Could UPS replace New Mexico's mileage-based trucking sales-factor formula with its state-to-state package-volume method because the regulatory formula grossly distorted its in-state business activity?
Apply this to your situation
This page answers the general question as of 2019. Ezel answers yours, under current New Mexico tax law, with citations.
Plain-English summary
UPS proved that New Mexico's mileage-based trucking formula grossly distorted its corporate income tax sales factor and won full abatement of the assessment. The Administrative Hearings Office allowed UPS to use its state-to-state package-volume method as a reasonable equitable adjustment.
The Multistate Tax Commission audit covered 2007 through 2009. The Department's original notice assessed $3,024,065 of corporate income tax, $604,813 of penalty, and $455,008.63 of interest, for a total of $4,083,886.63.
Regulation 3.5.19.15 ordinarily applied a special mileage-based apportionment method to trucking companies. But Section 7-4-19 permitted an equitable adjustment when the prescribed formula did not fairly represent the taxpayer's New Mexico business activity and the proposed alternative was reasonable.
Mileage measured distance, not UPS's economic activity
UPS showed that New Mexico's large geography and comparatively dispersed customers required many miles to deliver relatively few packages. Its New Mexico sales per combined package-car and tractor mile were $2.60 in 2007, $2.51 in 2008, and $2.46 in 2009. Company-wide sales per mile were $10.55 in 2009—more than four times the New Mexico figure.
The resulting attribution was extreme:
- For 2007, UPS's state-to-state method attributed $86,009,161 to New Mexico and actual New Mexico billings were $56,178,891. The MTC mileage method attributed $681,827,729—1,113% above actual revenue.
- For 2008, the volume method attributed $88,214,706 and actual billings were $53,621,784. The mileage method attributed $634,817,086—1,083% above actual revenue.
- For 2009, the volume method attributed $90,205,556 and actual billings were $50,634,404. The mileage method attributed $723,523,285—1,328% above actual revenue.
In 2009, New Mexico ranked 45th among states by UPS's actual billed revenue. The mileage formula moved it to 12th. The AHO found that result bore no rational relationship to the economic activity UPS demonstrated in New Mexico and violated the external-consistency requirement for fair apportionment.
The package-volume alternative was reasonable
UPS's state-to-state volume method used actual package volume, assigning 50% of an interstate shipment to the origin state and 50% to the destination state. It used the highest possible zone charge rather than customer discount rates, so its New Mexico attribution was higher than actual billed revenue.
UPS had used the method since 1988. The MTC and New Mexico previously accepted it for 1988–1990 after recognizing that mileage distorted UPS's New Mexico business, and the Department accepted it again for 1997–2000. UPS then asked to continue the method; the Department did not respond and accepted seven more years of returns using it.
The AHO found the history relevant but did not treat the old closing agreement as controlling later periods. The current evidence independently showed that the volume method was much closer to actual New Mexico revenue and was a reasonable alternative under Section 7-4-19.
The Department did not rebuild its assessment
At the hearing, the Department conceded an MTC adjustment reducing assessed tax principal from $3,024,065 to $2,421,979 and another $48,300 reduction for wrongly disallowed nonbusiness income. It also agreed that missing intrastate mileage required another downward recalculation. But it never supplied the promised updated liability or evidence sufficient to reestablish the assessment after UPS rebutted its presumed correctness.
Result: protest GRANTED. The assessment was abated in full, including tax, penalty, and interest. If UPS still sought costs and fees, the decision required a written motion within ten days.
What this means for you
Interstate trucking and delivery companies
A regulatory industry formula normally applies, but it is not immune from challenge. A taxpayer seeking departure must provide clear, quantified evidence that the formula as a whole misrepresents in-state activity and must offer a reasonable alternative.
Businesses operating across large, lower-density states
Physical activity such as miles traveled can overstate economic activity where serving fewer customers requires longer routes. This decision compared attributed sales with actual billings, revenue rankings, vehicle composition, and sales per mile to demonstrate distortion.
Multistate tax departments
Document why an alternative method reflects the business better than the default. UPS's long filing history and earlier agency acceptance helped establish reasonableness, but the contemporaneous 2007–2009 data was still essential.
Taxpayers relying on an old closing agreement
The AHO considered UPS's earlier closing agreement as relevant evidence of the method's origins and prior acceptance, not as dispositive for later tax years.
Common questions
Q: Did the AHO say New Mexico's trucking regulation was invalid for everyone?
A: No. UPS was subject to Regulation 3.5.19.15. The decision allowed an equitable adjustment because UPS proved that applying the regulation to its particular facts grossly distorted New Mexico activity.
Q: What is external consistency?
A: As applied here, it required the apportionment factor to reflect a reasonable sense of how the taxpayer's income was generated in the state. The mileage result attributed New Mexico sales far out of proportion to UPS's demonstrated business activity.
Q: Why was the state-to-state volume method acceptable if it exceeded actual billings?
A: It used maximum zone charges without customer discounts, so it was conservative in New Mexico's favor. Its figures were still much closer to actual revenue than the mileage method's results.
Q: Did previous Department acceptance automatically authorize the method forever?
A: No. The decision said the earlier closing agreement was conclusive only for its own period. The history supported reasonableness, while UPS's current evidence established distortion for 2007–2009.
Q: How much of the assessment was abated?
A: The order abated the assessment in full. The original notice totaled $4,083,886.63, although the Department had already conceded multiple downward adjustments during the proceeding.
Citations and references
Statutes and regulations:
- NMSA 1978, § 7-2A-3 — corporate income tax for an out-of-state corporation doing business in New Mexico
- NMSA 1978, § 7-4-19 — equitable adjustment of an unrepresentative apportionment formula
- NMSA 1978, § 7-1-17(C) — presumption that an assessment is correct
- NMSA 1978, § 7-1-20 — closing agreements
- Regulation 3.5.19.15 NMAC — special trucking-company apportionment
- Regulation 3.5.19.9(C) NMAC — alternative apportionment
Principal authorities discussed:
- Hans Rees' Sons, Inc. v. North Carolina, 283 U.S. 123 (1931) — grossly disproportionate attribution
- Montana Department of Revenue v. United Parcel Service, 252 Mont. 476, 830 P.2d 1259 (1992) — mileage distortion and UPS's volume method in a large, lower-population state
- Kmart Properties, Inc. v. Taxation and Revenue Department, 2006-NMCA-026 — burden for alternative apportionment
- MPC Ltd. v. New Mexico Taxation and Revenue Department, 2003-NMCA-021 — burden shifts after the taxpayer rebuts an assessment
Source
- Listing: New Mexico Decisions & Orders
- Decision post: United Parcel Service
- Decision PDF: D&O 19-27
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 UNITED PARCEL SERVICE INC. (OHIO) & AFFILIATES
6 TO ASSESSMENT ISSUED UNDER LETTER
7 ID NO. L1388538320
8 v. D&O No. 19-27
9 NEW MEXICO TAXATION AND REVENUE DEPARTMENT
10 DECISION AND ORDER
11 On June 5 and June 6, 2018, Chief Hearing Officer Brian VanDenzen, Esq., conducted a
12 merits administrative hearing in the matter of the tax protest of the United Parcel Service, Inc.
13 (Ohio) & Affiliates (Taxpayer) pursuant to the Tax Administration Act and the Administrative
14 Hearings Office Act. At the hearing, Attorney J. Edward Goff, appearing pro hac vice, and
15 Attorney Joe Lennihan, appeared representing Taxpayer. Taxpayer employee Melissa Mackay
16 also observed the hearing. Staff Attorney Peter Breen appeared, representing the opposing party
17 in the protest, the Taxation and Revenue Department (Department).
18 Taxpayer employees Mr. Rick Bishop and Mr. Anthony Estrada appeared as Taxpayer
19 witnesses. Taxpayer also called former Department employee Andrick Tsabetsaye and
20 Department employee Tamara Smith as witnesses. Department protest auditor Danny Pogan
21 appeared as a witness for the Department. Taxpayer Exhibits #1-83 were admitted into the
22 record. The parties submitted the transcript of the proceeding on October 29, 2018. The parties
23 submitted their respective written closing arguments, proposed findings of fact, and proposed
24 conclusions of law on December 10, 2018, making this matter ripe for a decision as of that date.
25 In quick summary, this protest involves a Multistate Tax Commission (MTC) audit of
26 Taxpayer for tax years 2007, 2008, and 2009 that resulted in the Department’s assessment of
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 1 of 64.
1 additional corporate income tax, penalty, and interest for those years. Taxpayer argues in protest
2 that the special trucking apportionment method under Regulation 3.5.19.15 NMAC that the MTC
3 and the Department relied upon in the audit and subsequent assessment of additional tax distorts
4 Taxpayer’s true business activities in New Mexico. Therefore, Taxpayer contends that it is entitled
5 to an equitable adjustment to the apportionment method in the form of the state-to-state volume
6 method it has used since tax year 1988, a method that the Department twice previously accepted in
7 resolving two other earlier audits. Ultimately, after making findings of fact and discussing the issue
8 in more detail throughout this decision, the Hearing Officer finds that Taxpayer did establish by
9 clear and cogent evidence that the special trucking company regulatory method for apportionment
10 results in distortion of Taxpayer’s true New Mexico business activities in violation of external
11 consistency requirements and that Taxpayer established the state-to-state volume method was
12 reasonable, entitling Taxpayer to that equitable adjustment of the apportionment formula. Therefore,
13 Taxpayer’s protest must be granted. IT IS DECIDED AND ORDERED AS FOLLOWS:
14 FINDINGS OF FACT
15 Jurisdictional Findings.
16 1. On September 30, 2013, under letter id. no. L1388538320, the Department issued
17 a Notice Assessment for $3,024,065.00 in corporate income tax, $604,813.00 in penalty, and
18 $455,008.63 in interest for a then-total assessment of $4,083,886.63 for the corporate income tax
19 reporting period of December 31, 2007 through December 31, 2009. [Administrative File;
20 Hearing Request Packet, Taxpayer Ex. #25].
21 2. On December 23, 2013, Taxpayer filed a formal protest of the assessment.
22 [Administrative File; Hearing Request Packet].
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 2 of 64.
1 3. On January 13, 2014, the Department acknowledged receipt of a valid protest.
2 [Administrative File; Hearing Request Packet].
3 4. On February 13, 2014, the Taxation and Revenue Department requested a hearing
4 with the Hearings Bureau 1. [Administrative File; Hearing Request Packet].
5 5. On February 14, 2014, the Hearings Bureau set this matter for a scheduling
6 hearing on March 3, 2014. [Administrative File].
7 6. On March 3, 2014, a scheduling hearing occurred in this matter. Neither party
8 objected that conducting the scheduling hearing satisfied the statutory 90-day hearing
9 requirement. [Administrative File].
10 7. The merits hearing in this matter occurred on June 5 and June 6, 2018.
11 8. Near the conclusion of the merits hearing, and without objection, the Department
12 was directed to provide an updated spreadsheet of alleged liabilities as of the conclusion of the
13 hearing, given the concessions that the Department made in this matter. [Tr. 531-532].
14 9. The Department has never filed an updated spreadsheet of liabilities as it agreed
15 to do at the conclusion of the hearing.
16 10. At the request of Taxpayer, the Hearing Officer ordered written closing arguments
17 and proposed findings of facts be submitted after conclusion of the evidentiary hearing within
18 90-days of submission of the final completed transcript of the hearing. [Tr. 541:23-544:19].
1
On July 1, 2015, pursuant to the Administrative Hearings Office Act, the Hearings Bureau left the Taxation and
Revenue Department and became the independent Administrative Hearings Office (“AHO”). For events before July
1, 2015, the Hearings Bureau will be used even though this decision is issued under AHO’s caption. AHO will be
used for events after July 1, 2015.
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 3 of 64.
1 11. On October 29, 2018, Taxpayer submitted a copy of the final transcripts of the
2 two-day hearing, along with notice of errata and corrected certification from the reporting
3 service. [Administrative Record].
4 12. On December 10, 2018, Taxpayer submitted its written closing argument and
5 proposed findings of fact and conclusions of law. [Administrative Record].
6 13. On December 10, 2018, the Department filed its written closing argument and
7 proposed findings of fact. [Administrative Record].
8 Substantive Findings
9 Witness Background
10 14. Anthony Estrada is employed by Taxpayer as an operations manager, on road
11 supervisor, in New Mexico. He has been employed with Taxpayer for approximately 18-19
12 years, working for the last 14-years in management. [Tr. 140; 201].
13 15. Rick Bishop is the state and local tax director for Taxpayer. Mr. Bishop has a
14 bachelor’s degree and a master’s degree in accounting from the University of Georgia. [Tr. 256].
15 16. Tamara Smith is a staff manager of the Department’s Commercial Vehicle
16 Bureau. She has a bachelor’s degree and 10-years work experience at the Department [Tr. 60].
17 17. Andrick Tsabetsaye is a retired Department employee who originally was
18 assigned to this protest when he was a Department protest auditor. [Tr. 85-86].
19 18. Danny Pogan is the Department’s protest auditor assigned to this case after the
20 retirement of Mr. Tsabetsaye. Mr. Pogan has a bachelor’s degree in accounting from New
21 Mexico State University. Mr. Pogan has been employed by the Department since 1991 as an
22 auditor, whose duties included conducting corporate income tax audits. [Tr. 507-509].
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 4 of 64.
1 Taxpayer’s Business and Corporate Structure.
2 19. Taxpayer, United Parcel Service, Inc. (Ohio) and affiliates, is one of the
3 worldwide leaders in the shipping, delivery, distribution, freight, supply chain management, and
4 logistics business. [Taxpayer Ex. #81; Taxpayer. Ex. #82; Taxpayer Ex. #83; Administrative
5 Notice 2].
6 20. Taxpayer is an entity within the broader United Parcel Service Organization.
7 [Taxpayer Ex. #52].
8 21. At the top of the corporate structure is United Parcel Services, Inc. (Delaware), an
9 entity that went public in 1999. [Taxpayer Ex. #52; Tr. 262].
10 22. Underneath United Parcel Services, Inc. (Delaware) is a holding company, United
11 Parcel Service of America, Inc. (Delaware). [Taxpayer Ex. #52; Tr. 263].
12 23. Underneath the holding company United Parcel Services, Inc. (Delaware) are
13 numerous other entities. [Taxpayer Ex. #52].
14 24. Underneath the holding company United Parcel Services, Inc. (Delaware) is
15 United Parcel Service Company (Delaware), an airline company used for expedited shipping of
16 packages. [Taxpayer Ex. #52; Tr. 263-265].
17 25. Underneath the holding company United Parcel Services, Inc. (Delaware) is
18 Overnite Corporation (Virginia), which is a holding company above UPS Ground Freight Inc.
19 (Virginia), a company doing business as UPS Ground Freight. [Taxpayer Ex. #52; Tr. 266].
20 26. Underneath the holding company United Parcel Services, Inc. (Delaware) is UPS
21 Worldwide Forwarding, Inc. (Delaware), a freight forwarding company. [Taxpayer Ex. #52; Tr.
22 265].
2
The Hearing Officer will take administrative note of common knowledge and observation of UPS known to
virtually everyone through shared experience.
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 5 of 64.
1 27. Underneath UPS Worldwide Forwarding, Inc. (Delaware) are United Parcel
2 Service Inc. (Ohio), the Taxpayer in this protest, and United Parcel Service, Inc. (New York),
3 which merged into Taxpayer on January 1, 2009. [Taxpayer Ex. #52; Tr. 265-269].
4 28. In 2007 and 2008, United Parcel Service Inc. (Ohio) provided package delivery
5 services in 37 states. [Tr. 266].
6 29. In 2007 and 2008, United Parcel Service Inc. (New York) provided package
7 delivery services in 13 northeastern states plus the District of Columbia. [Tr. 266].
8 30. In 2009, United Parcel Service Inc. (New York) merged with United Parcel
9 Service Inc. (Ohio). [Tr. 311-312].
10 Taxpayer’s Operations
11 31. In 2007, over its 252 operating days, Taxpayer had an average daily package
12 volume of 13,857,000 packages in the United States, which translates to approximately 3.49
13 billion packages handled domestically. [Taxpayer Ex. #81.2344; Tr. 390].
14 32. In 2008, over its 252 operating days, Taxpayer had an average daily package
15 volume of 13,576,00 packages in the United States, which translates to approximately 3.42
16 billion packages handled domestically. [Taxpayer Ex. #82.2454; Tr. 393-394].
17 33. In 2009, over its 253 operating days, Taxpayer had an average daily package
18 volume of 13,050,00 packages in the United States, which translates to approximately 3.30
19 billion packages handled domestically. [Taxpayer Ex. #83.2545; Tr. 394-395].
20 34. Taxpayer relies on a hub and spoke system for package delivery. [Tr. 272-273].
21 35. Taxpayer’s employees use package cars to pick up and deliver packages to and
22 from their residential and commercial destinations.
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 6 of 64.
1 36. Package cars are the familiar, ubiquitous brown delivery vehicles/trucks/vans
2 used by Taxpayer to deliver packages to their final delivery destinations. These package cars
3 usually have two large sliding doors (often left propped open while the vehicle is in motion) in
4 the driver’s compartment, and a large rear package cargo area with a rolling, vertical door where
5 packages are stored. [Taxpayer Ex. #53; Tr. 142-145; Administrative Notice].
6 37. Package cars are vehicles custom made for Taxpayer by various manufacturers.
7 [Tr. 145].
8 38. Package cars have a gross vehicle weight of approximately 18,000 pounds, under
9 New Mexico’s 26,000-pound threshold for registration for weight distance tax. [Tr. 144:18-25].
10 39. The package cars are systematically loaded with packages for ease of delivery
11 using a meticulous UPS system that prioritizes the type of delivery (business vs. residential),
12 route, identification, bulk stops, and time commitments. [Tr. 145; Tr. 158-159].
13 40. Taxpayer uses internal operations employees to sort, organize, and preload the
14 package cars according to its unique loading system. [Tr. 159].
15 41. A package car driver does not have a Commercial Driver’s License (CDL). [Tr.
16 203].
17 42. The package car driver drives the packages to their destination, unloads them
18 from the package car and delivers the packages to their destination using hand carts/trucks or by
19 carrying the packages. [Tr. 146; Administrative Notice].
20 43. On average, a typical Taxpayer package car driver will make between 160-170
21 stops per day per package car. [Tr. 194].
22 44. An average package car drove 60.9 miles per day in 2009. [Taxpayer Ex.
23 #68.1540; Tr. 197].
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 7 of 64.
1 45. Taxpayer also employs package feeder trucks and attached trailers to move
2 packages between Taxpayer’s centers/hubs. [Taxpayer Ex. #54; Tr. 146-148].
3 46. Package feeder truck drivers have CDLs. [Tr. 203].
4 47. The packages are systematically loaded into the feeder truck’s attached trailers
5 using a special UPS method that does not involve pallets. [Tr. 149].
6 48. An average feeder truck will make 3-4 stops on average per day. [Tr. 194-195].
7 49. An average feeder truck drove 266.7 miles per day in 2009. [Taxpayer Ex.
8 #68.1540; Tr. 197].
9 50. Taxpayer uses internal operations employees to sort, organize, preload, load and
10 unload the feeder trailers according to its unique loading system. [Tr. 173-176].
11 51. Taxpayer also uses rail flatcars to transport its trailers, which is referred to as
12 trailer-owned flatcars or TOFC. [Taxpayer Ex. #56; Tr. 151-152].
13 52. In this scenario, Taxpayer’s feeder drivers go to a rail facility where a crane lifts
14 the loaded trailer to or from the flat rail car to or from Taxpayer’s tractor truck [Taxpayer Ex.
15 #56; Tr. 152-154].
16 53. Taxpayer owns the trailers involved in the TOFC but does not own the flat rail
17 cars. [Tr. 155].
18 54. Taxpayer also uses jet airplanes, called browntails by Taxpayer, to transport
19 packages to package cars and package feeder trucks. [Taxpayer Ex. #57; Tr. 154-155].
20 55. The browntails are loaded with packages using a similar system as package cars
21 and package feeder trucks. [Tr. 155-156].
22 56. Taxpayer’s employees use a handheld device called a DIAD extensively as a
23 method of communication for delivery and pick up information. [Tr. 161-162].
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 8 of 64.
1 57. The DIAD is a small handheld computer device (similar in size and shape to a
2 large, wired telephone or early brick-style cellphones) with a small screen, a mini alphanumeric
3 keyboard, and an optical scanner. [Taxpayer Ex. #61; Administrative Notice].
4 58. Package drivers use the DIAD to capture delivery confirmation for customers, to
5 find packages within the package car loadout through UPS packing system, organize deliveries,
6 and to communicate with headquarters. [Tr. 161-163].
7 59. Taxpayer’s workforce spends approximately 13% of their time driving motor
8 vehicles. [Tr. 384-385].
9 60. In 2007, Taxpayer as a company (not including UPS New York which had not yet
10 merged) had a total of package and tractor miles of 1,983,985,780. [Taxpayer Ex. 68.1537].
11 61. In 2007, Taxpayer as a company (not including UPS New York which had not yet
12 merged) billed $22,115,770,234.00 in sales. [Taxpayer Ex. 71.1548].
13 62. Using Taxpayer’s 2007 billed sales of $22,115,770,234.00 and the combined
14 feeder and tractor mileage total of 1,983,985,780 Taxpayer generated $11.15 of sales per feeder
15 and tractor mile driven as a corporation (not including UPS New York which had not yet
16 merged) in 2007. [Taxpayer Ex. 68.1540; Taxpayer Ex. 71.1548].
17 63. In 2008, Taxpayer as a company (not including UPS New York which had not yet
18 merged with Taxpayer) had a total of package and tractor miles of 1,996,328,575. [Taxpayer Ex.
19 68.1539].
20 64. In 2008, Taxpayer as a company (not including UPS New York which had not yet
21 merged) billed $20,682,752,645.00 in sales. [Taxpayer Ex. 71.1550].
22 65. Using Taxpayer’s 2008 billed everywhere sales of $20,682,752,645.00 and the
23 combined feeder and tractor mileage total of 1,996,328,575 Taxpayer generated $10.36 of sales
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 9 of 64.
1 per feeder and tractor mile driven as a corporation (not including UPS New York which had not
2 yet merged) in 2008. [Taxpayer Ex. 68.1539; Taxpayer Ex. 71.1550].
3 66. In 2009, Taxpayer as a company had a total of package and tractor miles of
4 1,996,328,575. [Taxpayer Ex. 68.1539].
5 67. In 2009, Taxpayer as a company billed $25,684,403,456.00 in sales. [Taxpayer
6 Ex. 71.1552].
7 68. Using Taxpayer’s 2009 billed everywhere sales of $25,684,403,456.00 and the
8 combined feeder and tractor mileage total of 2,434,718,308 Taxpayer generated $10.55 of sales
9 per feeder and tractor mile driven as a corporation in 2009. [Taxpayer Ex. 68.1540; Taxpayer Ex.
10 71.1552].
11 69. A comparison of the mileage numbers by state on Taxpayer Exhibit #68 with the
12 billed revenue numbers by state on Taxpayer Exhibit #71 allows the calculation of sales per
13 feeder and tractor mile driven by various states in 2009 as follows:
14 a. Montana, $2.53 of sales per feeder and tractor mile driven in 2009.
15 b. Texas, $9.16 of sales per feeder and tractor mile driven in 2009.
16 c. Tennessee, $10.18 of sales per feeder and tractor mile driven in 2009.
17 d. Indiana, $8.73 of sales per feeder and tractor mile driven in 2009.
18 [Taxpayer Ex. 68.1540; Taxpayer Ex. 71.1551-52].
19 70. Taxpayer does not handle palletized cargo. [Tr. 226].
20 UPS Ground Freight.
21 71. UPS Ground Freight, a distinct entity from Taxpayer, also employs tractors and
22 trailers to conduct its freight shipping business. However, UPS Ground Freight is not used in the
23 UPS package delivery system. [Tr. 149-150; 187].
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 10 of 64.
1 72. UPS Ground Freight is a separate business from Taxpayer. [Tr. 276].
2 73. UPS Ground Freight is the LTL trucking company. [Tr. 277].
3 74. UPS Ground Freight uses a different loading warehouse system to load its freight
4 into UPS Freight trucks. [Tr. 165-166].
5 75. UPS Ground Freight and Taxpayer do not share trucks, trailers, tractors, packages
6 cars, or drivers. [Tr. 187; 230].
7 76. UPS Ground Freight trucks and trailers are never intermingled with Taxpayer’s
8 parcel business. [Tr. 275-276].
9 77. UPS Ground Freight does not deliver packages to Taxpayer for the purposes of
10 sorting for subsequent delivery to a consignee (end receiver). [Tr. 225-226].
11 78. The only time Taxpayer receives packages from UPS Ground Freight is when
12 Taxpayer itself is the final consignee (end receiver) of the shipped item, for instance when
13 Taxpayer receives an engine for vehicle maintenance. [Tr. 225-226].
14 79. For operational and administrative efficiency, UPS Ground Freight registers all of
15 its vehicles not only in the state in which a vehicle is stationed, but in all states in which a
16 vehicle travels. [Tr. 276-281].
17 80. Department’s counsel asked Ms. Tamara Smith, Weight Distance Tax Bureau
18 Chief, to research Taxpayer’s vehicles registered under New Mexico’s Weight Distance Tax Act.
19 81. Ms. Smith apparently was provided the wrong entity information and instead
20 researched the number of vehicles UPS Ground Freight had registered in New Mexico under the
21 Weight Distance Tax Program and its payments under the program for the first quarter of 2017 (a
22 year not relevant to the audit period). [Taxpayer Ex. #78; Tr. 64-74; 276-281].
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 11 of 64.
1 82. UPS Ground Freight apportions and pays its taxes based on the Department’s
2 special reporting method for trucking companies by using a mileage method. [Tr. 276-277; Tr.
3 436].
4 83. The MTC made no audit adjustments to UPS Ground Freight’s reporting method
5 in New Mexico during the relevant audit years. [Tr. 274-275].
6 Taxpayer’s New Mexico Operations
7 84. Taxpayer’s operations in New Mexico are part of Taxpayer’s Desert Mountain
8 District, which includes Arizona and New Mexico. [Taxpayer Ex. #70; Tr. 185; Tr. 223; Tr. 380-
9 383].
10 85. Using a three-year average of 2007, 2008, and 2009, Taxpayer employed on
11 average 5,963 people annually in the Desert Mountain District (New Mexico and Arizona).
12 a. On average, 2,448 (41.1%) of those annual employees were hub and sort
13 union employees.
14 b. On average, 2,171 (36.4%) of those annual employees were union drivers,
15 including both package car and feeder truck drivers.
16 i. 1,904 (31.9%) of those employees were package car drivers.
17 ii. 266 (4.5%) were feeder truck drivers.
18 c. On average, 67 (1.1%) of those annual employees were union auto mechanics.
19 d. On average, 808 (13.6%) of those annual employees were in management.
20 e. On average, 469 (7.9%) of those annual employees were clerical.
21 [Taxpayer Ex. #70; Tr. 185-187; Tr. 380-385].
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 12 of 64.
1 86. New Mexico has 19 centers/hubs throughout the state in places like Albuquerque,
2 Santa Fe, Grants, Gallup, Farmington, Las Vegas, Springer, Taos, Hobbs, Carlsbad, and Roswell.
3 [Tr. 148; Tr. 171].
4 87. At the Albuquerque Taxpayer hub facility, there are 82 bays for package cars and
5 32 doors for package feeder semi-trucks. [Tr. 204-206].
6 88. In New Mexico, there is a TOFC loading and unloading facility in Albuquerque
7 called the Woodward facility. [Taxpayer Ex. #56; Tr. 154].
8 89. Taxpayer has approximately 70 employees stationed at the Albuquerque
9 International Sunport who load and unload Taxpayer’s browntail aircrafts according to
10 Taxpayer’s package system. [Tr. 166-167].
11 90. Depending on the time of year, Taxpayer’s vehicle count will vary. [Tr. 187-193].
12 91. In 2007, Taxpayer owned or rented 556 package cars and 87 feeder tractors in
13 New Mexico. [Taxpayer Ex. #69.1541; Tr. 193].
14 92. In 2007, package cars made up 86.5% of Taxpayer’s New Mexico 643 vehicle
15 fleet. [Taxpayer Ex. #69.1541; Tr. 193].
16 93. New Mexico’s vehicle fleet constituted .6% of Taxpayer’s national fleet in 2007,
17 which consisted of 89,760 package cars and 16,272 feeder tractors outside of New Mexico.
18 [Taxpayer Ex. #69.1541; Tr. 194; Tr. 379].
19 94. In 2008, Taxpayer owned or rented 574 package cars and 58 feeder tractors in
20 New Mexico. [Taxpayer Ex. #69.1542; Tr. 377-380].
21 95. In 2008, package cars constituted 90.8% of Taxpayer’s New Mexico 632 vehicle
22 fleet. [Taxpayer Ex. #69.1542].
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 13 of 64.
1 96. New Mexico’s vehicle fleet constituted .6% of Taxpayer’s national fleet in 2008.
2 [Taxpayer Ex. #69.1542].
3 97. In 2009, Taxpayer owned or rented 550 package cars and 81 feeder tractors in
4 New Mexico. [Taxpayer Ex. #69.1544; Tr. 380].
5 98. In 2009, package cars constituted 87.2% of Taxpayer’s New Mexico 631 vehicle
6 fleet. [Taxpayer Ex. #69.1544].
7 99. New Mexico’s vehicle fleet constituted .59% of Taxpayer’s national fleet in 2009.
8 [Taxpayer Ex. #69.1544].
9 100. In 2007, Taxpayer (not including UPS, New York, which had not yet merged with
10 Taxpayer) had 10,104,618 package car miles and 11,492,288 tractor truck miles in New Mexico
11 for a combined total mileage of 21,596,906. [Taxpayer Ex. 68.1537].
12 101. Using Taxpayer’s 2007 billed New Mexico sales of $56,178,891.00 and the
13 combined New Mexico feeder and tractor mileage total of 21,596,906, Taxpayer generated $2.60
14 of sales per feeder and tractor mile driven in New Mexico in 2007. [Taxpayer Ex. 68.1537;
15 Taxpayer Ex. 71.1548].
16 102. In 2008, Taxpayer (not including UPS, New York, which had not yet merged with
17 Taxpayer) had 10,249,517 package car miles and 11,109,112 tractor truck miles in New Mexico
18 for a combined total mileage of 21,358,629. [Taxpayer Ex. 68.1539].
19 103. Using Taxpayer’s 2008 billed New Mexico sales of $53,621,784.00 and the
20 combined New Mexico feeder and tractor mileage total of 21,358,629, Taxpayer generated $2.51
21 of sales per feeder and tractor mile driven in New Mexico in 2008. [Taxpayer Ex. 68.1539;
22 Taxpayer Ex. 71.1549].
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 14 of 64.
1 104. In 2009, Taxpayer (post-merger with UPS, New York) had 9,864,559 package car
2 miles and 10,699,290 tractor truck miles in New Mexico for a combined total mileage of
3 20,563,849. [Taxpayer Ex. 68.1540].
4 105. Using Taxpayer’s 2009 billed New Mexico sales of $50,634,404.00 and the
5 combined New Mexico feeder and tractor mileage total of 20,563,849, Taxpayer generated $2.46
6 of sales per feeder and tractor mile driven in New Mexico in 2009. [Taxpayer Ex. 68.1539;
7 Taxpayer Ex. 71.1549].
8 Taxpayer’s New Mexico Corporate Income Tax Returns.
9 106. For tax year 2007, Taxpayer filed its original CIT-1 New Mexico Corporate
10 Income and Franchise Tax Return on November 4, 2008. [Taxpayer Ex. #28; Tr. 281].
11 107. Taxpayer determined its 2007 average New Mexico factor of 0.4618% for
12 purposes of apportionment as follows:
13 a. Property: $205,980,361.00 in New Mexico divided by everywhere property of
14 $22,405,358,018.00 for a property factor of 0.6166%.
15 b. Payroll: $71,544,430.00 in New Mexico divided by everywhere payroll of
16 $15,239,818,248.00 for a payroll factor of 0.4695%.
17 c. Sales: $131,569,232.00 in New Mexico divided by everywhere sales of
18 $43,965,730,714.00 for a sales factor of 0.2993%.
19 [Taxpayer Ex. #28.1049; Tr. 282].
20 108. The average apportionment factor of 0.4618% in 2007 was cited in the MTC
21 audit. [Taxpayer Ex. #46.1418; Tr. 282-283].
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 15 of 64.
1 109. The average apportionment factor of 0.4618% in 2007 did not change after
2 Taxpayer filed an amended 2007 CIT-1 return in 2014 as a result of federal audit changes.
3 [Taxpayer Ex. #31; Tr. 286-287].
4 110. Taxpayer prepared a pro forma federal 1120 return for 2007. [Taxpayer Ex. #34;
5 Tr. 292].
6 111. Taxpayer’s 2007 pro forma 1120 return showed it had $22,115,770,234.00 in
7 receipts, reduced by expenses totaling $24,497,919,599.00 constituting $8,666,675,893.00 in
8 salaries and wages, $7,231,529,960.00 in pensions and profit sharing, $1,885,516,140.00 in
9 employee benefits, and various other expenses totaling the remaining approximate $5-billion.
10 [Taxpayer Ex. #34.1177; Tr. 292-294].
11 112. Of the total $24,497,919,599.00 in expenses under the 2007 pro forma 1120
12 return, employee expenses totaling $17,783,721,993.00 predominate. [Taxpayer Ex. #34.1177;
13 Tr. 294].
14 113. In 2007, Taxpayer’s 1120 pro forma return showed $785,390,541 as an expense
15 for TOFC, which amounts to 3.2% of Taxpayer’s total reported expenses that year. [Taxpayer
16 Ex. #34.1191; Tr. 295].
17 114. Taxpayer paid less for fuel for its vehicles in 2007 than it did for professional
18 services. [Tr. 295-296].
19 115. In 2007, the MTC reversed Taxpayer’s categorization of $20,734,638 as non-
20 business income. [Taxpayer Ex. #34.1190; Taxpayer Ex. #46.1414; Tr. 296-301].
21 116. For tax year 2008, Taxpayer filed its original CIT-1 New Mexico Corporate
22 Income and Franchise Tax Return on October 27, 2009. [Taxpayer Ex. #29; Tr. 283-285].
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 16 of 64.
1 117. Taxpayer determined its 2008 average New Mexico factor of 0.4610% for
2 purposes of apportionment as follows:
3 a. Property: $210,380,232.00 in New Mexico divided by everywhere property of
4 $34,660,019,017.00 for a property factor of 0.6070%.
5 b. Payroll: $71,656,854.00 in New Mexico divided by everywhere payroll of
6 $15,277,843,987.00 for a payroll factor of 0.4690%.
7 c. Sales: $141,401,281.00 in New Mexico divided by everywhere sales of
8 $46,038,171,370.00 for a sales factor of 0.3071%.
9 [Taxpayer Ex. #29.1056; Tr. 284].
10 118. The average apportionment factor of 0.4610% in 2008 was cited in the MTC
11 audit. [Taxpayer Ex. #46.1405; Tr. 284-285].
12 119. The average apportionment factor of 0.4610% in 2008 did not change after
13 Taxpayer filed an amended 2008 CIT-1 return in 2014 as a result of federal audit changes.
14 [Taxpayer Ex. #32; Tr. 288-291].
15 120. Of the total $20,682,752,644.00 in expenses under the 2008 pro forma 1120
16 return, some 60% of that amount was attributable to employee expenses. [Taxpayer Ex.
17 #35.1204; Tr. 301-302].
18 121. In 2008, Taxpayer’s 1120 pro forma return showed $832,584,642.00 as an
19 expense for TOFC, which constituted approximately 4% of Taxpayer’s total reported expenses
20 that year. [Taxpayer Ex. #35.1223; Tr. 303].
21 122. 4.75% of Taxpayer’s expenses in 2008 were for fuel for its vehicles. [Tr. 303-
22 305].
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 17 of 64.
1 123. For tax year 2009, Taxpayer filed its original CIT-1 New Mexico Corporate
2 Income and Franchise Tax Return on November 11, 2010. [Taxpayer Ex. #30; Tr. 285-286].
3 124. In 2009, Taxpayer merged with UPS (New York), resulting in a significant
4 increase in gross receipts compared to 2007 and 2008. [Tr. 311-312].
5 125. Taxpayer determined its 2009 average New Mexico factor of 0.4666% for
6 purposes of apportionment as follows:
7 a. Property: $207,863,823.00 in New Mexico divided by everywhere property of
8 $34,992,045,033.00 for a property factor of 0.5940%.
9 b. Payroll: $72,216,796.00 in New Mexico divided by everywhere payroll of
10 $15,256,522,954.00 for a payroll factor of 0.4734%.
11 c. Sales: $134,257,577.00 in New Mexico divided by everywhere sales of
12 $40,391,290,285.00 for a sales factor of 0.3324%.
13 [Taxpayer Ex. #30.1063; Tr. 286].
14 126. The average apportionment factor of 0.4666% in 2009 did not change after
15 Taxpayer filed an amended 2009 CIT-1 return in 2014 as a result of federal audit changes.
16 [Taxpayer Ex. #33; Tr. 288-291].
17 127. Of the total $20,682,752,644.00 in expenses under the 2009 pro forma 1120
18 return, some 60% of that amount was attributable to employee expenses. [Taxpayer Ex.
19 #35.1204; Tr. 301-302].
20 128. In 2009, Taxpayer’s 1120 pro forma return showed $834,271,550.00 as an
21 expense for TOFC, which amounts to approximately 3.5-4% of Taxpayer’s total reported
22 expenses that year. [Taxpayer Ex. #36.1256; Tr. 312].
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 18 of 64.
1 129. Taxpayer paid $768-million in fuel expenses in 2009, less than the $1.6 billion in
2 business service fees that year [Taxpayer Ex. #36.1257; Tr. 312].
3 The State-to-State Volume Method and its Origins.
4 130. Under this state-to-state volume method, Taxpayer used a hybrid sourcing
5 method: assigning 50% of the sale to the originating state and 50% to the destination state. [Tr.
6 492].
7 131. Under the state-to-state volume method, Taxpayer uses the actual volume of
8 shipped packages, then looks to the highest possible charge for shipment of those packages
9 (without applying any potential rack discount rates taxpayer actually applied to its customers)
10 from the two furthest possible zones within the origin and destination states. [Tr. 322-325; 334-
11 337; 461-468].
12 132. Taxpayer has used the state-to-state volume method since 1988 because it
13 believed it was a reasonable method that Taxpayer and the Department have agreed to use even
14 though a billed revenue method would result in lower taxation for Taxpayer. [Tr. 470].
15 133. Taxpayer had utilized the state-to-state volume method in large geographic states
16 with lower populations, including Montana and New Mexico, for corporate tax years beginning
17 in the late 1980s. [Tr. 342].
18 134. The MTC accepted the state-to-state volume method during an audit from 1988 to
19 1990. [Tr. 343-344; Tr. 469].
20 135. New Mexico previously accepted the state-to-state volume method during two
21 previous audits. [Tr. 344-345; Tr. 469-470].
22 136. During a previous audit of tax years 1988, 1989, and 1990, the MTC auditor
23 agreed with Taxpayer that using a mileage method would distort Taxpayer business presence in
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 19 of 64.
1 New Mexico. The Department accepted the MTC auditor’s conclusion and did not use miles to
2 calculate the revenue factor. The Department and Taxpayer entered into a closing agreement in
3 1997 to resolve a previous assessment. [Taxpayer Ex. #44.1348-1349; Taxpayer Ex. 75.1947-
4 1950; Tr. 348-351].
5 137. On November 12, 2003, Taxpayer submitted a letter to the Department’s Audit &
6 Compliance Division Bureau Chief seeking permission to continue to use the state-to-state
7 volume method it had employed in previous years with approval. [Taxpayer Ex. #44.1353-1355;
8 Tr. 351-356].
9 138. The Department never responded to Taxpayer’s Letter of November 12, 2003,
10 seeking permission to continue to use the state-to-state volume method and the Department did
11 not issue an assessment for the period discussed in that letter where Taxpayer did use the state-
12 to-state volume method. [Tr. 356, TR 388-389].
13 The MTC Audit, Adjustments, and Changes to Taxpayer’s Sales under the State-to-State Method.
14 139. The MTC conducted an audit of Taxpayer for tax years 2007, 2008, and 2009 on
15 behalf of various states, including New Mexico. [Taxpayer Ex. #37; Tr. 313-314].
16 140. Taxpayer agreed to extend the statute of limitations on the audit through
17 September 30, 2012 and then again through September 30, 2013. [Taxpayer Ex. #37.1272;
18 Taxpayer Ex. #38.1276; Tr. 313-315].
19 141. The MTC audit information document requests did not seek any information
20 about Taxpayer’s intrastate revenue. [Taxpayer Ex. #39; Taxpayer Ex. #40; Taxpayer Ex. #43;
21 Taxpayer Ex. #44; TR. 314-317; 347-348].
22 142. Taxpayer mistakenly failed to provide MTC package car mileage traveled by
23 state, but presented that information at the hearing. Taxpayer contends that package car mileage
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 20 of 64.
1 must be included in any calculation under the trucking regulation that the Department claims
2 applies to Taxpayer. [Taxpayer Ex. #68; Tr. 376; 415-416].
3 143. The biggest change under the MTC’s audit adjustments resulted from a
4 substantial increase in the denominator of the sales/receipts apportionment factor related to using
5 mileage under the special apportionment method for trucking companies, including feeder miles
6 over TOFC miles. [Taxpayer Ex. #46.1418; #46.1432; Tr. 101-104:12; Tr. 110-117].
7 144. The MTC auditor disallowed all of Taxpayer’s claimed nonbusiness income in
8 2007 ($20,734,638.00), 2008 ($52,168,439.00), and 2009 ($47,295,835). [Taxpayer Ex.
9 #46.1414; Tr. 117-118:18].
10 145. Taxpayer employed this state-to-state volume method as its starting point in 2007,
11 2008, and 2009 and disclosed this method to the MTC as part of the audit. [Taxpayer Ex. #63;
12 Taxpayer Ex. #64; Taxpayer Ex. #64; Tr. 329-332].
13 146. In 2007, Taxpayer handled 15,812,462 packages that were delivered in New
14 Mexico, which resulted in an estimated 3 $67,410,956 in revenue. [Taxpayer Ex. 42.1300; Tr.
15 325-328].
16 147. In 2007, Taxpayer handled 4,685,557 packages originating from New Mexico,
17 which resulted in $19,878,083.00 in estimated revenue. [Taxpayer Ex. 42.1300; Tr. 328].
18 148. In 2007, Taxpayer shipped 902,312 packages intrastate from a New Mexico
19 source to a New Mexico destination, with an estimated revenue of $6,051,346.00. [Taxpayer Ex.
20 42.1300; Tr. 323-326].
3
Taxpayer used the actual volume of shipped packages, but instead of using the actual billed rate for the individual
shipped packages, Taxpayer used the largest amount it could possibly charge for the shipping of a package under its
zone-by-zone rate charts by the average rate of the packages. [Tr. 322-325; 334-337; 461-468].
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 21 of 64.
1 149. In 2007, as part of the state-to-state volume method, Taxpayer had an estimated
2 $87,289,039.00 in revenue for 20,498,019 packages delivered either to or from New Mexico.
3 [Taxpayer Ex. 42.1300; Tr. 323-328].
4 150. In 2007, Taxpayer had $22,115,770,234 in revenue for packages delivered
5 everywhere, which compared to its $87,289,039 in New Mexico, resulting in a ratio of .3947,
6 which is then multiplied against intercompany eliminations to result in $86,009,161.00 in New
7 Mexico revenue after eliminations under the state-to-state volume method. [Taxpayer Ex.
8 42.1299; Taxpayer Ex. #46.1432; Tr. 328-329].
9 151. That state-to-state volume method in 2008 resulted in $88,214,706.00 in New
10 Mexico sales. [Taxpayer Ex. #42.1311-12; Taxpayer Ex. #46.1432; Tr. 331].
11 152. That state-to-state volume method in 2009 resulted in $90,205,556.00 in New
12 Mexico sales. [Taxpayer Ex. #42.1323-24; Taxpayer Ex. #46.1432; Tr. 331-332].
13 153. After accounting for volume shipping discounts given to customers, Taxpayer’s
14 actual revenue in New Mexico in 2007 was $56,178,891.00 rather than the $86,009,161.00
15 allocated amount in 2007 under the state-to-state volume method. [Taxpayer Ex. #66.1530;
16 Taxpayer Ex. #34.1177; Tr. 338-342].
17 154. For 2007, the MTC audit adjusted the reported New Mexico in state sales from
18 $86,009,161.00 (as determined by the state-by state volume method) to $681,827,729.00, an
19 increase of $595,818,568.00 or 692% 4. [Taxpayer Ex. #46.1432; Taxpayer. Ex. #71.1548; Tr.
20 398-400].
4
In order to be conservative, all percentage increases have been rounded down to the closest whole number. For
instance, the result of the calculation of this percentage increase, which is (681,827,729-
86,009,161)/86,009,161*100”, is actually 692.738%, which has been rounded down to 692% for ease of reference
and subsequent discussion. The Hearing Officer relied on an Excel spreadsheet to verify calculations, a copy of
which is added to the administrative record.
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 22 of 64.
1 155. Taxpayer’s actual 2007 New Mexico billings only totaled $56,178,891.00,
2 meaning that the MTC’s adjustment to $681,827,729.00 in New Mexico increased Taxpayer’s
3 New Mexico revenue 1113% above its actual revenue in the state. [Taxpayer Ex. #71; Tr. 401-
4 406, 410].
5 156. For 2008, the MTC audit adjusted the reported New Mexico in state sales from
6 $88,214,706.00 as reported under the state-to-state volume method to $634,817,086.00, a
7 difference of $546,602,380.00 and an increase of 619%. [Taxpayer Ex. #46.1432; Taxpayer. Ex.
8 #71.1550; Tr. 398-400].
9 157. Taxpayer’s actual 2008 New Mexico billings only totaled $53,621,784.00,
10 meaning that the MTC’s adjustment to $634,817,086.00 in New Mexico increased Taxpayer’s
11 New Mexico revenue 1083% above its actual revenue in the state. [Taxpayer Ex. #71.1549; Tr.
12 401-412].
13 158. For 2009, the MTC audit adjusted the reported New Mexico in-state sales from
14 $90,205,556.00 as reported under the state-to-state volume method to $723,523,285.00, a
15 difference of $633,317,719.00 and an increase of 702%. [Taxpayer Ex. #46.1432; Taxpayer. Ex.
16 #71.1552; Tr. 398-400].
17 159. Taxpayer’s actual 2009 New Mexico billings only totaled $50,634,404.00,
18 meaning that the MTC’s adjustment of sales to $723,523,285.00 in New Mexico increased
19 Taxpayer’s New Mexico sales 1328% above its actual sales in the state. [Taxpayer Ex. #71.1552;
20 Tr. 401-415].
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 23 of 64.
1 Party Stipulations and Concessions at Hearing
2 160. The parties stipulated that there is a positive correlation between an increase in
3 volume of packages and revenue. And there is a negative correlation between a decrease in the
4 volume of packages and revenue. [Tr. 485-488].
5 161. Taxpayer conceded that there was no internal consistency issue with the
6 apportionment in this case. [Tr. 398:6-12; Taxpayer’s Written Summation, p. 16].
7 162. The Department conceded at the hearing that Taxpayer had non-business income
8 of $14 million in 2007, $18-million in 2008, and $16-million in 2009 that was incorrectly
9 disallowed by the MTC auditor, amounting to a reduction in the assessed tax amount of
10 $48,300.00 plus associated penalty and interest. [Tr. 307-309; Tr. 508].
11 163. The final adjustment to the MTC report reduced the assessed tax principal from
12 $3,024,065.00 to $2,421,979.00 and, at the hearing, the Department accepted this downward
13 MTC adjustment to the assessed liability, conceding that portion of the assessment. [Taxpayer
14 Ex. #46.1402; Tr. 119: 17-120:6; Tr. 132:22-135; Tr. 508].
15 164. Although Taxpayer did not provide the MTC the intrastate mileage during the
16 audit, Department Protest Auditor Danny Pogan agreed a recalculation under the Department’s
17 trucking regulation was necessary, which would result in a downward adjustment in the assessed
18 tax. [Tr. 562-567].
19 165. The Department never provided its recalculation of this downward adjustment
20 that Mr. Pogan indicated was supported, or any of the updated liabilities, after the conclusion of
21 the hearing, failing to reestablish the correctness of its assessment after its concessions.
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 24 of 64.
1 Other Procedural Findings
2 166. On March 4, 2014, the Hearings Bureau issued a scheduling order, setting this
3 matter for a merits hearing on August 19 and 20, 2015. [Administrative File].
4 167. On September 26, 2014, Taxpayer moved to amend the scheduling order and
5 continue the scheduled August 2015 hearing dates. [Administrative File].
6 168. On September 29, 2014, the Hearings Bureau issued a continuance order, vacating
7 the previous scheduling order and hearing in favor of a new scheduling order and new merits
8 hearing date of February 17 and 18, 2016. [Administrative File].
9 169. On March 25, 2015, Taxpayer again moved to amend the scheduling order.
10 [Administrative File].
11 170. On March 31, 2015, the Hearings Bureau issued a second continuance order and
12 amended scheduling order, vacating the previous scheduling order and merits hearing dates in
13 favor of a new scheduling order and merits hearing date on August 9 and 10, 2016.
14 [Administrative File].
15 171. On October 27, 2015, Taxpayer again moved to amend the controlling scheduling
16 order and vacate the hearing date. [Administrative File].
17 172. On October 29, 2015, the Administrative Hearings Office issued a third
18 continuance and amended scheduling order, vacating the previous scheduling order and merits
19 hearing dates in favor of a new amended scheduling order and merits hearing date on April 5, 6,
20 and 7, 2017. [Administrative File].
21 173. On December 15, 2016, the parties jointly moved to amend the scheduling order.
22 [Administrative File].
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 25 of 64.
1 174. On December 19, 2016, the Administrative Hearings Office issued its fourth
2 continuance order and amended scheduling order, vacating the previous controlling scheduling
3 order and hearing date as well as resetting the merits hearing for November 15 and 16, 2017.
4 [Administrative File].
5 175. On August 9, 2017, the parties jointly moved again to amend the scheduling
6 order. [Administrative File].
7 176. On August 16, 2017, the Administrative Hearings Office issued its fifth
8 continuance order and amended notice of administrative hearing, vacating the previous
9 scheduling order and scheduling this matter for a merits hearing on June 5, 6, and 7, 2018.
10 [Administrative File].
11 177. On April 10, 2018, Taxpayer filed a motion to admit evidence under Rule 902(11)
12 NMRA, along with a memorandum in support. [Administrative File].
13 178. On April 14, 2018, Taxpayer filed a motion for summary judgment, along with a
14 memorandum in support. [Administrative File].
15 179. On April 19, 2018, Taxpayer moved to amend the scheduling order in this matter.
16 [Administrative File].
17 180. On April 26, 2018, the Department filed its opposition to Taxpayer’s motion for
18 summary judgment. [Administrative File].
19 181. On May 15, 2018, the Administrative Hearings Office denied Taxpayer’s motion
20 for summary judgement and denied Taxpayer’s motion to amend the scheduling order. The
21 Administrative Hearings Office partially granted Taxpayer’s motion for admission of documents,
22 finding that the documents were self-authenticating. [Administrative File].
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 26 of 64.
1 182. On May 21, 2018, the parties filed their joint prehearing statement.
2 [Administrative File].
3 183. Taxpayer has spent more than $50,000.00 in attorney’s fees and related expenses
4 in the preparation and defense of its protest. [Tr. 418].
5 DISCUSSION
6 This protest involves the Department’s assessment of additional corporate income tax,
7 penalty, and interest for tax years 2007, 2008, and 2009 after the MTC conducted an audit of
8 Taxpayer’s business. At dispute in this protest is the calculation of the sales factor under the
9 apportionment formula, and specifically how, either the regulatory special trucking
10 apportionment method (which relies on mileage) or the state-to-state volume method, attributes
11 revenue under the sales factor to New Mexico. Taxpayer originally used the state-to-state volume
12 method to calculate its sales in New Mexico for purposes of apportionment. Under the state-to-
13 state volume method, 50% of all interstate deliveries originating from or delivered to New
14 Mexico and 100% of Taxpayer’s New Mexico intrastate pick up and deliveries are attributed to
15 New Mexico sales. The Department argues that Taxpayer is required to follow the regulatory
16 special trucking mileage method to determine New Mexico sales. Taxpayer contends that the
17 special method of apportionment for trucking companies is inapplicable to its business and that,
18 even if it is applicable, it violates external consistency because its application distorts Taxpayer’s
19 true New Mexico business activities. Moreover, given its history of previous acceptance,
20 Taxpayer claims that the state-to-state volume method is a reasonable method to calculate its
21 sales factor.
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 27 of 64.
1 Presumption of Correctness
2 Under NMSA 1978, Section 7-1-17 (C) (2007), the assessment issued in this case is
3 presumed correct. Consequently, Taxpayer has the burden to overcome the assessment. See
4 Archuleta v. O'Cheskey, 1972-NMCA-165, ¶11, 84 N.M. 428. Unless otherwise specified, for the
5 purposes of the Tax Administration Act, “tax” is defined to include interest and civil penalty. See
6 NMSA 1978, §7-1-3 (X) (2013). Under Regulation 3.1.6.13 NMAC, the presumption of
7 correctness under Section 7-1-17 (C) extends to the Department’s assessment of penalty and
8 interest. See Chevron U.S.A., Inc. v. State ex rel. Dep't of Taxation & Revenue, 2006-NMCA-50,
9 ¶16, 139 N.M. 498, 503 (agency regulations interpreting a statute are presumed proper and are to be
10 given substantial weight). Accordingly, it is Taxpayer’s burden to present some countervailing
11 evidence or legal argument to show that they are entitled to an abatement, in full or in part, of the
12 assessment issued in the protest. See N.M. Taxation & Revenue Dep't v. Casias Trucking, 2014-
13 NMCA-099, ¶8. When a taxpayer presents sufficient evidence to rebut the presumption of
14 correctness of the assessment, the burden shifts to the Department to reestablish the correctness
15 of the assessment.
16 Corporate Income and Franchise Tax Act, UDITPA, and Apportionment.
17 Subject to the limitations of the United States Constitution’s Due Process and Commerce
18 Clause, under NMSA 1978, Section 7-2A-3, New Mexico levies an income tax on “the net income
19 of every domestic corporation and upon the net income of every foreign corporation employed or
20 engaged in the transaction of business in, into or from this state or deriving any income from any
21 property or employment within this state.” As used under the Corporate Income and Franchise Tax
22 Act, the term “corporations” includes corporations, joint stock corporations, certain real estate
23 trusts, financial corporations, banks, other business associations, limited liability companies, and
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 28 of 64.
1 partnerships taxed as corporations under the Internal Revenue Code. See NMSA 1978, § 7-2A-2
2 (D). Taxpayer is an out-of-state corporation engaged in transaction of business into and from New
3 Mexico, subjecting Taxpayer to New Mexico’s corporate income tax during the relevant years,
4 2007, 2008, and 2009.
5 Generally, states may not impose an income tax on the value earned outside of its border
6 under the Due Process and Commerce Clauses of the United States Constitution. See ASARCO Inc.
7 v. Idaho State Tax Commission, 458 U.S. 307, 314 (1982). Specifically, the Commerce and Due
8 Process Clauses of the United States Constitution impose distinct but parallel limitations on New
9 Mexico’s power to tax value earned from out-of-state business activities. See Mobil Oil Corp. v.
10 Comm'r of Taxes, 445 U.S. 425, 454 (1980); Norfolk & Western R. Co. v. Missouri Tax
11 Comm'n., 390 U.S. 317, 325, n.5 (1969). However, states may tax a fairly apportioned share of a
12 multistate entity’s business income. See Northwestern States Portland Cement Co. v. Minnesota,
13 358 U.S. 450, 458-462 (1959). In Complete Auto Transit v. Brady, 430 U.S. 274 (1977), the
14 United States Supreme Court held that a state tax on corporations performing exclusively
15 interstate business will not violate the protections of the Commerce Clause if the tax meets the
16 following four-part test: (1) a sufficient nexus exists between the activity being taxed and the
17 taxing state; (2) the tax is fairly apportioned; (3) the tax does not discriminate against interstate
18 commerce; and (4) the tax is fairly related to services provided by the state.
19 New Mexico, like many states, has adopted the Uniform Division of Income for Tax
20 Purposes Act (“UDITPA”) to address fair apportionment and allocation of income earned by
21 multistate or multinational entities for their New Mexico activities. See NMSA 1978, §§7-4-1
22 through 7-4-21; see also ASARCO Inc. v. Idaho State Tax Commission, 458 U.S. 307, 311 fn.3
23 (1982) (short discussion of history of UDITPA); see also J. Hellerstein & W. Hellerstein, State
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 29 of 64.
1 Taxation, ¶9.01 (3rd ed. 2001-2015) (discussion of history of adoption of UDITPA, or similar
2 statutory regimes, by numerous states). UDITPA distinguishes between business income
3 (apportionable to any state where a multistate taxpayer is subject to corporate income tax) and
4 nonbusiness income (allocated only to a single location, usually a taxpayer’s domicile). See NMSA
5 1978, §7-4-10 (A) (2013) (“…all business income shall be apportioned...”). Under UDITPA,
6 business income is apportioned according to a three-factor formula based on the amount of a
7 corporation’s respective property, payroll, and sales everywhere (the denominators) against the
8 respective amount of its property, payroll, and sales within a state (the numerators). Using the
9 denominator and numerator in each category of property, payroll, and sales, a percentage is
10 calculated for each of the three factors, and the average percentage of the three is then applied
11 against the corporation’s total income to determine the percentage amount of apportioned income
12 subject to New Mexico’s corporate income tax. See NMSA 1978, §§ 7-4-10 through 7-4-18.
13 The general idea behind UDITPA, amongst others, is to ensure that each state only taxes an
14 apportioned share of a taxpayer’s income, a share under the formula roughly commensurate with the
15 portion of the income attributable to the business activities conducted within that respective state.
16 See e.g. Kmart Props., Inc. v. Taxation & Revenue Dep't, 2006-NMCA-026, ¶ 46, 139 N.M. 177,
17 131 P.3d 27 (New Mexico Court of Appeals provides a brief overview of the apportionment process
18 under UDITPA and describes that process as “an effort at fair and uniform allocation of taxable
19 income among the states.”). UDITPA has two basic goals: “(1) fair apportionment of income among
20 the taxing jurisdictions; and (2) uniformity of application of the statutes. Twentieth Century-Fox
21 Film Corp. v. Dep't of Revenue, 299 Or. 220, 227, 700 P.2d 1035 (1985). If all states applied the
22 UDITPA formula in a uniform manner, then 100% of a multistate taxpayer’s income, and “no more
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 30 of 64.
1 or no less,” would be subject to tax. W.J. Pierce, The Uniform Division of Income for State Tax
2 Purposes, 35 Taxes 747, 748 (1957), (as cited in Twentieth Century-Fox, 299 Or. 220, 226-27).
3 Although not the only permissible method of apportionment, UDITPA’s standard three-
4 factor formulary apportionment has become the “benchmark” for fair apportionment. Container
5 Corp. of America v. Franchise Tax Board, 463 U.S. 159, 170 (1983). As the United States
6 Supreme Court noted, the reason UDITPA’s standard three-factor apportionment has become the
7 approved standard is that “payroll, property, and sales appear in combination to reflect a very
8 large share of the activities by which value is generated.” Container Corp. of Am. v. Franchise
9 Tax Bd., 463 U.S. 159, 183 (1983). While there is expected variance between the three factors,
10 the average of the three factors is designed in most cases to arrive at a reasonably reliable
11 determination of a taxpayer’s activities in a state. Thus, the three-factor apportionment, even if
12 such formula is “necessarily imperfect,” is generally able to avoid the “sort of distortions” that
13 raise constitutional issues with state taxation of multistate businesses. Id.
14 While Container Corp. embraced the standard three-factor formulary apportionment, the
15 Supreme Court also established in that decision that any apportionment formula used must be
16 both internally and externally consistent. See Container Corp., 463 U.S. 159, 169-170. By
17 internal consistency, the Court meant that “the formula must be such that, if applied by every
18 jurisdiction, it would result in no more than all of the unitary business' income being taxed.” id.,
19 463 U.S. 159, 169. At hearing, Taxpayer conceded that there was no internal consistency issue in
20 this case. See Tr. 398:6-12; see also Taxpayer’s Written Summation p. 16.
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 31 of 64.
1 In light of its concession to the internal consistency issue, at the hearing and again in its
2 written closing argument, Taxpayer instead argued that the assessment at issue in this case
3 violated the external consistency requirement 5. See Taxpayer’s Written Summation, p. 9.
4 The Supreme Court identified external consistency as a much more difficult concept: “the factor
5 or factors used in the apportionment formula must actually reflect a reasonable sense of how
6 income is generated.” id. As the New Jersey Supreme Court, in synthesizing various United
7 Supreme Court cases addressing external consistency, summarized
8 [e]xternal consistency looks "to the economic justification for the State's
9 claim upon the value taxed, to discover whether a State's tax reaches
10 beyond that portion of value that is fairly attributable to economic activity
11 within the taxing State." [Okla. Tax Comm'n v. Jefferson Lines, 514 U.S.
12 175, 185 (1995)] Stated simply, the question is whether the state's tax law
13 reasonably reflects the activity within its jurisdiction. The external
14 consistency test requires a "practical inquiry" into the inter-state activity
15 taxed in relation to the activity in the taxing jurisdiction. Goldberg v.
16 Sweet, 488 U.S. 252, 264-65, 109 S. Ct. 582, 590-91, 102 L. Ed. 2d 607,
17 618-19 (1989).
18 Whirlpool Props., Inc. v. Dir., Div. of Taxation, 208 N.J. 141, 165, 26 A3D 446 (2011).
19 The United States Supreme Court had indicated that an apportionment formula is not
20 invalidated simply because it may result in the taxation of income earned beyond the taxing state.
21 See Moorman Mfg. Co. v. Bair, 437 U.S. 267, 272 (1978). Because apportionment involves
22 “slicing a shadow,” reasonable imprecision under an apportionment formula is permitted.
23 Container Corp., 463 U.S. 159, 192-93. An apportionment formula generally only fails when a
24 taxpayer can show by clear and cogent evidence that the income attributed to the state is “out of
5
Yet, despite Taxpayer’s on-the-record concession on the internal consistency issue and presentation of evidence
focused on external consistency, the Department’s closing argument begins with the incorrect premise that internal
consistency is the core of Taxpayer’s argument—“the Taxpayer here challenges the internal consistency of the
assessment”—and goes on to brief the internal consistency standard and case law. See Department Post Hearing
Memorandum, p.1. In focusing on the wrong issue, an issue that Taxpayer had in fact conceded, the Department’s
closing argument is not particularly pertinent or helpful in resolving this protest.
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 32 of 64.
1 all appropriate proportions to the business transacted… in that state.” Hans Rees Sons, Inc. v.
2 North Carolina, 283 U.S. 123, 135 (1931). While the apportionment formula need not be exact,
3 when a taxpayer shows that an application of a formula for apportionment results in gross
4 distortion, a modification to the application of that formula is required in that particular instance.
5 See Norfolk & W. R. Co. v. Mo. State Tax Comm'n, 390 U.S. 317, 329 (1968).
6 Equitable Adjustments to Apportionment Under UDITPA
7 UDITPA itself contains a provision that allows for equitable adjustment to the standard
8 three factor apportionment when the three-factor formula does not fairly capture the business
9 activity of a multistate taxpayer. UDITPA was designed primarily to address manufacturing and
10 merchandising. See Twentieth Century-Fox, 299 Or. 220, 227. The drafters of UDITPA created
11 this equitable apportionment provision to provide flexibility to tax administrators and taxpayers
12 when the standard three-factor apportionment would reach an “unreasonable result.” W.J. Pierce,
13 The Uniform Division of Income for State Tax Purposes, 35 Taxes 747, 781 (1957), (as cited in
14 Twentieth Century-Fox, 299 Or. 220, 226-227). As Professor Pierce, the drafter of UDITPA
15 expounded, the equitable apportionment provision of UDITPA allows for
16 some latitude for showing that for the particular business activity, some
17 more equitable method of allocation and apportionment could be
18 achieved. Of course, departures from the basic formula should be avoided
19 except where reasonableness requires. Nonetheless, some alternative
20 method must be available to handle the constitutional problem as well as
21 the unusual cases, because no statutory pattern could ever resolve
22 satisfactorily the problem for the multitude of taxpayers with individual
23 business characteristics.
24 Id.
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 33 of 64.
1 This equitable adjustment provision of UDITPA has been adopted in New Mexico and
2 codified as NMSA 1978, Section 7-4-19. Section 7-4-19 (emphasis added) reads:
3 If the allocation and apportionment provisions of the Uniform
4 Division of Income for Tax Purposes Act [7-4-1 NMSA 1978] do not
5 fairly represent the extent of the taxpayer’s business activity in this
6 state, the taxpayer may petition for, or the department may require, in
7 respect to all or any part of the taxpayer’s business activity, if
8 reasonable:
9
10 A. separate accounting;
11 B. the exclusion of any one or more of the factors;
12 C. the inclusion of one or more additional factors which will
13 fairly represent the taxpayer’s business activity in this state; or
14 D. the employment of any other method to effectuate an
15 equitable allocation and apportionment of the taxpayer’s
16 income.
17 The party seeking to depart from the standard apportionment formula under UDITPA carries the
18 burden of persuasion as to why the modification is necessary. See Kmart Props., Inc. v. Taxation
19 & Revenue Dep't (KPI), 2006-NMCA-026, ¶¶ 50-51, 139 N.M. 177 (reversed on other grounds;
20 certiorari as to corporate income tax issues quashed). In order to meet this burden of departure,
21 the party seeking the departure must prove two things: first, that statutory formula as a whole
22 does not fairly represent the extent of the taxpayer’s business activity in the state and second that
23 the alternative method of apportionment employed is reasonable. See Twentieth Century-Fox, 299
24 Or. 220, 233. When there is substantial evidence that the standard formula distorts the reality of the
25 taxpayer’s state activity, it is appropriate to depart from the standard three factor formula. See KPI,
26 ¶51.
27 Application of the Special Apportionment for Trucking Companies.
28 The Department has promulgated a series of regulations interpreting UDITPA’s equitable
29 adjustment provision. See 3.5.19.6 NMAC. The accepted practice is that when a state
30 promulgates special rules on apportionment pursuant to UDITPA’s equitable adjustment
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 34 of 64.
1 provisions to a particular industry, those special rules for apportionment become the standard
2 requirement for apportionment for any company within that industry. See J. Hellerstein & W.
3 Hellerstein, State Taxation, ¶9.20[4] (3rd ed. 2001-2015).
4 At issue in this protest is the special rules for apportionment of trucking companies found
5 at Regulation 3.5.19.15 NMAC, which the MTC audit determined applied and the Department
6 relied upon in issuing the assessment. Under Regulation 3.5.19.15 (B) NMAC, “the term
7 ‘trucking company’ means a motor common carrier, a motor contract carrier or an express carrier
8 which primarily transports tangible personal property of others by motor vehicle for
9 compensation.”
10 Taxpayer contends that it is not a trucking company for the purposes of the special
11 apportionment regulation because it claims transporting property by motor vehicle for
12 compensation is not primarily what it does. Instead, Taxpayer contends it is a package delivery
13 company, with only 13% of its activities by time involving transportation by motor vehicle
14 compared to 87% of time involving other activities “like hub and sorting operations, loading and
15 unloading airplanes and trailer and package cars, hand-carrying and hand-truck carrying of
16 packages, and using the electronic devices. 6”
17 However, the argument that Taxpayer presents attempts to reduce the analysis to a
18 mathematical equation that is too simplistic to resolve the question of whether the trucking
19 special apportionment regulation applies to Taxpayer. Taxpayer embraces that it is a package
20 delivery company: the core of delivering packages involves the transportation of those packages
21 from one location to another. While Taxpayer cleverly attempts to distinguish on road mileage
22 time from other activities, those other activities (while all important) are ancillary to the
6
Taxpayer’s Written Summation, p. 6-7.
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 35 of 64.
1 transportation needed to deliver a package from point A to point B. It is this transportation of
2 packages from origin to the destination that is the predominate source of Taxpayer’s income
3 generation, even if as part of that process Taxpayer spends most of its resources on the ancillary
4 services needed to deliver the packages timely.
5 Nor is the Department’s argument much help. Without any much analysis, reasoning,
6 justification, or support from the factual record, the Department asserted in closing argument that
7 Taxpayer must follow Regulation 3.5.19.15 NMAC simply because that regulation applies to
8 “express delivery companies” as well as trucking companies. 7 However, the Department’s
9 conclusory argument misquotes the regulation: the regulation itself does not use the language
10 “express delivery companies” but instead uses the phrase “express carrier.” Those terms may be
11 similar, but the Department simply presumes that similarity without trying through analysis or
12 citation to establish that similarity. Nor does the Department make any effort to tie its argument
13 related to express delivery companies to the evidentiary record in this case.
14 Neither the regulation, nor the Department’s argument which misquotes the regulatory
15 language, define the term “express carrier.” Under federal law, 19 C.F.R. §128.1 defines an
16 express carrier as “an entity operating in any mode or intermodally moving cargo by special
17 express commercial service under closely integrated administrative control. Its services are
18 offered to the public under advertised, reliable timely delivery on a door-to-door basis.”
19 As the record in this case makes clear, Taxpayer transports packages through various
20 modes of transportation for delivery under a closely integrated control system, ensuring timely
21 delivery from door to door. As part of the delivery of packages, the average feeder truck drove
22 266.7 miles per day in 2009, making 3-4 stops per day at Taxpayer’s hubs and centers, including
7
Department’s Post-Hearing Memorandum, p. 6.
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 36 of 64.
1 airports and rail stations. The average package delivery driver drives 60.9 miles per day, making
2 160-170 stops per day to deliver packages. Although there are many logistical and support
3 activities along the way that facilitate timely delivery, transportation by motor vehicle is the
4 unifying, essential component of Taxpayer’s package delivery service in 2007, 2008, 2009: not
5 all packages were transported by airline or by TOFC over rail car, but every delivered package
6 was transported by motor vehicle at some point under the hub system described in testimony.
7 Without transportation by motor vehicle (at least during the audit period of 2007, 2008, 2009),
8 Taxpayer would not be able to get the packages from initial origin to destination.
9 Considering this federal definition of the term “express carrier,” the regulatory reference
10 to that phrase, and the evidentiary record, the Hearing Officer finds that Taxpayer is an express
11 carrier for the purposes of Regulation 3.5.19.15 NMAC. Under the language of Regulation
12 3.5.19.15 (B) NMAC, Taxpayer primarily transports the tangible personal property of others by
13 motor vehicle for compensation. Although Taxpayer performs activities other than transporting
14 the property, those activities are all in support of ensuring timely delivery of the transported
15 tangible personal property. Therefore, Taxpayer is generally subject to the special apportionment
16 method for trucking companies under Regulation 3.5.19.15 NMAC.
17 Equitable Adjustments Apply to Special Regulatory Apportionment Method
18 While Taxpayer is generally subject to the special apportionment method for trucking
19 companies under Regulation 3.5.19.15 NMAC, that does not end the analysis in this protest.
20 Although no express equitable apportionment relief provision is contained under Regulation
21 3.5.19.15 NMAC, such equitable apportionment relief is still available by statute, by general
22 regulation, and by virtue of the case law previously cited discussing distortion and equitable
23 relief to an apportionment formula. Regulation 3.5.19.9 (C) NMAC, entitled “Adjustment of
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 37 of 64.
1 Formula,” acknowledges that the industry specific apportionment regulations contained within
2 that section of regulations including the trucking apportionment at issue here, may not be
3 appropriate for determining the apportionment formula and may require further adjustment.
4 More importantly, by statute UDITPA expressly allows for equitable apportionment relief with
5 the default apportionment formula does not fairly represent the full business activity of a
6 taxpayer. See § 7-4-19.
7 As Hellerstein and Hellerstein indicate in their preeminent state tax treatise, equitable
8 adjustment relief remains viable even under a special apportionment method specifically
9 designed for the industry in question. See J. Hellerstein & W. Hellerstein, State Taxation,
10 ¶9.20[7][o] & 10.08[4][b] (3rd ed. 2001-2015). Once it is clear that the conditions of the special
11 regulation apply, the special regulation becomes the default apportionment unless the party seeking
12 the departure from the special regulation apportionment formula can show by clear and cogent
13 evidence that the regulation “does not fairly represent the extent of the taxpayer’s activities” in the
14 state. Id., (citing Matter of the Appeal of Fluor Corporation, 1995 WL 799363 (Cal.St.Bd.Eq.)).
15 Moreover, allowing for equitable apportionment relief is also consistent with relevant case law,
16 which prohibits an apportionment method that results in gross distortion out of all appropriate
17 proportion to the business activity in the state. See Hans Rees, 283 U.S. 123, 135; see also
18 Norfolk, 390 U.S. 317, 329.
19 In order to deviate from the special trucking regulatory apportionment method, Taxpayer
20 must establish by clear and cogent grounds the special trucking apportionment method does not
21 fairly represent its business activity in this state. See KPI, 2006-NMCA-026, ¶ 50-51, 139 N.M.
22 177; see also Twentieth Century-Fox, 299 Or. 220, 233. When there is substantial evidence that the
23 standard formula distorts the reality of the taxpayer’s state business activity, it is appropriate for
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 38 of 64.
1 either a taxpayer or the Department to depart from the standard apportionment formula. See KPI,
2 ¶51; see also Pub. Serv. Co. v. N.M. Taxation & Revenue Dep't, 2007-NMCA-050, ¶ 33, 141 N.M.
3 520 (Court of Appeals continues to cite KPI for the proposition that either the taxpayer or the
4 Department may seek adjustment from apportionment formula when formula does not reflect extent
5 of business activity in the state even after KPI case was reversed on other grounds). Thus, although
6 subject to the special trucking apportionment method under Regulation 3.5.19.15 NMAC,
7 Taxpayer may still be entitled to apportionment relief if Taxpayer can establish by clear and
8 cogent evidence that the special regulatory apportionment does not fairly represent Taxpayer’s
9 business activities in this state.
10 Taxpayer Presented Clear and Cogent Evidence Requiring Adjustment to Apportionment
11 Here, Taxpayer presented clear and cogent evidence that the application of the special
12 trucking apportionment method under Regulation 3.5.19.15 NMAC grossly distorts its economic
13 activity in New Mexico out of all appropriate proportion to its actual receipts. Moreover, in
14 addition to the specific evidence of distortion in 2007 through 2009, Taxpayer also presented
15 evidence that the MTC and the Department have previously agreed that the special trucking
16 apportionment method as applied to Taxpayer’s business model was distortive of Taxpayer’s
17 actual business activities in New Mexico, resulting in express or implicit endorsement of the
18 alternative apportionment method (the state-to-state volume method) that Taxpayer has used in
19 New Mexico since corporate income tax year 1988. As such, Taxpayer overcame the
20 presumption of correctness of the assessment by showing by clear and cogent evidence that the
21 special regulatory apportionment does not fairly represent Taxpayer’s business activities in this
22 state.
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 39 of 64.
1 Taxpayer’s actual New Mexico revenue numbers in 2007, 2008, and 2009 in comparison
2 to the apportioned income under the special trucking method shows that the special trucking
3 method substantially distorts Taxpayer’s actual New Mexico revenue and business activity. In
4 2007, Taxpayer’s actually generated $56,178,891.00 in New Mexico revenue. The state-to-state
5 volume method that Taxpayer has used since tax year 1988 to apportion its revenue results in an
6 attributed 2007 New Mexico sales revenue of $86,009,161.00, which is $29,830,270.00 or 53%
7 more than its actual revenue. The MTC audit adjustment, which applied the special trucking
8 apportionment regulation under Regulation 3.5.19.15 NMAC, resulted in an increase of
9 Taxpayer’s New Mexico sales to $681,827,729.00, which is $595,818,568.00 or 692% above the
10 state-to-state volume method sales figure and $625,648,838.00 or 1113% above Taxpayer’s
11 actual documented 2007 New Mexico revenue.
12 In 2008, Taxpayer’s actually generated $53,621,784.00 in New Mexico sales. The state-
13 to-state volume method that Taxpayer used since tax year 1988 results in an attributed New
14 Mexico revenue of $88,214,706.00, which is $34,592,922.00 or 64% above Taxpayer’s actual
15 2008 revenue. The MTC audit adjustment, which applied the special trucking apportionment
16 regulation under Regulation 3.5.19.15 NMAC, resulted in an increase of Taxpayer’s New
17 Mexico sales to $634,817,086.00, which is $546,602,380.00 or 619% above the state-to-state
18 volume method sales figure and $581,195,302.00 or 1083% above Taxpayer’s actual
19 documented 2007 New Mexico revenue..
20 In 2009, Taxpayer’s actually generated $50,634,404.00 in New Mexico sales. The state-
21 to-state volume method that Taxpayer has used since 1988 results in an attributed 2009 New
22 Mexico sales of $90,205,556.00, which results in the attribution of an additional $39,571,152.00
23 in revenue to New Mexico than Taxpayer’s actual 2009 sales, a 78% increase. The MTC audit
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 40 of 64.
1 adjustment, which applied the special trucking apportionment regulation under Regulation
2 3.5.19.15 NMAC, resulted in an increase of Taxpayer’s New Mexico sales to $723,523,285.00,
3 which is $633,317,729.00 or 702% above the state-to-state volume method sales figure and
4 $672,888,881.00 or 1328% above Taxpayer’s actual documented 2007 New Mexico revenue..
5 Again, the requirement for external consistency requires a practical inquiry into whether
6 the state’s tax reaches beyond the value fairly attributed to the state. See Jefferson Line, 514 US
7 175, 185; see also Whirlpool Props., 208 N.J. 141, 165. The respective 2007, 2008, and 2009
8 increases of 1113%, 1083%, and 1328% to attributed sales in New Mexico under Regulation
9 3.5.19.15 NMAC’s special trucking regulation above Taxpayer’s actual known New Mexico
10 revenue in those years bears no rational relationship to Taxpayer’s demonstrated revenue
11 generation and business activity in the state and is highly distortive.
12 Taxpayer’s exhibits #68 and #71 are instructive as part of the required practical inquiry,
13 as they show how the special trucking apportionment method mileage method attributes far more
14 income to New Mexico than Taxpayer actually generated here. Looking at 2009, which
15 encompasses all 50-states after the merger of Taxpayer and UPS-New York, Taxpayer had total
16 national billed revenue of $25,684,403,456.00. See Taxpayer Ex. #71.1552. Taxpayer’s
17 $50,634,404.00 of New Mexico billed revenue in 2009 constituted 0.19714% of Taxpayer’s
18 national billed revenue, which ranked 45th among the states. See Taxpayer Ex. #71.1551-52.
19 Applying the special trucking apportionment method under Regulation 3.5.19.15 NMAC
20 increases the revenue attributable to New Mexico by 1328% to $723,523,285.00, which in turn
21 moves New Mexico from the 45th highest revenue to the 12th highest revenue state for Taxpayer
22 in 2009. See Taxpayer Ex. #71.1551-52.
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 41 of 64.
1 Rather than its actual ranking of 45th in revenue, Taxpayer’s revenue in New Mexico
2 under the special trucking apportionment method shares company with many states with far
3 greater population and often somewhat similar geographic sizes 8: 1. California (substantially
4 larger population and similar geographic size), 2. Texas (substantially larger population and
5 similar geographic size), 3. Illinois (substantially larger population but smaller geographic size),
6 4. New York (substantially larger population but smaller geographic size), 5. Pennsylvania
7 (substantially larger population but smaller geographic size), 6. Ohio (substantially larger
8 population but smaller geographic size), 7. New Jersey (substantially larger population but
9 smaller geographic size), 8. Florida (substantially larger population but smaller geographic size),
10 9. Kentucky (slightly larger population but smaller geographic size), 10. Georgia (substantially
11 larger population but smaller geographic size), 11. Tennessee (slightly larger population but
12 smaller geographic size), 12. New Mexico, and 13. Indiana (larger population but smaller
13 geographic size). See Taxpayer Ex. #71.1551-52.
14 Relatedly, as the Montana Supreme Court has found, using a mileage method in a large
15 geographic state with a lower population in Taxpayer’s line of business can lead to distortion of
16 the actual business activity in that state. See Mont. Dep't of Revenue v. United Parcel Serv., 252
17 Mont. 476, 830 P.2d 1259, 1262-1263 (1992). In that case, UPS put forward substantial
18 evidence showing that its drivers drove more miles to deliver fewer packages than in other states.
19 See id.; see also J. Hellerstein & W. Hellerstein, State Taxation, ¶10.03[iv] (3rd ed. 2001-2015). As
20 such, the Montana Supreme Court found that a sales factor based on mileage was distortive of
8
The Hearing Officer takes administrative notice of basic geographical facts not subject to reasonable dispute. The
Hearing Officer relies mostly on his own knowledge of basic population and geographical facts. However, out of an
abundance of caution, the Hearing Officer also verified the information by consulting the online World Atlas. See
Sawe, Benjamin Elisha. (2019, October 21). The 50 US States Ranked By Population. Retrieved from
https://www.worldatlas.com/articles/us-states-by-population.html and
https://www.worldatlas.com/aatlas/infopage/usabysiz.htm.
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 42 of 64.
1 UPS’s business activities in Montana, a large geographic state with a smaller population. See id.
2 Montana and New Mexico are similar in geographic size and both have relatively lower
3 populations given that size (though New Mexico has about double the population of Montana).
4 Taxpayer in New Mexico and Montana generates very little revenue per mile driven
5 compared to other states and compared to its corporate-wide total generation. As the evidence
6 showed in this protest 9, particularly the total mileage and billed revenue figures contained
7 respectively in Taxpayer’s Exhibits #68 and #71, in 2009 Taxpayer generated $2.46 in New
8 Mexico and $2.53 in Montana of sales per total tractor and package car miles driven. In 2009,
9 Taxpayer’s operations everywhere generated $10.55 of sales per total tractor and package car
10 miles driven, which is more than four times the average of what it generated respectively in
11 Montana and New Mexico that year. Similarly, Taxpayer in New Mexico generated far less sales
12 per mile driven than Texas ($9.16), Tennessee ($10.18), and Indiana ($8.73) 10 in 2009. As the
13 Montana Supreme Court found, relying on mileage to determine the sales factor of
14 apportionment can significantly distort the extent of Taxpayer’s activities in a low population,
15 large geographic state. And like Montana Supreme Court similarly concluded, the evidence
16 presented in this case illustrates how the application of the mileage method distorts the extent of
17 Taxpayer’s business activities in New Mexico.
18 To achieve the new attribution of sales resulting from the application of Regulation
19 3.5.19.15 NMAC, Exhibit #71 shows that California’s actual revenue sales are reduced by
9
In the interest of efficiency and consistency, this portion of the discussion regarding sales per mile driven will
focus on 2009, which is after Taxpayer merged with UPS, New York, in order to ensure the comparisons are equal.
However, the Hearing Officer did review 2007 and 2008 as well, and the numbers are generally consistent with
2009.
10
Texas is used in the comparison because it is a large geographic state but unlike Montana has a larger population
base. Tennessee and Indiana are used in the comparison because those states are ranked immediately before and
after New Mexico in revenue generation upon application of the mileage method under the special apportionment
method for trucking companies, as referenced two paragraphs earlier in this discussion section. See Taxpayer Ex.
71.1551-1552.
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 43 of 64.
1 $77,415,802.00, Texas’ by $40,925,038.00, Illinois’ by $37,983,005, New York’s by
2 $34,835,508.00, Pennsylvania’s by $33,353,682.00, Ohio’s by $32,866,691.00, New Jersey’s by
3 $30,530,884, Florida’s by $25,608,506.00, Kentucky’s by $25,563,445.00, Georgia’s by
4 $22,018,366.00, Tennessee’s by $20,298884.00, and all remaining states after New Mexico by
5 decreasing amounts. See id. While these large numbers can seem abstract, considering that these
6 are reductions in actual revenues in these states as a result of the application of the special
7 trucking apportionment formula, the distortion of Taxpayer’s actual business activity in New
8 Mexico and other states under this method is readily apparent. Indeed, as Taxpayer testified, in
9 previous MTC audits, the MTC auditor agreed that the special apportionment method for
10 trucking companies resulted in a distortion of Taxpayer’s actual New Mexico business activity.
11 In Hans Rees, the Supreme Court rejected an apportionment formula as disproportionate
12 that resulted in a tax on 83% of that taxpayer’s income despite the fact that the taxpayer in that
13 case only generated 17% of its income in that state. See Hans Rees, 283 U.S. 123; see also
14 Moorman, 437 U.S. 267, 274. In Norfolk, the Supreme Court considered the mechanical
15 application of a statutory formula that resulted in the attribution of 8.2824% of rolling stock in
16 Missouri to that taxpayer when that taxpayer demonstrated its actual in state rolling stock
17 accounted for only 2.71%. See Norfolk, 390 U.S. 317, 327. The difference between the assessed
18 value and the actual value was “too great” under the facts of that case for the Supreme Court to
19 accept the application of that relevant statute. Id. at 328. In rejecting that mechanical statutory
20 application, the Norfolk Supreme Court noted
21 …that it is not necessary that a State demonstrate that its use of the
22 mileage formula has resulted in an exact measure of value. But when a
23 taxpayer comes forward with strong evidence tending to prove that the
24 mileage formula will yield a grossly distorted result in its particular case,
25 the State is obliged to counter that evidence or to make the
26 accommodations necessary to assure that its taxing power is confined to
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 44 of 64.
1 its constitutional limits. If it fails to do so and if the record shows that the
2 taxpayer has sustained the burden of proof to show that the tax is so
3 excessive as to burden interstate commerce, the taxpayer must prevail.
4 Id. at 329.
5 By demonstrating with clear and cogent evidence that the special trucking apportionment
6 formula increases revenue attribution to New Mexico by 1113%, 1083%, and 1328%
7 respectively above actual known revenues generated in this state in 2007, 2008, and 2009,
8 resulting in a huge shift of actual revenue collected in other states to New Mexico well beyond
9 Taxpayer’s actual revenue generation in this state, and showing that Taxpayer’s revenue
10 generation per mile driven was far less than average and on par with Montana, Taxpayer has
11 established disproportionate distortion of economic reality contrary to the external consistency
12 requirement and necessitating an equitable adjustment to the formula. See KPI, 2006-NMCA-
13 026, ¶ 50-51, 139 N.M. 177; see also Twentieth Century-Fox, 299 Or. 220, 233.
14 Taxpayer Established that the Alternative Method is Reasonable
15 In addition to showing by clear and cogent evidence that the special trucking company
16 apportionment method under Regulation 3.5.19.15 NMAC does not fairly represent Taxpayer’s
17 business activities in this state, Taxpayer must also establish that the proposed alternative method
18 of apportionment employed is reasonable. See Twentieth Century-Fox, 299 Or. 220, 233. In this
19 case, Taxpayer filed its 2007, 2008, and 2009 corporate income tax using the state-to-state volume
20 method as the method to determine the sales factor under the apportionment formula, an action that
21 Taxpayer maintains is reasonable given its history of using that method dating back to tax year 1988
22 and the Department’s previous acceptance of that method in prior audits.
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 45 of 64.
1 Despite that history, the Department challenges the reasonableness of Taxpayer’s use of the
2 state-to-state volume method because the Department argues that Taxpayer is not allowed to “make
3 up” an apportionment method it likes better than a method supported by regulation or statute.
4 The Hearing Officer generally agrees that a taxpayer may not devise their own apportionment
5 method and file using that alternative method without first consulting with the Department about the
6 need to deviate from the default apportionment and the reasonableness of the alternative method.
7 But that is not the facts in this protest, where Taxpayer has shown a long history of using the state-
8 to-state volume method after acceptance by the MTC and the Department.
9 The Department’s argument is premised on an incorrect factual assertion that Taxpayer
10 simply made up the state-to-state volume method and an incorrect blanket assumption that
11 alternative apportionment is not supported by statute or regulations. As to the argument that
12 Taxpayer is not allowed to make up an apportionment method not provided for in statute, as had
13 already been discussed extensively above, the UDITPA statute, the regulations interpreting the
14 statute, and the case law make clear that when a prescribed apportionment method does not
15 accurately reflect a taxpayer’s true business activity in the state, a reasonable alternative method that
16 more accurately reflects the true extent of business activities may be employed. Therefore, contrary
17 to the Department’s argument that Taxpayer’s method is unsupported in the law, if the state-to-state
18 volume method reasonably reflects Taxpayer’s true business activities in New Mexico, it would be
19 a permissible method consistent with the equitable apportionment provision of Section 7-4-19.
20 Nor is the Department’s argument that Taxpayer simply made up its more preferred
21 apportionment under the state-to-state volume method accurate. As Mr. Bishop credibly
22 explained, the use of the state-to-state volume method started in the late 1980s in a series of
23 audits involving Taxpayer, the MTC, and a couple of large geographic territory but lower
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 46 of 64.
1 population states, including two audits in New Mexico. Taxpayer in this case used a reporting
2 method previously approved by the MTC and the Department dating back to an audit of tax years
3 1988 through 1990. After the Department issued an assessment against Taxpayer for tax year
4 1988 through 1990, an assessment also premised on a MTC audit of Taxpayer, Taxpayer and the
5 Department entered a closing agreement resolving that dispute 11. As part of the closing
6 agreement, the parties recognized that the MTC auditor determined that using a mileage method
7 to compute revenues sourced to New Mexico, which the special trucking apportionment does,
8 was distortive of Taxpayer’s business activity in New Mexico and that the Department accepted
9 the MTC’s conclusions to not rely on miles to determine the revenue factor.
10 Similar to the 1988 through 1990 audit, the Department also proposed to assess Taxpayer
11 additional tax in tax years 1997-2000 because the Department apparently considered rejecting
12 the state-to-state volume method in favor of a mileage method like the special trucking
13 regulatory method. See Taxpayer Ex. 75.1952-1954. However, the Department again accepted
14 Taxpayer’s use of the state-to-state volume method in tax years 1997-2000. After this resolution
15 of the 1997-2000 tax years, Taxpayer wrote a letter to the Department explaining that the state-
16 to-state volume continued to be a more accurate reflection of Taxpayer’s business activities in
17 New Mexico compared to a distortive mileage method, and seeking permission to continue to
18 use that method in future reporting years. See id. The Department failed to respond to Taxpayer’s
19 letter seeking continuing permission to use the state-to-state volume method that the Department
20 had twice previously accepted for the tax years 1988-1990 and 1997-2000. Given the previous
21 approvals of the state-to-state volume, the Department’s lack of response upon written inquiry
11
The Department strenuously objected to the admission of the closing agreement into the record, an objection that
was overruled on the record. That objection and ruling is addressed in greater detail later in this decision.
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 47 of 64.
1 could reasonably be seen as acquiescence to that method, especially considering the subsequent
2 acceptance of another seven years of returns based on the state-to-state volume method.
3 In addition to this New Mexico history, Mr. Bishop also referenced a case out of
4 Montana that predated the audits in New Mexico, where Taxpayer’s use of the state-to-state
5 volume method was approved. In 1992, the Montana Supreme Court agreed that use of
6 Taxpayer’s mileage to calculate revenue (like the special trucking apportionment at issue in this
7 protest requires) in a large geographic state with a smaller population distorted Taxpayer’s
8 business activities in Montana. See Mont. Dep't of Revenue v. United Parcel Serv., 252 Mont.
9 476, 830 P.2d 1259 (1992). In light of that distortion, the Montana Supreme Court affirmed that
10 Taxpayer was entitled under UDITPA’s equitable adjustment provision to use the more
11 reasonable state-to-state volume method to determine revenue under the apportionment method.
12 See id.
13 The reason why there is distortion using a mileage method in a large geographic state
14 with a smaller population is that Taxpayer needs to drive many more miles to get to fewer
15 customers; thus, although Taxpayer’s mileage activity suggests it is conducting substantial
16 business in that state, in reality it has less sales per mile than a smaller geographic state with
17 many more customers. See id. at 1262-1263. Montana and New Mexico are very similar in
18 population and geographic size, making the Montana Supreme Court’s decision particularly
19 insightful in establishing distortion in using a mileage method in a large-geographic, low
20 population state and the reasonableness of the state-to-state volume method in New Mexico.
21 Based on this history, it quite clear that the state-to-state volume method does fairly and
22 reasonably represent the extent of Taxpayer’s business activities in New Mexico. In fact, the
23 MTC and the Department previously accepted this method over the distortive mileage method
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 48 of 64.
1 for the periods of 1988-1990, the Department again agreed to that method in 1997-2000, and the
2 Department was silent in response to Taxpayer’s letter notifying the Department that it sought
3 continuing permission to use the state-to-state volume method twice previously approved by the
4 Department. The Montana Supreme Court likewise agreed that the state-to-state volume method
5 reasonably reflected Taxpayer’s business activity in a large-geographic but lower population
6 state, more so than a distortive mileage method.
7 And even beyond these previous instances of usage of the state-to-state volume method,
8 as previously discussed, the evidence in this case also clearly and convincingly shows that the
9 state-to-state volume method is reasonable reflection of Taxpayer’s actual business income in
10 this state during the audit period. To reiterate, for 2007, the state-to-state reporting method
11 resulted in an estimated 2007 New Mexico revenue of $86,009,161.00, which is far closer to
12 $56,178,891.00 in Taxpayer’s actual New Mexico revenue in that year than the Department’s
13 distortive mileage approach. For 2008, the state-to-state reporting method resulted in an
14 estimated 2008 New Mexico revenue of $88,214,706.00, which again is much closer to
15 Taxpayer’s actual New Mexico revenue that year totaling $53,621,784.00. The same is true for
16 2009, where the state-to-state reporting method results in estimated 2009 New Mexico revenue
17 of $90,205,556.00 compared to 2009 actual revenues of $50,634,404.00. While the state-to-state
18 volume method results in more revenue being attributed to New Mexico than Taxpayer’s
19 preferred approach at hearing of using actual revenues, and thus increases Taxpayer’s New
20 Mexico corporate income tax liability under the apportionment formula, the slight increases
21 above actual revenue under the state-to-state volume method are much closer in line with the
22 approximate, reasonable precision of an apportionment formula accepted by the case law (where
23 some variance is permitted) than the gross distortion that results from the Department’s use of
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 49 of 64.
1 the mileage method under the special trucking method regulation. The fact that the state-to-state
2 volume method actually increases the revenue attributable to New Mexico, and thereby increases
3 Taxpayer’s corporate income tax in this state, under the apportionment method strongly
4 undermines the Department’s argument that Taxpayer is not free to make up a filing method it
5 likes better. If that were the case, as Mr. Bishop testified, Taxpayer would have preferred the
6 originating revenue method. See Tr. 345:1-8. However, Taxpayer used the state-to-state volume
7 method because it was a reasonable approximation of sales in New Mexico that had previously
8 been accepted in New Mexico. See Tr. 345:1-18.
9 For these reasons, the Hearing Officer finds that Taxpayer established the reasonableness
10 of the state-to-state volume method as a method to attribute income generated in New Mexico to
11 calculate sales under the apportionment factor. Therefore, in light of the distortion under
12 Regulation 3.5.19.15 NMAC’s method for trucking companies, Taxpayer is entitled to an
13 equitable adjustment pursuant to Section 7-4-19 of the apportionment method using the state-to-
14 state volume method. See Regulation 3.5.19.9 (C) NMAC; see also KPI, ¶51; see also Twentieth
15 Century-Fox Film Corp., 299 Or. 220, 233.
16 Admission of the Closing Agreement Over the Department’s Objection.
17 Regarding the closing agreement, the Department made an untimely motion in limine at
18 the beginning of the hearing seeking to exclude the closing agreement from evidence. Under the
19 applicable August 16, 2017 scheduling order in place in this matter, the Department was required
20 to file all motions 45-days before the scheduled hearing. The Department did not move to
21 exclude that document by that deadline. While it is certainly true that a motion in limine
22 generally may be made at the time of the hearing, in this instance the Department was apparently
23 aware for some time of its intent to move to exclude perhaps Taxpayer’s most important piece of
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 50 of 64.
1 evidence. Rather than file a motion in limine by the motion deadline, or even along with the
2 prehearing statement where it first noted its intent to raise the issue, a motion where Taxpayer
3 would have had a full and fair opportunity to research the issue and respond, the Department
4 instead chose to wait to address the issue on the most critical piece of evidence until the
5 beginning of the hearing.
6 The Department wants it both ways on the closing agreement: on the one hand, the
7 Department’s counsel both at hearing and in written closing argument accused Taxpayer of
8 making up an unsupported apportionment method. Yet on the other hand the Department
9 objected to the admission of evidence—the closing agreement—that demonstrates the
10 Department’s assertion that Taxpayer made up the apportionment method is incorrect. Under
11 NMSA 1978, Section 7-1B-6 (D)(2), the Hearing Officer is required to conduct a hearing in a
12 manner that “allow[s] the ample and fair presentation of complaints and defenses.” The
13 Department’s approach to argue that Taxpayer made up the apportionment method while also
14 simultaneously untimely moving to exclude Taxpayer’s timely disclosed, probative, relevant,
15 and material exhibit disproving of the Department’s theory is inconsistent with the Hearing
16 Officer’s obligation to ensure fair presentation of cases to both parties. Taxpayer’s most
17 important exhibit, which is unquestionably relevant and material, should not be disregarded
18 lightly, particularly given the Department’s lack of diligence on the motion in limine.
19 Nevertheless, even beyond the timeliness of the motion in limine concern, there is no
20 statutory justification in this case to exclude the closing agreement. The basis of the
21 Department’s motion in limine to exclude the closing agreement as an exhibit is a contractual
22 term of that agreement contained in paragraph 7: “[n]o part of this agreement shall be used by
23 either party for any purpose unrelated to the enforcement of this agreement.” This term of the
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 51 of 64.
1 closing agreement is not a statutory requirement. Under the Tax Administration Act (TAA),
2 closing agreements are governed by NMSA 1978, Section 7-1-20 (1995). Nothing in that statute
3 prohibits the admission of a closing agreement as an exhibit at a subsequent administrative tax
4 protest hearing involving the same parties. Nor does the Department’s own regulation
5 interpreting Section 7-1-20 establish that such agreements are confidential and may not be used
6 at administrative proceeding under the TAA involving the same parties.
7 Section 7-1-20 (B) does make a closing agreement entered into after a court acquires
8 jurisdiction part of that court’s order disposing of the case (and thus presumably enforceable in
9 that court). Setting aside the question of whether the Administrative Hearings Office qualifies as
10 “court” for the purposes of Section 7-1-20 (B) 12, there is insufficient evidence that the matter
11 addressed in the closing agreement was ever before a hearing officer of the Administrative
12 Hearings Office or its predecessor, the Hearing Bureau or that a hearing officer signed the
13 closing agreement and adopted it as part of the Hearing Bureau’s final order. Only the parties
14 signed this closing agreement; it was not signed or adopted by a hearing officer, meaning that the
15 parties have not demonstrated that Section 7-1-20 (B) applies to this closing agreement.
16 Rather than a requirement of the TAA, the confidential term at issue simply appears to be
17 a contractual agreement of the parties. An administrative tax protest hearing before the
18 Administrative Hearings Office under the Tax Administration Act is not the appropriate venue to
19 litigate a contractual dispute in a matter where the Administrative Hearings Office never had
20 apparent jurisdiction. It is the nature of administrative law that the quasi-judicial powers of the
21 Administrative Hearings Office are reasonably limited to those powers expressly or implicitly
12
While in many respects, the Administrative Hearings Office serves as a tax court for the state, as an administrative
agency with limited statutory authority it lacks the traditionally enforcement powers of the judiciary to enforce a
settlement agreement or contract, such as an ability to issue an injunction or contempt powers for disregarding an
order.
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 52 of 64.
1 contained in statute, the Administrative Hearings Office Act, NMSA 1978, Section 7-1B-1
2 through 9. Nothing in the Administrative Hearings Office Act gives the Hearing Officer any
3 direct or implied statutory authority to enforce a contractual term of a closing agreement never
4 adopted as an order before the Administrative Hearings Office, particularly a contractual
5 confidentiality provision that is beyond the requirements of the TAA. If the Department was
6 concerned that the contractual terms of the agreement were being violated by Taxpayer, it should
7 have sought relief before a court with appropriate jurisdiction over a contractual dispute, perhaps
8 in the form of seeking an injunction from a district court against disclosing the closing
9 agreement.
10 The Department threatened that if Taxpayer proceeded with presentation of the closing
11 agreement at this hearing, it would reopen and pursue the assessment of 1988 through 1990
12 corporate income tax addressed in the closing agreement. However, there is no basis for the
13 Department’s threat. The Department may not annul, modify, set aside, or disregard a closing
14 agreement under the plain language of Section 7-1-20 (D) in the absence of fraud, malfeasance,
15 misrepresentation or concealment of material fact. Presentation of a material, relevant closing
16 agreement at a subsequent confidential administrative proceeding under the Tax Administration
17 Act involving the same taxpayer with the same substantive issues does not rise to the level of
18 fraud, malfeasance, misrepresentation or concealment of material fact. This is particularly true
19 because the Department assessed civil negligence penalty in this case, meaning that the previous
20 closing agreement establishing the legal grounds on which Taxpayer relied on in using the state-
21 to-state volume method are directly relevant to determining whether Taxpayer made a mistake of
22 law in good faith and on reasonable grounds under NMSA 1978, Section 7-1-69 (B) (2007).
23 Taxpayer also asserts that the closing agreement is relevant related to its administrative gloss
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 53 of 64.
1 argument under High Ridge Hinkle J.V. v. Albuquerque, 1998-NMSC-050, 126 N.M. 413 (1998),
2 an argument that the Hearing Officer does not address in light of the previous analysis and
3 conclusion that Taxpayer established it was entitled to an alternative method of apportionment.
4 Even assuming that the Department could prove that the violation of the confidentiality
5 contractual language by the presentation of material and relevant evidence at a subsequent
6 proceeding amounted to fraud, malfeasance, misrepresentation or concealment of material fact,
7 the Department would be prohibited from pursuing an assessment more than ten years old under
8 NMSA 1978, Section 7-1-19. Quite simply, threat or not, the Department has no authority or
9 ability at this point to disregard the closing agreement that authorized Taxpayer to use that
10 method for tax years 1988 through 1990 just because it is unhappy that the Taxpayer sought the
11 closing agreement’s admission.
12 As a question of admission into the record of a tax protest proceeding under the TAA,
13 nothing in the TAA prohibits its consideration and the closing agreement was relevant and
14 material to the disputed facts. The closing agreement is not dispositive of any issues other than
15 for the period of which it applies. See § 7-1-20 (D) (closing agreement is conclusive to the period
16 for which it applied). Nevertheless, the closing agreement is material, relevant, and pertinent to
17 this protest in showing the origins of Taxpayer’s use of the state-to-state volume method and in
18 considering the question of the appropriateness of the assessed civil negligence penalty. To
19 prohibit its admission in this proceeding would be akin to disregarding the facts of the closing
20 agreement, which is not permitted, that show that the Department had previously approved
21 Taxpayer’s use of the state-to-state volume method. Therefore, the closing agreement was
22 admitted into the record over the Department’s objection.
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 54 of 64.
1 Addressing Other Arguments of the Parties.
2 In this case, the Department also argued that Taxpayer was not allowed to present
3 evidence of distortion and the reasonableness of its alternative method because it did not present
4 an expert witness to validate its analysis. The Department argues that such validation is required
5 under Kumho Tire Co., Ltd. v. Carmichael, 526 U.S. 137 (199), yet the Department also
6 acknowledges that New Mexico has rejected the Kumho Tire standard and the formal rules of
7 evidence do not strictly apply to this administrative proceeding. For those precise reasons that
8 the Department itself cites, and others, the Hearing Officer is unpersuaded by the Department’s
9 argument. Taxpayer presented detailed exhibits and evidence, including extensive spreadsheets
10 that tied into the MTC audit and the returns, along with explanatory testimony of a CPA. This
11 evidence established by clear and cogent evidence that the Department’s method distorted
12 Taxpayer’s business activities in New Mexico (as previously recognized by the MTC and the
13 Department) and that Taxpayer’s alternative approach, twice previously permitted by the
14 Department, was reasonable. The Montana Supreme Court reached a similar conclusion about
15 using a mileage method in a large-geographic but low population state (similar to New Mexico)
16 and the need for the alternative state-to-state volume method. The evidence that Taxpayer
17 presented was sufficiently detailed, reliable, and compelling for Taxpayer to overcome the
18 presumption of correctness on the assessment.
19 The Department attacked the method in which Taxpayer calculated the state-to-state
20 volume, suggesting that substituting sales numbers without discounted rack rates for real
21 revenues violates UDITPA. However, the Department’s arguments seem premised on a
22 misunderstanding of how Taxpayer calculates rates under the state-to-state volume method,
23 which Mr. Bishop explained credibly using various exhibits. The Taxpayer in fact uses the
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 55 of 64.
1 maximum possible charge for the shipment and delivery of packages without including any
2 actual rack rate discounts provided to its bulk customers. That means that Taxpayer state-to-state
3 method reflects higher sales than Taxpayer actually billed. Taxpayer also used a method that
4 calculates shipment from a package in the further zone from each state, so even if the package in
5 fact traveled between two shorter zones at a lesser cost, the state-to-state volume method still
6 booked the maximum possible shipping charge between the states. Therefore, if there is an error
7 in the method, it is an error that results in sales numbers in New Mexico above actual numbers.
8 Indeed, this is illustrated by the fact that the state-to-state volume attributed sales numbers
9 exceeded Taxpayer’s actual revenues in each of the three years.
10 Taxpayer is using the same method that Montana Supreme Court reviewed and affirmed
11 in Mont. Dep't of Revenue v. United Parcel Serv., 252 Mont. 476, 481 (discussing the sales factor
12 calculated using the number of packages at an average shipped from the furthest zone in each
13 state). And Taxpayer is using the same method previously accepted by the MTC and the
14 Department in previous audits. As the United States Supreme Court has indicated, requiring
15 perfect precision when slicing the shadow of apportionment is simply too much to ask. See
16 Container Corp., 463 U.S. 159, 183. Instead of perfect precision, which seems to be the
17 Department’s attack on the calculation of sales, an apportionment method needs only to be
18 reasonable. Taxpayer’s state-to-state volume method, which does rely on using maximum
19 possible shipping charges before discount rack rates, was previously deemed reasonable by the
20 Montana Supreme Court, the MTC, and the Department. The Hearing Officer now agrees, even
21 with its potential to error of over-attribution of sales to New Mexico, the state-to-state volume
22 method is a reasonable method to determine sales for purposes of apportionment.
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 56 of 64.
1 Under MPC Ltd., 2003-NMCA-21, ¶13, once the Taxpayer has rebutted the presumption of
2 correctness, the Department may still demonstrate the correctness of its assessment. Here, Taxpayer
3 overcame that presumption of correctness by presenting convincing evidence and legal argument
4 that the Department’s application of the special trucking mileage rules distorted the true extent of
5 Taxpayer’s New Mexico business activities. The Department was free to present its own evidence,
6 witness, or expert testimony to reestablish the correctness of the assessment, especially to the
7 extent that the Department believed Taxpayer’s data was invalid. Instead of presenting such
8 evidence, the Department relied on the testimony of a witness who, through no fault of her own,
9 was instructed to research the weight distance tax filings of another corporate entity during the
10 wrong, irrelevant time period. The Department also briefly presented Protest Auditor Danny
11 Pogan as a witness in this case, but Mr. Pogan’s testimony, through no fault of his own, was
12 insufficient to reestablish the correctness of the Department’s assessment. The Department did
13 not call the MTC auditor as a witness in this case, did not call Dan Armer, the Department’s
14 Corporate Income Tax Bureau Chief and Department resident expert on corporate income tax, or
15 any other witness that could reestablish the correctness of the assessment. Illustrative of the
16 Department’s failure to reestablish the correctness of its assessment, the Department was given
17 many months to submit an updated total alleged liability to the assessed tax, penalty, and interest
18 considering the numerous concessions it made it hearing, but the Department failed to do so.
19 Reserved or Moot Issues.
20 Although not included in its original protest letter, Taxpayer sought the award of costs
21 and fees pursuant to NMSA 1978, Section 7-1-29.1 (2015) in its portion of the joint prehearing
22 statement. Taxpayer presented evidence that its costs and fees exceeded $50,000.00. However,
23 neither party expressly addressed this issue as part of their written closing arguments and since
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 57 of 64.
1 the filing of those closing arguments, the New Mexico Court of Appeals issued a very instructive
2 appellate decision, Helmerich Payne Int'l Drilling Co. v. N.M. Taxation & Revenue Dep't, 2019-
3 NMCA-054, 448 P.3d 1126, that needs to be addressed by the parties in the context of
4 Taxpayer’s claim in this case. As such, no ruling will be made on the costs and fees issue under
5 Section 7-1-29.1 unless and until Taxpayer files a written motion seeking such costs and fees and
6 the Department has an opportunity to respond to said motion.
7 Taxpayer argued a series of items related to the potential application of the special
8 apportionment method for trucking companies, should it be found liable to report using that
9 method under Regulation 3.5.19.15 NMAC. To the extent that Taxpayer was required to abide
10 by Regulation 3.5.19.15 NMAC, it argued that only those portions of receipts related to hauling
11 revenue should be subject to the regulation. Taxpayer further argued that the TOFC miles do not
12 qualify as purchased transportation for the purposes of Regulation 3.5.19.15 (D)(2)(b)(vi)
13 NMAC because they are not motor vehicle miles under that regulation or under NMSA 1978,
14 Section 66-1-4.11(H). These arguments are moot since the Hearing Officer found that Taxpayer
15 is entitled to an adjustment away from the apportionment method found under Regulation
16 3.5.19.15 NMAC in light of Taxpayer’s broader distortion and external consistency challenge.
17 Taxpayer argued that the Department violated its due process in this case in the
18 assessment of penalty because the Department failed to detail the basis of alleged negligence in
19 light of Taxpayer’s reliance on previous acceptance of the state-to-state volume method. This
20 issue is moot because, as this decision makes clear, Taxpayer is entitled to prevail.
21 Conclusion
22 Violations of the external consistency requirement in case law are rare, perhaps to the
23 point of raising a question about whether that phrase from Container Corp. has any independent
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 58 of 64.
1 meaning beyond requiring a fair apportionment reasonably related to a taxpayer’s activities in
2 that state. See J. Hellerstein & W. Hellerstein, State Taxation, ¶4.16[2] (3rd ed. 2001-2015). This
3 formulation of external consistency, as meaning only that there is a fair apportionment
4 reasonably related to a taxpayer’s business activities in the state, coincides closely with
5 UDITPA’s equitable apportionment provision, which requires an adjustment to apportionment
6 when the apportionment does not fairly represent the extent of taxpayer’s business activities in
7 the state. See § 7-4-19. To that extent, this decision should be read narrowly to the facts of this
8 protest, particularly in relation to the UDITPA equitable apportionment relief provisions, rather
9 than as a broad assertion about the application or power of the external consistency test.
10 Although the Hearing Officer does find that external consistency was violated in this case, that
11 finding is largely tied to Taxpayer’s demonstration in the record of significant distortion above
12 actual revenues, which triggered Section 7-4-19’s relief provision, in conjunction with the
13 history of both the MTC and the Department previously recognizing that distortion as well as
14 accepting Taxpayer’s returns—which used the reasonable state-to-state volume to determine
15 sales—since tax year 1988. On the facts of this case, Taxpayer presented clear and cogent
16 evidence that the Department’s mechanical application of the special trucking method of
17 apportionment resulted in an apportionment with no reasonable relation to Taxpayer’s true New
18 Mexico business activities, entitling Taxpayer to an equitable apportionment adjustment under
19 UDITPA, Section 7-4-19, in the form of the reasonable state-to-state volume method to
20 determine sales. For the foregoing reasons, Taxpayer’s protest IS GRANTED.
21 CONCLUSIONS OF LAW
22 A. Taxpayer filed a timely, written protest of the Department’s assessment and
23 jurisdiction lies over the parties and the subject matter of this protest.
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 59 of 64.
1 B. The hearing was timely set and held within 90-days of protest under Section 7-1B-8.
2 C. Taxpayer, as an out of state corporation engaged in the transaction of business
3 into and from New Mexico, was subject to New Mexico’s corporate income tax under Section 7-
4 2A-3.
5 D. The Department conceded at hearing that its assessment of tax principal needed to
6 be reduced from $3,024,065.00 to $2,421,979.00 in light of an MTC adjustment to the audit,
7 meaning that the Taxpayer overcame the presumption of correctness on that portion of the
8 assessment and related penalty and interest.
9 E. The Department further conceded at hearing that its assessment needed to be
10 adjusted downward by $48,300.00 in light of its recognition of non-business income of $14-
11 million in 2007, $18-million in 2008, and $16-million in 2009, meaning that the Taxpayer
12 overcame the presumption of correctness on that portion of the assessment and related penalty
13 and interest.
14 F. Under UDITPA, as a company engaged primarily in the transport of tangible
15 personal property of others by motor vehicle, Taxpayer is subject to the special rules for
16 apportionment of trucking companies found at Regulation 3.5.19.15 NMAC.
17 G. An applicable special regulatory method of apportionment nevertheless may
18 require further equitable adjustments in a similar manner to permitted equitable adjustments
19 under Section 7-4-19 (1986) when the party seeking a departure proves by clear and cogent
20 evidence that that the formula as a whole does not fairly represent the extent of the taxpayer’s
21 business activity in the state and the alternative method of apportionment employed is
22 reasonable. See J. Hellerstein & W. Hellerstein, State Taxation, ¶9.20[4] (3rd ed. 2001-2015),
23 (quoting Matter of the Appeal of Fluor Corporation, 1995 WL 799363 (Cal.St.Bd.Eq.)); Cf.
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 60 of 64.
1 Kmart Props., Inc. v. Taxation & Revenue Dep't (KPI), 2006-NMCA-026, ¶ 50-51, 139 N.M.
2 177; Cf. also Twentieth Century-Fox Film Corp. v. Dep't of Revenue, 299 Or. 220, 233, 700 P.2d
3 1035 (1985).
4 H. Taxpayer established by clear and cogent evidence that the application of the
5 special rules for apportionment of trucking companies resulted in gross distortion, in violation of
6 the external consistency requirement for fair apportionment, and that application of the special
7 rules for apportionment of trucking companies did not fairly represent the true extent of
8 Taxpayer’s New Mexico business activities, thereby entitling Taxpayer to an equitable
9 adjustment to the apportionment method under Section 7-4-19. See Hans Rees Sons, Inc. v. North
10 Carolina, 283 U.S. 123, 135 (1931); see also Norfolk & W. R. Co. v. Mo. State Tax Comm'n, 390
11 U.S. 317, 329 (1968); see also Okla. Tax Comm'n v. Jefferson Lines, 514 U.S. 175, 185 (1995);
12 see also Goldberg v. Sweet, 488 U.S. 252, 264-65, 109 S. Ct. 582, 590-91, 102 L. Ed. 2d 607,
13 618-19 (1989); see also Whirlpool Props., Inc. v. Dir., Div. of Taxation, 208 N.J. 141, 165, 26
14 A3D 446 (2011); see also Kmart Props., Inc. v. Taxation & Revenue Dep't (KPI), 2006-NMCA-
15 026, ¶ 50-51, 139 N.M. 177; see also Pub. Serv. Co. v. N.M. Taxation & Revenue Dep't, 2007-
16 NMCA-050, ¶ 33, 141 N.M. 520; see also Twentieth Century-Fox Film Corp. v. Dep't of Revenue,
17 299 Or. 220, 233, 700 P.2d 1035 (1985).
18 I. Taxpayer’s use of the state-to-state volume method for purposes of apportioning
19 sales in New Mexico was reasonable. See Mont. Dep't of Revenue v. United Parcel Serv., 252
20 Mont. 476.
21 J. The closing agreement is relevant and material and nothing in the Tax
22 Administration Act or the Administrative Hearings Office Act prohibits its use in a subsequent
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 61 of 64.
1 administrative tax protest hearing before the Administrative Hearings Office involving the same
2 parties and substantive issue.
3 K. Taxpayer overcame the presumption of correctness on the remaining assessed tax,
4 penalty, and interest, entitling Taxpayer to a full abatement of the assessment.
5 L. The Department did not reestablish the correctness of the assessment. See MPC
6 Ltd., 2003-NMCA-21, ¶13.
7 For the foregoing reasons, the Taxpayer’s protest IS GRANTED. IT IS ORDERED that
8 the assessment in this case be abated in full. If Taxpayer still seeks costs and fees, IT IS
9 FURTHER ORDERED that it must do so upon written motion within 10-days of this decision.
10 IT IS FINALLY ORDERED that the Department shall have 10-days from the filing of
11 Taxpayer’s motion to file a written response.
12 DATED: October 25, 2019.
13
14 Brian VanDenzen
15 Chief Hearing Officer
16 Administrative Hearings Office
17 P.O. Box 6400
18 Santa Fe, NM 87502
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 62 of 64.
1 NOTICE OF RIGHT TO APPEAL
2 Pursuant to NMSA 1978, Section 7-1-25 (2015), the parties have the right to appeal this
3 decision by filing a notice of appeal with the New Mexico Court of Appeals within 30 days of the
4 date shown above. If an appeal is not timely filed with the Court of Appeals within 30 days, this
5 Decision and Order will become final. Rule of Appellate Procedure 12-601 NMRA articulates
6 the requirements of perfecting an appeal of an administrative decision with the Court of Appeals.
7 Either party filing an appeal shall file a courtesy copy of the appeal with the Administrative
8 Hearings Office contemporaneous with the Court of Appeals filing so that the Administrative
9 Hearings Office may begin preparing the record proper. The parties will each be provided with a
10 copy of the record proper at the time of the filing of the record proper with the Court of Appeals,
11 which occurs within 14 days of the Administrative Hearings Office receipt of the docketing
12 statement from the appealing party. See Rule 12-209 NMRA.
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 63 of 64.
1 CERTIFICATE OF SERVICE
2 On October 25, 2019, a copy of the foregoing Decision and Order was submitted to the
3 parties listed below in the following manner:
4 First Class Mail Interdepartmental Mail
5 INTENTIONALLY BLANK
6
7 John Griego
8 Legal Assistant
9 Administrative Hearings Office
10 P.O. Box 6400
11 Santa Fe, NM 87502
12
In the Matter of the Protest of United Parcel Service, Inc. (Ohio) & Affiliates, page 64 of 64.
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