening statements or closing arguments, was no more than 42 minutes given a

20 controversy involving more than $260,000.00 in gross receipts tax, penalty and interest. The

21 Department’s case took no more than 14 minutes. This is not to suggest that the quantity of

22 evidence is more important than the quality of evidence, but to highlight the Hearing Officer’s

23 perception that the protest was supported by little of both.

24 Our courts have recognized that “[i]t is not the responsibility of . . . the trial court to

25 search the record for evidence to support a claim or assertion.” See State v. Maestas, 2018-

26 NMSC-010, ¶51, 412 P.3d 79. The Hearing Officer, similar to a judge has a limited and neutral

In the Matter of the Protest of Online Radiology
Page 13 of 16.
1 role in the adversarial process, and must be wary of assuming the role of an advocate who combs

2 the record to make a party’s case for it.” See Adler v. Wal-Mart Stores, 144 F.3d 664, 672 (10th

3 Cir. 1998).

4 Nevertheless, in the midst of what the Hearing Officer perceives as a paltry record, there

5 exists the compulsion to scour what is available to solidify one position over another and satisfy

6 the need to see justice done. In this case, the Hearing Officer repeatedly revisited, reexamined and

7 reevaluated the record, but found nothing to compel another outcome. The Hearing Officer must

8 find that Taxpayer did not present sufficient evidence to rebut the presumption that its receipts from

9 the stipend, or cash collection guarantee, were taxable, and for that reason, it also failed to overcome

10 the statutory presumption of correctness that attached to the assessment.

11 Taxpayer’s protest should be denied.

12 CONCLUSIONS OF LAW

13 A. Taxpayer filed timely, written protests of the Department’s assessment and

14 jurisdiction lies over the parties and the subject matter of the protests.

15 B. The hearing was timely set and held under NMSA 1978, Section 7-1B-8 (2015).

16 C. The assessment issued in this case is presumed correct and Taxpayer has the

17 burden to overcome the assessment. See NMSA 1978, Section 7-1-17 (C) (2007); See Archuleta

18 v. O’Cheskey, 1972-NMCA-165, ¶11, 84 N.M. 428.

19 D. Taxpayer did not present countervailing evidence or legal argument to establish

20 entitlement to an abatement, in full or in part, of the assessment issued in the protest. See N.M.

21 Taxation & Revenue Dep’t v. Casias Trucking, 2014-NMCA-099, ¶8.

22 E. The burden did not shift to the Department to show that the assessment is correct.

23 See MPC Ltd. v. N.M. Taxation & Revenue Dep't, 2003-NMCA-21, ¶13, 133 N.M. 217.

In the Matter of the Protest of Online Radiology
Page 14 of 16.
1 For the foregoing reasons, the Taxpayer’s protest IS DENIED. IT IS ORDERED that

2 Taxpayers remit payment in the amounts of $187,922.79 in gross receipts tax, $39,076.28 in gross

3 receipts tax penalty, $21,959.64 in gross receipts tax interest, $46,693.00 in compensating tax,

4 $7,846.85 in compensating tax penalty, and $5,686.93 in compensating tax interest, the sum of

5 $16,088.86 in interest accruing since the assessment through the date of the hearing, and

6 additional interest accruing from the date of the hearing until the liability is satisfied.

7 DATED: July 16, 2019

8
9 Chris Romero
10 Hearing Officer
11 Administrative Hearings Office
12 P.O. Box 6400
13 Santa Fe, NM 87502

14 NOTICE OF RIGHT TO APPEAL

15 Pursuant to NMSA 1978, Section 7-1-25 (2015), the parties have the right to appeal this

16 decision by filing a notice of appeal with the New Mexico Court of Appeals within 30 days of the

17 date shown above. If an appeal is not timely filed with the Court of Appeals within 30 days, this

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

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

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

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

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

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

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

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

In the Matter of the Protest of Online Radiology
Page 15 of 16.
1 CERTIFICATE OF SERVICE

2 On July 16, 2019, a copy of the foregoing Decision and Order was submitted to the parties

3 listed below in the following manner:

4 First Class Mail Interagency State Mail
5

6 INTENTIONALLY BLANK
7
8 John Griego
9 Legal Assistant
10 Administrative Hearings Office
11 P.O. Box 6400
12 Santa Fe, NM 87502

In the Matter of the Protest of Online Radiology
Page 16 of 16.