My medical staffing agency is based out of state and only recruits out of state — do I still owe New Mexico gross receipts tax on placements at New Mexico hospitals?

Plain-English summary

The protest was denied in full — roughly $2.9 million stands. Vista Staffing Solutions, Inc. is a Utah-based medical staffing agency (a "locum tenens" placement firm and a subsidiary of Envision Healthcare) with no New Mexico office and no New Mexico employees. It places doctors and other medical professionals at healthcare facilities around the country, including in New Mexico. After an audit, the Department assessed Vista $2,090,515.39 in gross receipts tax, $379,924.37 in interest, and a $418,103.08 civil negligence penalty.

Vista raised four arguments; Hearing Officer Chris Romero rejected each.

1. "Our service is recruiting, and we do it entirely out of state." Rejected. Vista argued its receipts came from recruiting performed outside New Mexico, so they fell outside the definition of gross receipts ("performing services in New Mexico"). But the Hearing Officer found Vista's income actually comes from the successful placement of medical professionals at New Mexico facilities, where those professionals then provide services in New Mexico. Recruiting is just a step toward a placement and generates no revenue without one. Following ITT Educational Services and Mountain States Advertising, what matters is the service contracted for and where it is performed — here, placement in New Mexico. Vista even structured its contracts (governed by New Mexico law) to bar the facilities and professionals from dealing directly with each other, keeping Vista in every transaction.

• The out-of-state-services exemption (Section 7-9-13.1) — for services performed outside New Mexico whose "product" is first used in New Mexico — did not apply: there was no tangible "product," and the facilities paid Vista for placements in New Mexico, not for referrals.

2. "The money we passed through to the medical professionals should be excluded as a disclosed agent." Rejected — twice. Section 7-9-3.5(A)(3)(f) excludes "amounts received solely on behalf of another in a disclosed agency capacity."

• No genuine agency relationship. Under MPC, Ltd. and Regulation 3.2.1.19(C)(1), merely using the word "agent" isn't enough. Vista's contracts didn't give the medical professionals a real right to proceed directly against the healthcare operators if Vista failed to pay them, and the operators didn't understand themselves to be directly liable to the professionals. That's not a true disclosed agency.
• Failed the mandatory bookkeeping rule. Independently, Regulation 3.2.1.19(C)(2) requires an agent's billings to separately state the reimbursed amounts. Vista admitted its invoices did not distinguish the pay owed to the medical professionals from Vista's own service fee. Payments from operators to Vista, and from Vista to professionals, are separate transactions; taxing only the first is not double taxation (House of Carpets).

3. Health-care deductions (Sections 7-9-93 and 7-9-77.1). Waived, and meritless anyway. Vista raised these only in its reply brief, so they were waived (Hale v. Basin Motor). Even considered, they don't fit: these deductions are for a health care practitioner's receipts from qualifying payors (a managed-care provider or health insurer under 7-9-93; Medicare under 7-9-77.1). Vista is a staffing company, not a medical-services provider, and it billed operators hourly (rate × hours worked) rather than for specific medical services to eligible patients. It never showed its receipts came from a qualifying payor (Benvenuti; Four Corners Healthcare).

4. Negligence penalty (Section 7-1-69). Not abated. The word "shall" makes the penalty mandatory once negligence is established (Marbob Energy), and Regulation 3.1.11.10 defines negligence broadly. Vista's reliance on an unexplained internal "tax department," without showing what it actually relied on, wasn't ordinary business care. The good-faith-mistake-of-law exception in Section 7-1-69(B) requires evidence of an informed consultation or study — Vista had none (C & D Trailer Sales; contrast the Santa Fe Tow decision, where a taxpayer's penalty was abated because a CPA had advised the receipts were non-taxable). No non-negligence indicators applied.

Result: protest DENIED. Vista must pay the tax, penalty, and interest.

What this means for you

Out-of-state agencies that place people or broker deals in New Mexico

Being headquartered elsewhere, with no New Mexico office or staff, does not shield you from New Mexico gross receipts tax if your fee comes from an activity that is completed in New Mexico — here, placing professionals at New Mexico facilities. New Mexico looks at the service the client actually paid for and where it happens, not the label ("recruiting") or where your back-office work occurs. Preparatory work done out of state doesn't move the taxable event out of state.

If you rely on the "disclosed agency" pass-through exclusion

To exclude money you collect and pass on to someone else, two things both have to be true: (1) a genuine agency relationship in which the third party can look directly to your principal — not just the word "agent" in a contract — and (2) your invoices must separately state the pass-through amounts from your own fee, and your books must identify them as reimbursements. Vista lost partly because a single, combined invoice line doomed the exclusion. Bill in a way that itemizes the reimbursement.

Health-care and staffing businesses

The gross-receipts deductions for health-care practitioners (Sections 7-9-93, 7-9-77.1) follow the entity that actually renders medical services and bills a qualifying payor (insurer, managed-care organization, Medicare). A staffing intermediary that bills hourly generally can't claim them, even though its placed clinicians treat patients. Know which entity in the chain the deduction attaches to.

Don't wait until the reply brief, and get real tax advice

Arguments raised for the first time in a reply brief are waived. And to avoid a negligence penalty on a good-faith-mistake theory, you need evidence of an actual informed consultation (e.g., documented CPA or tax-counsel advice) — pointing to an in-house "tax department" without explaining what it concluded and why won't cut it.

Common questions

Q: I'm an out-of-state staffing agency. Do I owe New Mexico gross receipts tax on placements at New Mexico facilities?
A: Yes, generally. If your fee is earned from placing workers at New Mexico facilities where they perform services, the receipts are from performing services in New Mexico and are taxable — even if you have no New Mexico office and do your recruiting elsewhere.

Q: We just recruit — isn't recruiting an out-of-state service?
A: The tribunal looks at what the client paid for. Here, clients paid for placements in New Mexico, not standalone recruiting, and recruiting produced no revenue without an in-state placement. So the receipts were treated as New Mexico-source.

Q: We pass most of the money through to the workers. Isn't that a non-taxable reimbursement?
A: Only if you prove a genuine disclosed agency relationship and your invoices separately state the pass-through amount. Vista's combined invoices — with no split between the workers' pay and its own fee — failed the regulation's requirement, so nothing was excluded.

Q: Do the health-care gross-receipts deductions cover a medical staffing company?
A: Usually not. Those deductions apply to health-care practitioners' receipts from qualifying payors like insurers or Medicare. A staffing company billing hourly for placements is not providing the deductible medical service and typically can't claim them.

Q: Why wasn't the negligence penalty removed?
A: The penalty is mandatory once negligence is shown, and Vista didn't prove it acted with ordinary care or relied on informed tax advice. Citing an internal "tax department," without explaining the basis for its no-tax conclusion, wasn't enough for the good-faith-mistake-of-law exception.

Q: Can I rely on this decision for my own situation?
A: Not directly. A Decision and Order resolves one taxpayer's protest on its specific facts and is not a general ruling or advisory opinion of the Department. It does illustrate how New Mexico sources staffing/placement receipts and the strict requirements of the disclosed-agency exclusion.

Citations and references

Statutes and regulations:

• NMSA 1978, § 7-9-3.5(A)(1) (2017) — "gross receipts" includes receipts from performing services in New Mexico; § 7-9-3.5(A)(3)(f) (2007) — exclusion for amounts received solely on behalf of another in a disclosed agency capacity
• NMSA 1978, § 7-9-3.3 (2002) — "engaging in business" defined
• NMSA 1978, § 7-9-5 (2002) — presumption that all receipts are taxable
• NMSA 1978, § 7-9-13.1 — exemption for receipts from selling services performed outside New Mexico whose product is initially used in New Mexico
• NMSA 1978, § 7-9-93 — deduction for certain health-care practitioner receipts from a managed health care provider or health care insurer
• NMSA 1978, § 7-9-77.1 — deduction for a health care practitioner's receipts from Medicare for services to Medicare beneficiaries
• NMSA 1978, § 7-1-67 (2007) — interest on unpaid tax
• NMSA 1978, § 7-1-69 (2007) — mandatory civil negligence penalty; subsection (B) good-faith-mistake-of-law exception
• NMSA 1978, § 7-1-25 (2015) — appeal to the New Mexico Court of Appeals; § 7-1B-8 (2019) — hearing procedures
• NMSA 1978, § 7-9-3(D) (2022) — later statutory definition of "disclosed agency" (enacted after the audit period; not applied)
• Regulation 3.2.1.19(C)(1)–(2) NMAC — disclosed-agency requirements, including separately stating reimbursed amounts on billings
• Regulation 3.1.11.10 NMAC — definition of negligence; Regulation 3.1.11.11 NMAC — indicators of non-negligence

Cases:

• MPC, Ltd. v. N.M. Taxation & Revenue Dep't, 2003-NMCA-021, 133 N.M. 217 (elements of a disclosed agency relationship and its bookkeeping requirements)
• ITT Educational Services, Inc. v. Taxation & Revenue Dep't, 1998-NMCA-078, 125 N.M. 244 (focus on the service contracted for and where it is performed)
• Mountain States Advertising, Inc. v. Bureau of Revenue, 1976-NMCA-058, 89 N.M. 331 (services taxed where performed for the client)
• House of Carpets, Inc. v. Bureau of Revenue, 1973-NMCA-034, 84 N.M. 747 (separate transactions; taxing one is not double taxation)
• Wing Pawn Shop v. Taxation & Revenue Dep't, 1991-NMCA-024, 111 N.M. 735 (exemptions/deductions construed strictly against the taxpayer)
• TPL, Inc. v. N.M. Taxation & Revenue Dep't, 2003-NMSC-007, 133 N.M. 447 (taxpayer must clearly establish entitlement to a clearly expressed deduction)
• Hale v. Basin Motor Co., 1990-NMSC-068, 110 N.M. 314 (issues raised for the first time in a reply brief are not considered)
• Marbob Energy Corp. v. N.M. Oil Conservation Comm'n, 2009-NMSC-013, 146 N.M. 24 ("shall" makes a statutory provision mandatory)
• C & D Trailer Sales v. Taxation & Revenue Dep't, 1979-NMCA-151, 93 N.M. 697 (penalty upheld where the taxpayer relied on no informed consultation)
• Benvenuti v. N.M. Taxation & Revenue Dep't, 2022 WL 17959156 (N.M. Ct. App. Dec. 27, 2022) (non-precedential) (Section 7-9-93 requires payment by a qualifying payor)
• Four Corners Healthcare Corp. v. N.M. Taxation & Revenue Dep't, 2022 WL 17663616 (N.M. Ct. App. Dec. 14, 2022) (non-precedential) (Section 7-9-77.1 Medicare requirements)

Source

• Listing: New Mexico Decisions & Orders
• Decision post: Vista Staffing Solutions
• Decision PDF: D&O 23-09

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 VISTA STAFFING SOLUTIONS INC.
6 TO ASSESSMENT ISSUED UNDER
7 LETTER ID NO. L0797491376

8 v. Case Number 19.03-027A, D&O 23 - 09

9 NEW MEXICO TAXATION AND REVENUE DEPARTMENT

10 DECISION AND ORDER

11 On December 8, 2021, Hearing Officer Chris Romero, Esq., of the Administrative

12 Hearings Office conducted an administrative hearing on the merits of the tax protest of Vista

13 Staffing Solutions, Inc. (hereinafter “Vista” or “Taxpayer”) pursuant to the Tax Administration

14 Act and the Administrative Hearings Office Act. The hearing was conducted in person and

15 videoconference, as permitted under NMSA 1978, Section 7-1B-8 (H) (2019) and Regulation

16 22.600.3.10 NMAC under the circumstances of the public health emergency presented by

17 COVID-19. The record closed on September 22, 2022 with the filing of Taxpayer’s written

18 rebuttal argument.

19 Mr. Marc Simonetti, Esq., Mr. Evan Hamme, Esq., Mr. Robert Desiderio, Esq., and Ms.

20 Janette Duran, Esq., appeared in person for Vista along with Ms. Carolyn Koo and Ms. Chandra

21 Westergaard, who appeared by videoconference.

22 Staff Attorneys, Mr. David Mittle, Esq., appeared in person, and Mr. Kenneth Fladager,

23 Esq., appeared by videoconference and in person, representing the opposing party in the protest,

24 the Taxation and Revenue Department (Department).

25 Mr. John Murphy, Ms. Alma Amador, Ms. Marcy Coca, and Ms. Lizette Rivera appeared

26 as witnesses. Mr. Murphy and Ms. Coca were called by Vista and appeared by videoconference.

In the Matter of the Protest of Vista Staffing Solutions, Inc.
Page 1 of 57
1 Ms. Amador was called by Vista and appeared in person. Ms. Rivera was called by the

2 Department and appeared by videoconference.

3 Taxpayer Exhibits 1 – 15 and 18, and Department Exhibits A – B were admitted without

4 objection upon stipulation of the parties.

5 Vista’s main arguments for abatement of the assessment are that: (1) Vista did not

6 conduct its business activities within the State of New Mexico; (2) amounts paid to Medical

7 Professionals should be excluded from taxation as reimbursed expenditures of an agent in a

8 disclosed agency capacity; (3) civil negligence penalty should not apply because it assertedly

9 exercised reasonable business care and prudence and because its interpretation of its reporting

10 and payment obligations was grounded on good faith and reason. Vista also argued in

11 Petitioner’s Reply Brief (written rebuttal closing) in favor of the application of NMSA 1978,

12 Sections 7-9-93 and 7-9-77.1.

13 As explained in greater detail in the subsequent discussion, the Hearing Officer finds

14 based on the evidence and arguments presented that Vista is not entitled to an abatement of the

15 assessment for the reasons stated. IT IS DECIDED AND ORDERED AS FOLLOWS:

16 FINDINGS OF FACT

17 A written transcript of the proceedings was prepared by Vista and provided to the

18 Department and the Administrative Hearings Office. Citations to the written transcript adhere to

19 the following general convention: Volume No.: Page No.: Line No. – Line No. or Volume No.:

20 Page No.: Beginning Line No. – Page No.; Ending Line No.

21 Neither Vista nor the Department alerted the Hearing Officer to any perceived errors in

22 the transcript, and the Hearing Officer did not independently detect any errors either. However,

23 because the official audio recording represents the official record of proceedings, any

In the Matter of the Protest of Vista Staffing Solutions, Inc.
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1 discrepancy between the audio recording and the written transcript should be resolved by

2 reference to the recording.

3 Vista’s Business Operations

4 1. Vista is a medical staffing agency that provides medical professional placement

5 services to medical facilities across the country. [12-8-21 2:3:24 – 25; 12-8-21 2:4:1 – 2;

6 Taxpayer Ex. 9.1; Stip. ¶ 3]

7 2. Since 2015, Vista has been a wholly owned subsidiary of Envision Healthcare

8 Corp. [Stip. ¶ 1; Taxpayer Ex. 11; 12-8-21 1:31:6 – 7; 12-8-21 2:3:21 – 23]

9 3. Vista is a Utah corporation with its principal place of business and headquarters in

10 Utah. [12-8-21 1:33:5 – 7; Stip. ¶ 2]

11 4. Healthcare operators maintain facilities for, and operate programs to facilitate, the

12 provision of comprehensive healthcare services to patients (“Healthcare Operators”). [12-8-21

13 1:35:19 – 36:3; 12-8-21 1:45:19 – 21]

14 5. Among other services, Vista provides professional placement services to

15 Healthcare Operators consisting of hospitals, healthcare facilities, and health programs. [12-8-21

16 1:33:20 – 34:7]

17 6. Healthcare Operators require duly licensed professionals, including physicians,

18 nurse practitioners, physician assistants, and certified registered nurse anesthetists (“Medical

19 Professionals”), to perform healthcare services for patients at the Healthcare Operators’

20 locations. [12-8-21 1:34:22 – 36:3]

21 7. Vista maintains a network of licensed advanced Medical Professionals and makes

22 referrals from such network to its Healthcare Operator clients. [12-8-21 1:37:3 – 15; Stip. ¶ 3]

23 8. When Vista successfully places a Medical Professional with a Healthcare

In the Matter of the Protest of Vista Staffing Solutions, Inc.
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1 Operator, such Medical Professional then provides healthcare services to patients at a Healthcare

2 Operator’s location. [Stip. ¶ 3; Taxpayer Ex. #2.3, § I.A, definition of “Agency Healthcare

3 Provider.”]

4 9. Vista’s primary externally measured metric is NPS scores, which is “like best of

5 staffing.” [12-8-21 2:7: 4 – 7]

6 Vista’s Process Generally

7 Sales Function

8 10. Vista’s functions include sales, recruiting, support, and billing functions to

9 perform its services. [12-8-21 1:34:9 – 35:7]

10 11. Vista develops relationships with Healthcare Operators that are potential new

11 clients and maintains relationships with Healthcare Operators that are existing clients. [12-8-21

12 1:39:2 – 6]

13 12. Vista communicates with Healthcare Operators regarding opportunities to

14 perform staffing services for the Healthcare Operators. [12-8-21 1:39:2 – 6]

15 13. Vista develops and maintains relationships with Healthcare Operators to access

16 and obtain additional staffing opportunities. [12-8-21 1:38:5 – 39:9]

17 Staffing Function

18 14. Vista’s “value proposition is that [Healthcare Operators are] trying to find

19 healthcare providers. And we [i.e., Vista] not only have a relationship with thousands of health

20 care providers, but even if we don’t have a relationship with someone immediately, we are able

21 to recruit based on our experience and our expertise. So we are able to do the job of recruiting of

22 that healthcare professional to our client organizations in a more cost-effective way than they’re

23 able to do it themselves because of our relationships and because of our expertise.” [12-8-21

In the Matter of the Protest of Vista Staffing Solutions, Inc.
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1 1:37:5 – 15.]

2 15. Healthcare Operators make requests to Vista to “find and staff medical

3 professionals.” [12-8-21 2:10 – 25; 12-8-21 2:11:1 – 3]

4 16. Upon inquiry from a Healthcare Operator, Vista will assist in the identification

5 and placement of a Medical Professional having the necessary expertise to satisfy the Healthcare

6 Operator’s personnel needs. [12-8-21 1:38:5 – 45:9; Stip. ¶ 20; Ex. 4, ¶ 2]

7 17. Vista’s professional placement function includes a scheduling function, which “is

8 in charge of making the match” between the Medical Professional and Healthcare Operator. [12-

9 8-21 1:39:10 – 14]

10 18. When Vista identifies a Medical Professional, Vista evaluates the Medical

11 Professional to verify the Medical Professional’s training and education. [12-8-21 1:34:1 – 5; 12-

12 8-21 1:41:1 – 16]

13 19. If Vista identifies a qualified Medical Professional, Vista provides that identified

14 Medical Professional with relevant information about the opportunity. [12-8-21 1:42:3 – 25]

15 20. If the Medical Professional is interested in the opportunity, Vista will refer the

16 Professional to the Healthcare Operator and inform the Healthcare Operator of the Medical

17 Professional’s qualifications and availability. [12-8-21 1:42:1 – 43:5]

18 21. Healthcare Operators review the Medical Professional’s information and decide

19 whether to accept the referral. [12-8-21 1:42:1 – 43:5]

20 22. Vista will put the Medical Professional through a credentialing process, which

21 includes verifying education and licensure and checking for malpractice claims. [12-8-21 1:41:2

22 – 16; Ex. 2.4 (Locum Tenens Agreement, Healthcare Personnel Requirements, III(A))]

23 23. The Healthcare Operators have the right to interview the Medical Professional

In the Matter of the Protest of Vista Staffing Solutions, Inc.
Page 5 of 57
1 candidates provided by Vista. [12-8-21 2:11:4 – 18]

2 24. The Healthcare Operator decides which potential candidate to accept for an

3 independent contractor assignment. [12-8-21 2:11:16 – 18]

4 25. If a Healthcare Operator decides to staff its facility with a Medical Professional

5 Vista identified, then the Healthcare Operator and Vista negotiate Vista’s payment terms.

6 [Taxpayer Ex. 2.10 (Locum Tenens Agreement, Healthcare Personnel Requirements,

7 III(A)(1)(a))]

8 26. Healthcare Operators and Vista agree on a rate of compensation for Vista. [12-8-

9 21 2:11:21 – 23; Taxpayer Ex. 2.10 (Locum Tenens Agreement, Healthcare Personnel

10 Requirements, III(A)(1)(a))]

11 27. Medical Professionals negotiate their own rate of hourly pay. [12-8-21 2:13:1 – 4;

12 Taxpayer Ex. 2.11 (Locum Tenens Agreement, Healthcare Personnel Requirements, III(A)(3))]

13 28. The Healthcare Operators decide the start and completion date of the work under

14 the contract. [12-8-21 2:12: 14 – 16]

15 29. The Healthcare Operator provides an orientation for the Medical Professional.

16 [12-8-21 2:13:15 – 17]

17 30. The Healthcare Operators control the work schedule of the Medical Professional.

18 [12-8-21 2:14:12 – 17]

19 31. Medical Professionals work at the Healthcare Operator’s medical facility and

20 dress in accordance with the Healthcare Operator’s dress code. [12-8-21 2:13:24 – 14:1]

21 32. Healthcare Operators supervise the day-to-day job performance of the assigned

22 Medical Professional. [12-8-21 2:14:12 – 17]

23 33. Healthcare Operators retain the ability to terminate the assignment of Medical

In the Matter of the Protest of Vista Staffing Solutions, Inc.
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1 Professionals. [12-8-21 2:14: 5 – 9]

2 34. Vista stays in contact with the Medical Professional throughout the assignment

3 and through termination of the assignment. [12-8-21 1:45:4 – 6]

4 35. During the audit period, payment of the Medical Professionals came from

5 submission of timecards approved by the Healthcare Operator. [12-8-21 1:73:2 – 6; 12-8-21

6 2:22:7]

7 36. The timecards may or may not have been on Vista’s letterhead. [12-8-21 2:22:8 –

8 15]

9 37. Vista generally pays Medical Professionals twice a month. [12-8-21 1:46:10 – 11;

10 19 – 21; 12-8-21 1:73:2 – 6; 12-8-21 2:14:18 – 22]

11 38. Vista pays Medical Professionals before it is paid by the Healthcare Operator.

12 [12-8-21 2:14:23 – 25]

13 Support Function

14 39. If the Medical Professional accepts the placement, Vista continues to participate

15 in the transaction. [12-8-21 1:43:25 – 45:9; 12-8-21 1:54:11 – 55:5]

16 40. After a placement, Vista “engages” the Medical Professional on the Healthcare

17 Operator’s behalf, i.e., obtains the Medical Professional’s legal agreement to perform healthcare

18 services at Healthcare Operator’s location. [12-8-21 1:43:25 – 45:17; 12-8-21 1:57:9 – 58:25]

19 41. Once the Medical Professional is engaged, Vista discloses the Healthcare

20 Operator’s identifying information and “onboards” the Medical Professional, i.e., provides the

21 Medical Professional documents regarding the Healthcare Operator’s policies and practices and

22 other information relevant to the placement. [12-8-21 1:56:19 – 23]

23 42. During the onboarding process, Vista verifies the Medical Professional’s

In the Matter of the Protest of Vista Staffing Solutions, Inc.
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1 credentials and, if necessary, assists the Medical Professional to obtain necessary permits or

2 licenses to perform healthcare services in the Healthcare Operator’s jurisdiction. [12-8-21 1:41:2

3 – 3; 12-8-21 1:41:2 – 23]

4 43. Further, during the onboarding process, Vista may assist the Medical Professional

5 to determine plans for travel and lodging near the Healthcare Operator’s location. [12-8-21

6 1:43:25 – 45:8]

7 44. During the “charting” process, Vista provides formal documentation to the

8 Medical Professional specifying the regulatory requirements to perform healthcare services at the

9 Healthcare Operator’s location. [12-8-21 1:57:9 – 23]

10 45. During the onboarding and charting process, Vista obtains the Medical

11 Professional’s agreement to contract terms and conditions between the Healthcare Operator and

12 the Professional. [12-8-21 1:57:16 – 58:2]

13 46. After engagement, onboarding, and charting, the Medical Professional travels to

14 and begins performing healthcare services at Healthcare Operator’s location. [12-8-21 1:43:25 –

15 45:9]

16 47. Vista does not direct or control Medical Professionals providing healthcare

17 services. [Taxpayer Ex. #4.2]

18 48. Vista facilitates the transactions between Medical Professionals and Healthcare

19 Operators during the term of the engagement. [12-8-21 1:43:25 – 45:9]

20 49. Medical Professionals prepare work records reflecting their time and services

21 provided to patients at a Healthcare Operator’s location. [12-8-21 1:45:10 – 17; 12-8-21 1:60:5 –

22 15]

23 50. Vista collects these work records and disburses compensation to the Medical

In the Matter of the Protest of Vista Staffing Solutions, Inc.
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1 Professional based on the work records on the Healthcare Operator’s behalf. [12-8-21 1:44:21 –

2 22; 12-8-21 1:46:3 – 23; Taxpayer Ex. # 2.14]

3 51. Following a placement, Healthcare Operators are not permitted to contract for the

4 Medical Professional’s services directly for a specified period. [12-8-21 1:43:12 – 18]

5 52. Vista administers the Medical Professionals’ engagements to prevent Healthcare

6 Operators from “contract[ing] that provider [i.e., Medical Professional] directly outside our

7 relationship for some period of time . . . usually two years.” [12-8-21 1:43:15 – 18]

8 53. The engagement process “is what ensures that if we make that introduction [of the

9 Medical Professional to the Healthcare Operator], that they [i.e., the Professional] don’t call the

10 health care operator and say . . . why don’t you just hire me directly. . . . [T]he contract is] both

11 ways and our adherence to having them always in place is what ensures that we’re able to do

12 business.” [12-8-21 1:55:11 – 16]

13 54. There are two reasons why maintaining communications with Healthcare

14 Operators and Medical Professionals throughout an engagement creates business opportunities

15 for Vista:

16 a. First, “one of the ways [Vista does] business is through
17 extensions” of a Professional placement with a Healthcare
18 Operator; and

19 b. Second, Vista “also need[s] to know very clearly as that
20 [placement] is coming to a close because [it] would try to place
21 that provider [i.e., Medical Professional] somewhere else.” [12-
22 8-21 1:45:4 – 9]

23 Billing Function

24 55. Vista bills the Healthcare Operator for both Vista’s services and the Medical

25 Professional’s healthcare services. [Stip. ¶ 33]

26 56. Vista retains records that state: (i) the amount Vista receives as compensation for

In the Matter of the Protest of Vista Staffing Solutions, Inc.
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1 its services; and (ii) the amounts Vista accepts from Healthcare Operators for Professionals’

2 compensation. [12-8-21 1:63:6 – 64:9; Stip. ¶ 34]

3 57. Vista’s invoices to Healthcare Operators do not separately state the amounts

4 billed for the services of Medical Professionals and the amount billed for Vista’s service fee. [12-

5 8-21 2:31:13 – 16; Taxpayer Ex. 18.5]

6 58. Healthcare Operators bill healthcare payors, such as insurance companies,

7 managed care organizations, and government healthcare insurance programs (e.g., Medicare), for

8 Medical Professionals’ services. [Taxpayer Exs. 2.14; 5.1]

9 Vista’s Business Locations

10 59. Vista maintains offices in Utah; Houston, Texas; and Georgia. [12-8-21 1:33:8 –

11 16; Stip. ¶ 21]

12 60. During the period from January 1, 2010, through May 31, 2017 (“Audit Period”),

13 Vista had offices in Wisconsin and Texas that have since closed. [12-8-21 1:33:11 – 13]

14 61. At no time whatsoever has Vista ever had an office in New Mexico. [12-8-21

15 1:33:14 – 16]

16 62. Vista does most of its business over the telephone, e-mail, or other electronic

17 means, although it occasionally visits client sites. [12-8-21 2:4:10 – 15]

18 63. Vista’s employees work from Vista’s offices outside of New Mexico. [12-8-21

19 1:35:8 – 16; Stip. ¶ 22]

20 64. During the Audit Period, Vista occasionally allowed employees to work remotely

21 but it did not have an employee work remotely from a location inside New Mexico. [12-8-21

22 1:35:8 – 16]

23 65. It was likely that during the audit period, Vista’s representatives met with Vista’s

In the Matter of the Protest of Vista Staffing Solutions, Inc.
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1 clients in New Mexico. [12-8-21 2:5:11 – 16]

2 66. Vista’s employees are divided into three relevant departments: Operations, Front

3 Office Support, and Sales. [12-8-21 1:34:9 – 35:7]

4 67. The Sales Department employees perform the sales function, i.e., seek to identify

5 new potential clients and obtain new opportunities with existing clients. [12-8-21 1:34:9 – 14]

6 68. The Operations Department employees include recruiters and schedulers, and

7 these employees perform the core recruiting activities, including maintaining Vista’s

8 Professional network, reviewing client openings, identifying potential candidates, and

9 communicating with clients and Medical Professionals regarding referrals and placements. [12-

10 8-21 1:34:15 – 21]

11 69. The Front Office Support employees perform the support function, including

12 preparing contracts and other paperwork to engage the Medical Professionals, onboarding the

13 Professional on Healthcare Operators’ behalf, verifying the Medical Professionals’ credentials,

14 and charting the Professionals. [12-8-21 1:34:22 – 35:3]

15 70. Vista also has back-office personnel that fulfill the billing function, including

16 generating and maintaining Vista’s billing records. [12-8-21 1:35:4 – 7]

17 71. Vista’s Operations, Front Desk, and back-office employees do not travel to client

18 locations or meet Medical Professionals in person. [12-8-21 1:35:8 – 16]

19 72. Vista’s Sales Department employees may visit existing or potential clients to sell

20 Vista’s services. [12-8-21 2:4:18 – 5:10]

21 Vista’s Transactions with New Mexico Healthcare Operators and New Mexico Clients

22 73. During the Audit Period, Vista contracted with Healthcare Operators with

23 locations in New Mexico. [Taxpayer Ex. 2; Taxpayer Ex. 3]

In the Matter of the Protest of Vista Staffing Solutions, Inc.
Page 11 of 57
1 74. Specifically, Vista performed professional placement services for members of the

2 New Mexico Hospital Association. [Stip. ¶ 8]

3 75. New Mexico Hospital Association is a private member organization of

4 approximately forty-five Healthcare Operators (“Private Healthcare Operators”). [Stip. ¶ 8]

5 76. Vista also provided professional placement services for New Mexico Healthcare

6 Operators that are operated by the Indian Health Service (“IHS”), an agency of the U.S.

7 Department of Health and Human Services. [Stip. ¶ 12]

8 Contracts for New Mexico Healthcare Operators

9 77. Vista and the New Mexico Healthcare Operators entered into Locum Tenens

10 Agreements (“LT Agreements”). [Taxpayer Ex. 2]

11 78. Vista and Medical Professionals entered into Professional Services Placement

12 Agreements (“PSP Agreements”). [Taxpayer Ex. 4]

13 79. New Mexico Healthcare Operators and Medical Professionals entered into

14 Reassignment Agreements. [Taxpayer Ex. 5; Stip. ¶ 18]

15 Locum Tenens Agreements

16 80. Healthcare Operators Services Corporation (“HSC”) is a subsidiary of the New

17 Mexico Hospital Association, which is a member organization of approximately forty-five

18 hospitals. [Stip. ¶ 8; 12-8-21 2:8:21 – 25; 12-8-21 2:9:1]

19 81. HSC represents the New Mexico Healthcare Operators Association members

20 [Healthcare Operators] in negotiating locum tenens agreements for the provision of Medical

21 Professionals through companies like Vista. [Stip. ¶ 9; 12-8-21 2:9:17 – 20]

22 82. HSC is located in New Mexico. [12-9-21 3:62:22 – 23]

23 83. Vista and HSC entered into an LT Agreement, dated June 3, 2009, which is a

In the Matter of the Protest of Vista Staffing Solutions, Inc.
Page 12 of 57
1 standard LT Agreement representative of Vista’s LT Agreements with New Mexico Healthcare

2 Operators. [Stip. ¶ 10; 12-8-21 1:49:20 – 50:1; Taxpayer Ex. 2]

3 84. The LT Agreement is a custom contract used by HSC for all staffing agencies.

4 [12-8-21 1:49:23 – 25; 12-8-21 1:51:21 – 25]

5 85. Vista and HSC negotiated and entered into the New Mexico Locum Tenens

6 Program, 2009 – 2011 Locum Tenens Agreement; Physicians, Physician Assistants, Certified

7 Nurse Practitioners and Certified Registered Nurse Anesthetists dated June 3, 2009. [Ex. 2.2 (LT

8 Agreement at Art. 1); Stip. ¶ 10]

9 86. Vista entered into LT Agreements with the New Mexico Healthcare Operators.

10 [Stip. ¶ 4; Taxpayer Ex. 2; Taxpayer Ex. 3]

11 87. LT Agreements specify that Healthcare Operators “are located both in rural and

12 urban settings [in New Mexico], and all have needs for locum tenens placements to a greater or

13 lesser degree.” [Taxpayer Ex. 2.2 (LT Agreement, Purpose)]

14 88. LT Agreements provide that, “HSC seeks to secure physician, physician

15 assistants, certified nurse practitioners, and certified registered nurse anesthetists, locum tenens

16 services for member facilities and other health care entities, participating institutions, and their

17 affiliated physician groups who elect to participate….” [Taxpayer Ex. 2.2 (LT Agreement,

18 Purpose)]

19 89. Vista’s LT Agreements with Government Healthcare Operators are contracts that

20 comply with IHS requirements. [Stip. ¶ 13.]

21 90. The LT Agreements control the legal terms for the services Vista provides to New

22 Mexico Healthcare Operators. [12-8-21 1:50:2 – 8; 12-8-21 1:52:4 – 7; Taxpayer Ex. 2.4 (§

23 III.A, “Agency Requirements”)]

In the Matter of the Protest of Vista Staffing Solutions, Inc.
Page 13 of 57
1 91. A standard LT Agreement defines the parties as follows:

2 a. “Participating Institution means an NMHA [i.e., New Mexico
3 Hospital Association] member institution or other customer
4 healthcare entity, and/or its designated affiliated physician
5 groups participating in this Agreement [i.e., the Healthcare
6 Operators].” [Taxpayer Ex. 2.3]

7 b. “Agency means those agencies selected to enter into contracts
8 with HSC and Participating Institutions under the Locum
9 Tenens Program [i.e., Vista].” [Taxpayer Ex. 2.3]

10 c. “Agency Healthcare Provider means the Agency’s independent
11 contractors providing healthcare services to a Participating
12 Institution under this Agreement [i.e., the Professionals]. The
13 Participating Institution and HSC acknowledge that the Agency
14 Healthcare Providers are not the Agency’s employees but are
15 independent contractors.” [Taxpayer Ex. 2.3]

16 92. Medical Professionals are not Vista employees. [Taxpayer Ex. 4, ¶ 11); Stip. ¶ 24]

17 93. HSC receives a monthly fee from Vista to participate in the Locum Tenens

18 Program. [Taxpayer Ex. 2.14 (LT Agreement, Administrative Fee to HSC); 12-8-21 2:10:2 – 5]

19 94. Vista used telephone and email to communicate with its New Mexico Healthcare

20 Operator contacts regarding referrals. [12-8-21 2:4:10 – 15]

21 95. Vista used telephone and email to communicate with Medical Professionals

22 regarding placements with the New Mexico Healthcare Operators. [12-8-21 2:4:10 – 13]

23 96. The standard LT Agreements state:

24 “Prior to the assignment of an agency Healthcare Provider to a
25 Participating Institution: Agency shall assure that an independent
26 contractor agreement is executed between the Agency [i.e., Vista]
27 and the Agency Healthcare Provider [i.e., Medical Professionals]
28 … Such fully executed independent contractor agreement shall be
29 maintained in the Agency’s file concerning the Agency Healthcare
30 Provider.” [Taxpayer Ex. 2.4, § III.A.2]

31 97. The LT Agreement specified terms to which Vista and the Medical Professionals

32 must agree for Vista to refer, and for Medical Professional to accept, a referral under the LT

In the Matter of the Protest of Vista Staffing Solutions, Inc.
Page 14 of 57
1 Agreement. [Taxpayer Ex. 2.4 – 2.6]

2 98. The standard LT Agreements state:

3 “Prior to the assignment of an Agency Healthcare Provider [i.e.,
4 Medical Professional] to a Participating Institution [i.e., Healthcare
5 Operator]: Agency shall . . . inform[] the Agency Healthcare
6 Provider [i.e., Medical Professional] of the matters set forth in this
7 Agreement [i.e., the LT Agreement] which begins with the words
8 ‘Agency shall inform Agency Healthcare Provider,’ or words to
9 that effect.” [Taxpayer Ex. 2.4, § III.A.2]

10 99. During the onboarding process, Vista provides the controlling LT Agreement to

11 Medical Professionals for their review. [12-8-21 1:54:11 – 55:7]

12 100. The standard LT Agreements state:

13 “Agency shall contractually obligate each Agency Healthcare
14 Provider to comply with timely medical documentation on each
15 patient. Agency shall contractually obligate Agency Healthcare
16 Provider to complete such documentation prior to the Agency
17 Healthcare Provider leaving the Participating Institution’s
18 premises. In addition, Agency shall contractually obligate Agency
19 Healthcare Provider to adhere to the clinical check-out procedures
20 as prescribed by the Participating Institution including such
21 procedures related to the change of shifts to ensure that the next
22 practitioner is provided with the information necessary to
23 understand the status of each patient, and the plan for evaluation
24 and care of each patient.” [Taxpayer Ex. 2.6, § III.A.10]

25 101. The standard LT Agreements state:

26 “Agency [i.e., Vista] shall inform each Agency Healthcare
27 Provider [i.e., Medical Professionals] of his or her responsibility to
28 understand, and Agency shall contractually obligate the Agency
29 Healthcare Provider to, comply with all state and federal laws and
30 regulation and all policies and procedures of the Participating
31 Institution [i.e., Healthcare Operators] at which an Agency
32 Healthcare Provider serves related to the confidentiality of
33 protected healthcare information and medical records.” [Taxpayer
34 Ex. 2.6, § III.A.9]

35 102. The standard LT Agreements attach an “Agency Healthcare Provider Contractual

36 Obligation Reference,” which states:

In the Matter of the Protest of Vista Staffing Solutions, Inc.
Page 15 of 57
1 “Agency [i.e., Vista] is solely responsible for contractually
2 obligating the Agency Healthcare Provider [i.e., Medical
3 Professional] to comply with certain terms and conditions, and for
4 informing [the Medical Professional] of certain matters, as
5 expressly set forth in the General Terms and Conditions of the
6 Agreement [i.e., the LT Agreement].” [Taxpayer Ex. 2.46]

7 103. The “Agency Healthcare Provider Contractual Obligation Reference” provides a

8 seven-page reference for Vista regarding the multitude of terms to which Vista must

9 contractually obligate the Medical Professionals. [Taxpayer Ex. 2.46 – 52]

10 104. The LT Agreements provide a required billing process that ensures patients

11 receive a single bill for healthcare services received at Healthcare Operator locations. [12-8-21

12 1:60:3 – 61:25; Taxpayer Ex. 2.11, § III.A.3]

13 105. The LT Agreements require the Healthcare Operators to compensate Vista for its

14 services and Medical Professionals for their healthcare services. [Stip. ¶¶ 31 – 32]

15 106. The LT Agreements require Medical Professionals to execute a reassignment

16 letter (“Reassignment Agreement”) to legally grant Healthcare Operators the right to bill for

17 Medical Professionals’ healthcare services. [12-8-21 1:67:6 – 20; Taxpayer Ex. 2.14, § III.D.2]

18 107. The LT Agreements state:

19 “Participating institution [i.e., Healthcare Operators] shall bill,
20 collect and retain all professional fees due for services provided
21 under this Agreement [i.e., Medical Professionals’ healthcare
22 services under the LT Agreement] in accordance with Medicare
23 reassignment rules, and other applicable rules and regulations.”
24 [Taxpayer Ex. 2.14, § III.D.1]

25 108. The LT Agreements state:

26 Agency will provide Participating Institution with a signed
27 Reassignment Agreement for each Agency Healthcare Provider
28 physician [i.e., Medical Professionals] assigned to Participating
29 Institution.” [Taxpayer Ex. 2.14, § III.D.2]

30 109. Vista’s and the Healthcare Operators’ have an “independent contractor

In the Matter of the Protest of Vista Staffing Solutions, Inc.
Page 16 of 57
1 relationship.” [Taxpayer Ex. 2.26 (LT Agreement, Independent Contractor, ¶ XIV)]

2 110. Healthcare Operators agree to indemnify Vista and Medical Professionals for

3 “any and all claims, suits, fines, penalties, or damages which may arise from” Healthcare

4 Operators’ billing and collection. [Taxpayer Ex. 2.14, § III.D.3]

5 111. The LT Agreements require Vista to issue bills with all relevant support,

6 including Medical Professionals’ timesheets. [12-8-21 1:60:3 – 15; Taxpayer Ex. 2.11, § III.A.3]

7 112. The LT Agreements provide a list of necessary information for Vista’s billing

8 records, including the Medical Professionals’ name; the dates the Medical Professional

9 performed healthcare services; the area of the Medical Professional’s practice; the Medical

10 Professional’s hours; whether the Medical Professional performed services on a regular,

11 overtime, holiday, or “on-call” basis; the rate or rates for the services; and the total amount

12 Healthcare Operators owe Vista and Medical Professionals. [12-8-21 1:61:4 – 18; Taxpayer Ex.

13 2.13, § III.B.1]

14 113. The LT Agreements require Vista to retain books and records related to the

15 required billing procedures. [12-8-21 1:63:6 – 64:9; Taxpayer Ex. 2.29, § XIX, “Access to Books

16 and Records.”]

17 114. The LT Agreements state:

18 “Agency shall, until the expiration of four years after the providing
19 of services pursuant to this Agreement, retain all of its books,
20 documents and records, which are necessary to certify the nature
21 and extent of all costs and sums paid by or to Participating
22 Institutions under this Agreement. Such books, records and
23 documents shall be made available to the Secretary of Health and
24 Human Services, the Comptroller General, or their duly authorized
25 representatives on request.” [Taxpayer Ex. 2.29, § XIX]

26 115. The LT Agreements grant Healthcare Operators the right of access to Vista’s

27 books and records to ensure compliance with the LT Agreement’s billing process. [12-8-21

In the Matter of the Protest of Vista Staffing Solutions, Inc.
Page 17 of 57
1 1:63:6 – 65:10; Taxpayer Ex. 2.9-10, § II.E, “HSC Audit.”]

2 116. The LT Agreements state:

3 “HSC may conduct random audits, at HSC’s expense, for
4 contractual compliance, either on-site or at HSC offices, of the
5 Agency’s application, screening and billing files of Agency
6 Healthcare Providers who have … provided services pursuant to
7 this Agreement.” [Taxpayer Ex. 2.9, § II.E, “HSC Audit.”]

8 Professional Services Placement Agreements

9 117. The PSP Agreement establishes the legal relationship between Vista and Medical

10 Professionals. [Taxpayer Ex. 4 (PSP Agreement); Stip. ¶ 16); 12-8-21 1:69:20 – 24]

11 118. The PSP Agreement defines the Medical Professional as “Professional;” Vista as

12 the “Company;” and Healthcare Operators as the “Client.” [Taxpayer Ex. 4.1; 12-8-21 1:71:5 –

13 8]

14 119. Under the PSP Agreement, Medical Professionals assign to Vista all rights to

15 receive payments from Healthcare Operators for placements made pursuant to this agreement.

16 [Taxpayer Ex. 4.1, ¶ 3; 12-8-21 1:72: 13 – 17]

17 120. Under the PSP Agreement, a Medical Professional’s relationship with Vista is one

18 of independent contractor. [Taxpayer Ex. 4.2, ¶ 11]

19 121. Under the PSP Agreement, a Medical Professional’s relationship with a

20 Healthcare Operator is one of independent contractor. [Taxpayer Ex.4.1, ¶ 2]

21 122. Under the PSP Agreement, a Medical Professional has “no authority to bind

22 [Vista].” [Taxpayer Ex. 4.3, ¶ 24(d)]

23 123. Under the PSP Agreement, “[i]t is agreed that [Vista] is an agent for [Medical]

24 Professional and [Healthcare Operators] in arranging Locum Tenens placements.” [Taxpayer Ex.

25 4.2, ¶ 11]

26 124. Healthcare Operators are not a party to, nor have they seen, the PSP Agreement

In the Matter of the Protest of Vista Staffing Solutions, Inc.
Page 18 of 57
1 between Vista and a Professional. [12-8-21 2:29:9 - 12]

2 125. At no point does the PSP Agreement disclose any sort of agency relationship or

3 whether the Medical Professional has any rights or remedies directly against the Healthcare

4 Operator. [Taxpayer Ex. 4]

5 126. Under the PSP Agreement, additional terms and conditions are provided in a

6 Placement Letter. [Taxpayer Ex. 4 ,¶ 3]

7 127. After a Medical Professional accepts a placement, Vista provides the PSP

8 Agreements for Medical Professionals to review and execute. [12-8-21 1:71:13 – 22]

9 128. Under the PSP Agreement, Professionals are independent contractors from Vista

10 and any client. [Stip. ¶ 25; Taxpayer Ex. 4.2]

11 129. Medical Professionals are not Vista employees. [Stip. ¶ 24; Taxpayer Ex. 4.2]

12 130. The standard PSP Agreements state:

13 “[Medical] Professional’s relationship to Company [i.e., Vista]
14 under this Agreement, and [Medical] Professional’s relationship to
15 any Client, shall be and remain that of independent contractor.
16 [Medical] Professional shall not exercise any control of any nature
17 over the manner in which [Vista] conducts its activities under this
18 Agreement. [Vista] shall not exercise any control of any nature
19 relating to the manner in which or means by which [Medical]
20 Professional performs professional medical services or reaches
21 decisions in the practice of medicine in any placement.” (Taxpayer
22 [Ex. 4.2]

23 131. The PSP Agreements provide:

24 “It is agreed that [Vista] is an agent for [Medical] Professional and
25 Clients [i.e., Healthcare Operators] in arranging Locum Tenens
26 placements, and [Vista] is neither an employment agency nor an
27 employee leasing company.” [Taxpayer Ex. 4.2]

28 132. The PSP Agreements disavow any agency relationship between Vista and the

29 Medical Professionals:

30 “No Authority to Bind [Vista]. [Medical] Professional has no

In the Matter of the Protest of Vista Staffing Solutions, Inc.
Page 19 of 57
1 authority to enter into contracts or agreements on behalf of [Vista].
2 This agreement does not create a partnership or any agency
3 relationship between the parties [i.e., Vista and the Professional].”
4 [Taxpayer Ex. 4.3]

5 133. Under the PSP Agreement, Vista agrees to disburse the Medical Professionals’

6 compensation from amounts Vista receives from Healthcare Operators. [Stip. ¶ 26; Taxpayer Ex.

7 4.1, § 3]

8 134. The PSP Agreements state:

9 “[Medical] Professional assigns to Company [i.e., Vista] all rights
10 to receive payments from Clients [i.e., Healthcare Operators] for
11 placements made pursuant to this Agreement. From the amounts
12 received, [Vista] will pay over to [Medical] Professional [the]
13 amount as agreed for each placement.” [Taxpayer Ex. 4.1, § 3]

14 135. The PSP Agreements require Medical Professionals to enter into Reassignment

15 Agreements that grant Healthcare Operators the exclusive right to bill for the Medical

16 Professionals’ healthcare services performed at Healthcare Operators’ locations. [Stip. ¶ 27;

17 Taxpayer Ex. 4.1-4.2, §§ 3, 13]

18 136. The reassignment is in accordance with Medicare rules and other applicable

19 regulations. [Taxpayer Ex. 5 (Reassignment Agreement, ¶¶ “A” and “B”)]

20 137. The standard PSP Agreements state:

21 “[Medical] Professional agrees that all billings for services
22 rendered to patients during any placement under this Agreement
23 shall be and remain the property of, and shall be invoiced and
24 collected by, the Client [i.e., Healthcare Operators]. [Medical]
25 Professional grants to such Client the authority to endorse and
26 deposit as appropriate all checks and other instruments or items
27 that may be payable to [Medical] Professional with respect to such
28 services rendered by [Medical] Professional.” [Taxpayer Ex. #4.2
29 § 13]

30 Reassignment Agreements

31 138. The LT Agreements and PSP Agreements require Medical Professionals to

In the Matter of the Protest of Vista Staffing Solutions, Inc.
Page 20 of 57
1 execute a Reassignment Agreement. [Taxpayer Ex. 2.14, § III.D.2; Taxpayer Ex. 4.2 § 13; Stip.

2 ¶¶ 18 – 19]

3 139. Vista provides Reassignment Agreements to Medical Professionals that are

4 consistent with the sample Reassignment Agreement attached to the LT Agreement. [12-8-21

5 1:75:24 – 76:4; Taxpayer Ex. 5]

6 140. Medical Professionals execute the Reassignment Agreements to assign their

7 billing and collection rights to the Healthcare Operators. [Stip. ¶¶ 28, 29]

8 141. The Reassignment Agreements state:

9 “It is hereby agreed that only Hospital [i.e., Healthcare Operator]
10 shall bill, collect and retain fees received from the Medicare
11 program and all other applicable payers for the professional
12 medical services furnished by the Physician [i.e., Medical
13 Professional] at the Hospital. The Physician will not bill or collect
14 fees from the Medicare program, patients, or any other applicable
15 payer for any service furnished by Physician at the Hospital. The
16 Hospital will timely submit to the appropriate Medicare contractor
17 a Form CMS- 855R, which includes a Reassignment of Benefits
18 Statement authorizing the reassignment of Physician’s benefits to
19 the Hospital.” [Taxpayer Ex 5.1]

20 142. Healthcare Operators then bill certain payors, including insurance companies,

21 managed care organizations, and government programs, for Medical Professionals’ healthcare

22 services. [Taxpayer Exs. 2.14; 5.1]

23 Fees From New Mexico Transactions

24 143. Healthcare Operators compensate Vista for both Vista’s services and services

25 furnished by Medical Professionals. [Stip. ¶¶ 31 – 32; 12-8-21 1:46:19 – 47:1; 12-8-21 1:47:2 –

26 25; Taxpayer Ex. 15]

27 144. Medical Professionals receive compensation for their services based on their

28 hours worked. [12-8-21 1:46:3 – 23]

29 145. Medical Professionals prepare and submit timesheets to Healthcare Operators and

In the Matter of the Protest of Vista Staffing Solutions, Inc.
Page 21 of 57
1 Vista. [12-8-21 1:45:10 – 17; 12-8-21 1:60:5 – 15]

2 146. Vista uses the timesheets to disburse to Medical Professionals their compensation

3 for healthcare services performed at Healthcare Operators’ locations. [12-8-21 1:46:3 – 7]

4 147. Vista bills Healthcare Operators for both Vista’s service fee and for Medical

5 Professionals’ healthcare service fees. [Stip. ¶ 33]

6 148. Healthcare Operators transmit to Vista the Medical Professionals’ fees for

7 healthcare services provided to patients at Healthcare Operators’ locations along with Vista’s

8 service fees. [Stip. ¶¶ 30 – 32; Taxpayer Ex. 2.13 (LT Agreement, Program Terms and

9 Classifications, III((B)(1)]

10 149. Under the LT Agreement, Vista shall submit and invoice to Healthcare Operators

11 at least once a month for services performed by Medical Professional during the prior month.

12 [Taxpayer Ex. 2.13 (LT Agreement, Program Terms and Classifications, III((B)(1)]

13 150. Under the LT Agreement, the parties, including Medical Professional’s

14 relationship with Healthcare Operators, disavowed any agency relationship and established the

15 relationship between the parties as independent contractors. [Taxpayer Ex. 2.26 (LT Agreement,

16 Independent Contractor)]

17 151. Under the LT Agreement, HSC explicitly disclaimed any responsibility regarding

18 any payment a Healthcare Operators might owe Vista. [Taxpayer Ex. 2.13 (LT Agreement,

19 Program Terms and Classifications, III(B)(3))].

20 152. Under the LT Agreement, the Healthcare Operator will indemnify Vista and the

21 Medical Professional only for billing and collection “claims, suits, fines, penalties, and damages

22 which may arise from participating institution's billing and collection activities related to

23 services provided by the agency and agency health care provider.” [Taxpayer Ex. 2.14 (LT

In the Matter of the Protest of Vista Staffing Solutions, Inc.
Page 22 of 57
1 Agreement, Program Terms and Classifications, D(3))]

2 153. Under the LT Agreement, HSC explicitly disclaimed any duty to indemnify

3 Medical Professionals for any losses or damages for negligence or other wrongful conduct.

4 [Taxpayer Ex. 2.25 (LT Agreement, Indemnification, XIII(B))]

5 154. For the Audit Period, New Mexico Healthcare Operators disbursed a total of

6 $43,427,732.12 to Vista, which included both Vista’s service fees of $14,772,315.71 and

7 Medical Professionals’ healthcare service fees of $28,655,425.43. [Stip. ¶ 5; Taxpayer Ex. 7.1 –

8 7.2]

9 155. For the Audit Period, New Mexico Hospital Association members disbursed

10 $32,926,192.32 to Vista, which included both Vista’s service fees of $10,394,724.88 and

11 Medical Professionals’ healthcare service fees of $22,531,476.44. [Stip. ¶ 6; Taxpayer Ex. 7.1 –

12 7.2; 12-8-21 1:34:15 – 21]

13 156. Vista’s contract with HSC controls the services provided by Vista to all New

14 Mexico Private Healthcare Operators. [Stip. ¶ 11]

15 157. For the Audit Period, IHS agencies disbursed $10,501,539.80 to Vista, which

16 included both Vista’s service fees of $4,377,590.83 and Medical Professionals’ healthcare

17 service fees of $6,123,948.99. [Stip. ¶ 7; Taxpayer Ex. 7.1 – 7.2; 12-8-21 1:34:15 – 21]

18 158. Vista’s LT Agreements with Gallup Indian Medical Center control the services

19 provided by Vista to Government Healthcare Operators that paid the majority of Vista’s

20 $10,501,539.80 receipts from Government Healthcare Operators. [Stip. ¶ 15]

21 159. Vista did not know how many independent contractors it placed with New

22 Mexico Healthcare Operators during the audit period. [12-8-21 2:7:18 – 22]

23 160. All independent contractors staffed at Healthcare Operators in New Mexico by

In the Matter of the Protest of Vista Staffing Solutions, Inc.
Page 23 of 57
1 Vista were issued 1099s rather than W-2s by Vista during the audit period. [12-8-21 2:8:9 – 11]

2 161. Vista has never received any determination that it is a joint employer from the

3 Department of Labor or the Internal Revenue Service. [12-8-21 2:8:17 – 20]

4 162. Vista agrees to pay Medical Professional’s for their services with amounts

5 received from Healthcare Operators with any excess amount being retained by Vista as

6 compensation for its services. [Taxpayer Ex. 4.1, ¶ 3; Stip. ¶ 26; 12-8-21 2:12:9 – 13]

7 163. Vista bills the Healthcare Operators at least once a month but not more than four

8 times a month. [Taxpayer Ex. 2.13 (LT Agreement, Program Terms and Classifications,

9 III(B)(3); 12-8-21 2:15:1 – 6]

10 164. Vista’s invoice does not break out Vista’s fee and the Medical Professional’s fee.

11 [12-8-21 2:31:13 – 16; Taxpayer Ex. 18.5 (Invoice)]

12 165. Healthcare Operators are to pay Vista within 60 days after receipt of a complete

13 and accurate invoice and timesheets. [12-8-21 1:59:20 – 22; Taxpayer Ex. 2.11 (LT Agreement,

14 Program Terms and Classifications, III(B)(3))]

15 166. The LT Agreement informs Vista it was responsible for applicable gross receipts

16 tax. [Taxpayer Ex. 2.10 (LT Agreement, Program Terms and Classifications, III(A)(1)(a)]

17 167. Vista’s parent companies’ tax department determined that Vista did not have a

18 filing obligation with New Mexico. [12-8-21 2:18:4 – 8; 12-8-21 2:18:21 – 25]

19 168. There was no showing that Vista’s parent companies’ tax department had any

20 specific expertise in New Mexico gross receipts tax. [12-8-21 2:19:1 – 2]

21 169. Vista did not file New Mexico Gross Receipts Tax returns during the Audit

22 Period. [Stip. ¶ 36]

23 170. As a result of the audit, the Department issued a Notice of Assessment of Taxes

In the Matter of the Protest of Vista Staffing Solutions, Inc.
Page 24 of 57
1 and Demand for Payment under Letter ID No. L0797491376 (“Assessment”) to Vista on

2 September 25, 2018. [Stip. ¶ 41]

3 171. The Assessment is for New Mexico Gross Receipts Tax in the amount of

4 $2,090,515.39, interest of $379,924.37, and a civil negligence penalty of $418,103.08. [Stip. ¶

5 42]

6 172. On December 30, 2018, Vista filed a Formal Protest with the New Mexico

7 Taxation and Revenue Department Protest Office contesting the Assessment in its entirety. [Stip.

8 ¶ 43]

9 Procedural History

10 173. On March 21, 2019, the Department filed a Hearing Request with the

11 Administrative Hearings Office. [Administrative File]

12 174. The Hearing Request was accompanied by a copy of the Assessment, Vista’s

13 Formal Protest, and a written acknowledgement of Vista’s Formal Protest dated February 4,

14 2019. [Administrative File]

15 175. On March 25, 2019, the Administrative Hearings Office entered Notice of

16 Telephonic Scheduling Hearing which set an initial hearing in the protest for April 12, 2019.

17 [Administrative File]

18 176. An initial telephonic scheduling hearing occurred on April 12, 2019 at which time

19 neither party objected that the hearing would satisfy the 90-day hearing requirement of Section

20 7-1B-8 (A). [Administrative File]

21 177. On April 15, 2019, the Administrative Hearings Office entered an Order to

22 Conduct Informal Conference and Notice of Second Telephonic Scheduling Hearing. The second

23 telephonic scheduling hearing was set to occur on October 11, 2019. [Administrative File]

In the Matter of the Protest of Vista Staffing Solutions, Inc.
Page 25 of 57
1 178. A second telephonic scheduling hearing occurred on October 11, 2019 at which

2 time Vista expressed the desire to engage in further discussion with the Department and

3 reconvene for scheduling in four months. The Department did not object and a hearing was set

4 for January 10, 2020. [Administrative File]

5 179. The Administrative Hearings Office entered a Notice of Third Telephonic

6 Scheduling Hearing on October 17, 2019. [Administrative File]

7 180. On November 13, 2019, Mr. Hamme, counsel for Vista, filed an Affidavit of Non-

8 Admitted Lawyer and Registration Certification of Non-Admitted Lawyer recording his

9 admission pro hac vice consistent with Rule 24-106 NMRA. [Administrative File]

10 181. On January 10, 2020, the Administrative Hearing Office entered a Notice of

11 Fourth Telephonic Scheduling Hearing after Taxpayer requested additional time to engage in

12 additional discussions with the Department. The hearing was set for February 28, 2020.

13 [Administrative File]

14 182. On March 5, 2020, the Administrative Hearings Office entered a Notice of

15 Telephonic Status Hearing set for May 1, 2020. The parties agreed to a status hearing in lieu of a

16 scheduling hearing due to the progress the parties mutually perceived as significantly narrowing

17 or resolving issues. Subsequent status hearings were noticed and held on: June 12, 2020; July 6,

18 2020; September 4, 2020; October 2, 2020; November 16, 2020; January 15, 2021; February 12,

19 2021; March 12, 2021. [Administrative File]

20 183. On March 12, 2021, the Department advised that the protest could not be resolved

21 without a hearing. Because Vista’s counsel desired an additional opportunity to confer with his

22 client, scheduling was set to occur on April 2, 2021. A Notice of Telephonic Scheduling Hearing

23 was entered on March 16, 2021. [Administrative File]

In the Matter of the Protest of Vista Staffing Solutions, Inc.
Page 26 of 57
1 184. A Notice of Telephonic Scheduling Hearing was entered on April 5, 2021 after

2 the parties agreed that they would benefit from additional discussions. The Administrative

3 Hearings Office entered a Notice of Telephonic Scheduling Hearing which set a hearing for May

4 7, 2021. [Administrative File]

5 185. On May 13, 2021, the Administrative Hearings Office entered a Scheduling Order

6 and Notice of Administrative Hearing which set a hearing on the merits of Vista’s protest to

7 commence on October 25, 2021. [Administrative File]

8 186. On July 21, 2021, the parties filed a joint motion to revise discovery and motions

9 deadlines. [Administrative File]

10 187. On July 23, 2021, the Administrative Hearings Office entered an Amended

11 Scheduling Order and Notice of Administrative Hearing which adopted the deadlines to which

12 the parties stipulated. [Administrative File]

13 188. On August 12, 2021, the parties filed a second joint motion to revise discovery

14 and motions deadlines. [Administrative File]

15 189. On August 13, 2021, the Administrative Hearings Office entered a Second

16 Amended Scheduling Order and Notice of Administrative Hearing which adopted the deadlines

17 to which the parties stipulated. [Administrative File]

18 190. On September 30, 2021, the parties filed a third joint motion to revise discovery

19 and motions deadlines. [Administrative File]

20 191. On October 4, 2021, the Administrative Hearings Office entered a Third

21 Amended Scheduling Order and Notice of Administrative Hearing which adopted the deadlines

22 to which the parties stipulated. [Administrative File]

23 192. On October 6, 2021, the Administrative Hearings Office entered a Notice of

In the Matter of the Protest of Vista Staffing Solutions, Inc.
Page 27 of 57
1 Telephonic Status Hearing which upon agreement of the parties, was set for October 7, 2021.

2 [Administrative File]

3 193. On October 7, 2021, the Administrative Hearings Office conducted a status

4 hearing and entered an Order Vacating and Resetting Administrative Hearing for December 8,

5 2021. [Administrative File]

6 194. On November 29, 2021, the Administrative Hearings Office entered a Notice of

7 Telephonic Status Hearing which set a status hearing for the same day with the agreement of the

8 parties. [Administrative File]

9 195. On November 30, 2021, Mr. Robert Desiderio, Esq. and Ms. Janette Angelica

10 Duran, Esq. entered their appearances as co-counsel for Vista. [Administrative File]

11 196. On December 1, 2021, Mr. Desiderio filed a Proof of Compliance with Pro Hac

12 Vice Requirements indicating that Mr. Simonetti, was authorized to appear before the

13 Administrative Hearings Office on behalf of Vista. [Administrative File]

14 197. On December 1, 2021, the Department and Vista filed their respective prehearing

15 statements. [Administrative File]

16 198. On December 10, 2021, the Administrative Hearings Office entered a Post

17 Hearing Briefing Schedule. [Administrative File]

18 199. On March 21, 2022, Vista filed Petitioner’s Post-Hearing Closing Argument.

19 [Administrative File]

20 200. On March 24, 2022, the Department filed Department’s Motion to Strike Vista’s

21 Post Hearing Closing Argument. [Administrative File]

22 201. On March 25, 2022, Vista submitted an email to the Administrative Hearings

23 Office, which was also simultaneously copied to the Department, which explained that the

In the Matter of the Protest of Vista Staffing Solutions, Inc.
Page 28 of 57
1 parties had conferred and agreed that Taxpayer would withdraw and resubmit its Post Hearing

2 Brief with all objectionable material removed. The Department verified its intent to withdraw its

3 Motion to Strike Vista’s Post Hearing Closing Argument. [Administrative File1]

4 202. On March 28, 2022, Vista filed Petitioner’s Post-Hearing Closing Brief.

5 [Administrative File]

6 203. On August 24, 2022, the Department filed Department’s Closing Brief.

7 [Administrative File]

8 204. On September 22, 2022, Vista filed Petitioner’s Reply Brief. [Administrative File]

9 DISCUSSION

10 As a preliminary observation, the parties diverge on the terminology used to describe

11 Vista’s services. Vista describes its services as “recruitment.” The Department favors “staffing.”

12 Upon considering the facts established by the evidence, the arguments of counsel, and

13 Taxpayer’s formal name of “Vista Staffing Solutions, Inc.,” the Hearing Officer will use the

14 terms “staff” or “staffing” to describe Vista’s services throughout the following discussion being

15 cognizant that the term is less significant to the analysis than the actual conduct of the parties.

16 However, the distinction for Vista is significant because it asserts that a staffing service

17 satisfies the needs of its clients by placing its own “employees,” while a “recruiting” company

18 satisfies the same need through identification of “independent contractors” and facilitation of

19 their placement. For reasons that will be further explained in the following discussions, the

20 Hearing Officer perceives the distinction as trivial and insignificant to the determination of

21 Vista’s tax liability.

22 In this protest, the evidence established that during the audit period, Vista staffed Medical

1
The items referenced herein remain in the Administrative File, but were not reviewed or considered during the
preparation of this Decision and Order.

In the Matter of the Protest of Vista Staffing Solutions, Inc.
Page 29 of 57
1 Professionals to various medical facilities across the country, including several facilities in New

2 Mexico from where it derived receipts, exceeding $40 million, for the services of Medical

3 Professionals and its own service fees combined. See Taxpayer Ex. 7.

4 In summary, if one of Vista’s independent contractor Medical Professionals matched the

5 staffing need of a Healthcare Operator, the Healthcare Operator could contract with Vista for

6 placement of that Medical Professional in its facility to provide medical services.

7 In return, the Healthcare Operator paid Vista a fixed hourly rate for the services provided

8 by the Medical Professional plus an additional fee for Vista’s services. At all relevant times,

9 Vista was obligated to compensate the Medical Professional for their services and authorized to

10 retain any excess amount as its fee. When the Department assessed gross receipts tax on all of

11 Vista’s receipts earned in New Mexico under this arrangement, Vista timely protested the

12 Assessment under the Tax Administration Act.

13 Vista asserts that the Assessment should be abated for the following reasons: (1) Vista

14 did not conduct its business activities within the State of New Mexico; (2) amounts paid to

15 Medical Professionals should be excluded from taxation as reimbursed expenditures of an agent

16 in a disclosed agency capacity; (3) civil negligence penalty should not apply because it assertedly

17 exercised reasonable business care and prudence and because its interpretation of its reporting

18 and payment obligations was grounded on good faith and reason. Vista also argued in

19 Petitioner’s Reply Brief (written rebuttal closing) in favor of the application of NMSA 1978,

20 Sections 7-9-93 and 7-9-77.1.

21 Presumption of Correctness.

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

23 presumed correct. Consequently, Taxpayer has the burden to rebut the presumption. See

In the Matter of the Protest of Vista Staffing Solutions, Inc.
Page 30 of 57
1 Archuleta v. O'Cheskey, 1972-NMCA-165, ¶ 11, 84 N.M. 428. Unless otherwise specified, for the

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

3 NMSA 1978, Section 7-1-3 (X) (2013). Under Regulation 3.1.6.13 NMAC, the presumption of

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

5 interest. See Chevron U.S.A., Inc. v. State ex rel. Dep't of Taxation & Revenue, 2006-NMCA-50, ¶

6 16, 139 N.M. 498, 503 (agency regulations interpreting a statute are presumed proper and are to be

7 given substantial weight).

8 Accordingly, it is Taxpayer’s burden to present some countervailing evidence or legal

9 argument to rebut the presumption of correctness. See N.M. Taxation & Revenue Dep't v. Casias

10 Trucking, 2014-NMCA-099, ¶8; Gemini Las Colinas, LLC v. N.M. Taxation & Revenue Dep’t,

11 -NMCA-, ¶ 27, No. A-1-CA-38672 (March 13, 2023)2 The question of whether a taxpayer

12 has satisfied this initial burden of production is a threshold legal determination in which the hearing

13 officer determines whether a taxpayer has produced some countervailing evidence tending to

14 dispute the correctness of the assessment. See Gemini, -NMCA-, ¶¶ 21 – 23; 25. Vista satisfied

15 its initial burden of production.

16 If a taxpayer, as Vista did in this protest, satisfies the initial burden of production, then the

17 burden of production shifts to the Department to present evidence showing the correctness of its

18 assessment beyond mere assertions that a taxpayer’s evidence is unreliable or not credible. See

19 Gemini, -NMCA-, ¶ 29. The hearing officer is then to weigh the evidence presented from both

20 parties under the preponderance standard and determine whether a taxpayer has carried its burden of

21 persuasion in the protest. Id.

22 Because the Hearing Officer is persuaded that both parties satisfied their respective burdens

2
Because this is such a recent opinion from the Court of Appeals, it is unknown at the time of this Decision and
Order whether certiorari will be sought, let alone whether it might be granted or denied.

In the Matter of the Protest of Vista Staffing Solutions, Inc.
Page 31 of 57
1 of production, the remainder of this Decision and Order will concentrate on their respective burdens

2 of persuasion.

3 Gross Receipts Tax.

4 “The purpose of the Gross Receipts and Compensating Tax Act is to provide revenue for

5 public purposes by levying a tax on the privilege of engaging in certain activities within New

6 Mexico and to protect New Mexico businessmen from the unfair competition that would otherwise

7 result from the importation into the state of property without payment of a similar tax.” See NMSA

8 1978, Section 7-9-2 (1966); Dell Catalog Sales LP v. NM Taxation & Revenue Dept., 2009-NMCA-

9 001, ¶ 29, 145 N.M. 419, 425, 199 P.3d 863, 869 (“Our gross receipts tax seeks to achieve fairness

10 between out-of-state sellers and New Mexico sellers who sell to New Mexico customers.”)

11 For the privilege of engaging in business in New Mexico, a gross receipts tax is imposed

12 on the receipts of any person engaged in business. See NMSA 1978, Section 7-9-4 (2002). The

13 term “gross receipts” is defined to mean:

14 [T]he total amount of money or the value of other consideration
15 received from selling property in New Mexico, from leasing or
16 licensing property employed in New Mexico, from granting a right to
17 use a franchise employed in New Mexico, from selling services
18 performed outside New Mexico, the product of which is initially used
19 in New Mexico, or from performing services in New Mexico.

20 See NMSA 1978, Section 7-9-3.5 (A) (1) (2007)

21 “Receipts include payments received for one’s own account and then expended to meet

22 one’s own responsibilities.” See MPC Ltd. v. New Mexico Taxation & Revenue Dept., 2003-

23 NMCA-021, ¶ 14, 133 N.M. 217, 220, 62 P.3d 308, 311. There is a statutory presumption that all

24 receipts of a person engaged in business are taxable. See NMSA 1978, Section 7-9-5 (2002).

25 “Engaging in business” is defined as “carrying on or causing to be carried on any activity with

26 the purpose of direct or indirect benefit.” See NMSA 1978, Section 7-9-3.3 (2003). See also

In the Matter of the Protest of Vista Staffing Solutions, Inc.
Page 32 of 57
1 Comer v. State Tax Comm'n, 1937-NMSC-032, ¶37, 41 N.M. 403 (gross receipts applies to “all

2 activities or acts engaged in (personal, professional and corporate) or caused to be engaged in

3 with the object of gain, benefit[,] or advantage either direct or indirect.”)

4 The first question to consider is whether Vista was engaged in business in New Mexico.

5 The answer will assist in evaluating if, or to what extent, Vista is subject to New Mexico’s Gross

6 Receipts and Compensating Tax Act.

7 Engaging in Business in New Mexico

8 As previously stated, engaging in business means “carrying on or causing to be carried on

9 any activity with the purpose of direct or indirect benefit.” Here, Vista was engaged in placing

10 Medical Professionals in Healthcare Operator facilities, in New Mexico, in order to provide

11 services for remuneration, in New Mexico. It was from this activity, the placement of a Medical

12 Professional, that Vista received a direct benefit in the form of compensation.

13 This business activity satisfies the definition of “engaging in business” and activates the

14 presumption of taxability under NMSA 1978, Section 7-9-5. However, Vista may still avail itself

15 of applicable deductions, exemptions, or relevant statutory exclusions to reduce its liability. The

16 evaluation will begin with the definition of “gross receipts” and proceed with a discussion of

17 whether any portion of Vista’s receipts are excluded by definition.

18 Statutory Exclusion for Selling Services Performed Outside New Mexico

19 The definition of “gross receipts” includes “money or the value of other consideration

20 received from … performing services in New Mexico[.]” See Section 7-9-3.5 A (1) (2017). Vista

21 asserts that it derives gross receipts from selling “recruiting” services, and because those services

22 are performed exclusively outside of New Mexico, its receipts derived from selling those services

23 are not taxable to New Mexico under the definition of “gross receipts.”

In the Matter of the Protest of Vista Staffing Solutions, Inc.
Page 33 of 57
1 Among other points, Vista emphasizes that: (1) its business activities were performed

2 outside of New Mexico; (2) it has never maintained a New Mexico business office; (3) it has never

3 maintained employees in New Mexico.

4 However, Vista’s argument is not persuasive. Recruiting, although a component of the

5 service provided, was not an activity from which Vista generated income. Instead, Vista

6 generated income through the successful placement of Medical Professionals, in New Mexico,

7 with Healthcare Operators, in New Mexico, to provide services for remuneration, in New

8 Mexico. Receipts derived as a direct result of the placement, not from the recruiting activities

9 that may have assisted the placement.

10 Conversely stated, Vista generates no income from its out-of-state services alone,

11 including recruiting activities. Receipts are derived only from placing a Medical Professional in a

12 New Mexico healthcare facility and deriving a recurring fee from that placement. Of course,

13 Vista certainly performs out-of-state tasks to facilitate the placement, whether they be identifying

14 qualified professionals, assisting them with obtaining necessary New Mexico credentials, or

15 assisting with travel and lodging, but those tasks are all performed for the purpose of securing

16 the placement. Those services are neither sold à la carte nor do they produce any revenue in the

17 absence of a placement, in New Mexico.

18 It is only after Vista successfully brokers a placement in New Mexico that it derives

19 receipts for its services. Then, in order to maximize its return, it assures through its contracts

20 with Healthcare Operators and Medical Professionals that it remains an essential party to the

21 ongoing transaction. Healthcare Operators and Medical Professionals are explicitly prohibited

22 from contracting directly with each other in order to prevent them from excluding Vista from the

23 ongoing transaction.

In the Matter of the Protest of Vista Staffing Solutions, Inc.
Page 34 of 57
1 Moreover, Vista’s ongoing involvement in the placement enhances Vista’s opportunity to

2 develop, establish, and maintain its market in New Mexico. Theoretically, once a placement is

3 made, Vista has an advantage in making additional placements, either with the same operator or

4 others who may become familiar with Vista through its work for other operators.

5 Once again, Vista robustly asserts that its business is “recruiting” and that activity occurs

6 exclusively out of state, but this does not fully describe Vista’s objective. Vista’s revenue clearly

7 derives from: (1) the placement of Medical Professionals in New Mexico; (2) who provide services

8 in New Mexico; (3) under the protection of or subject to the laws of New Mexico. See e.g. Taxpayer

9 Ex. 2.29 (“The validity, construction and effect of this Agreement shall be governed by the laws of

10 the State of New Mexico.”)

11 Exemption for Receipts from Sale of Out-of-State Services at Section 7-9-13.1

12 Despite the determination that Vista’s receipts derived from the sale of services performed

13 in New Mexico, the Hearing Officer will also consider the potential application of NMSA 1978,

14 Section 7-9-13.1 which states: “exempted from the gross receipts tax are the receipts from selling

15 services performed outside New Mexico the product of which is initially used in New Mexico.”

16 “Where an exemption or deduction from tax is claimed, the statute must be construed

17 strictly in favor of the taxing authority, the right to the exemption or deduction must be clearly and

18 unambiguously expressed in the statute, and the right must be clearly established by the taxpayer.”

19 See Wing Pawn Shop v. Taxation and Revenue Department, 1991-NMCA-024, ¶ 16, 111 N.M. 735

20 (internal citation omitted); See also TPL, Inc. v. N.M. Taxation & Revenue Dep't, 2003-NMSC-7, ¶

21 9, 133 N.M. 447.

22 This tribunal in a previous case from 2014 determined that Section 7-9-13.1 applied to

23 services in which a tangible “product” is produced. See In the Matter of the Protest of Adecco

In the Matter of the Protest of Vista Staffing Solutions, Inc.
Page 35 of 57
1 USA, Inc., Decision and Order 14-16, 2014 (May 22, 2014) (non-precedential). The hearing

2 officer in that case observed the contract central to the protest “did not produce a product which

3 was the result of a service performed outside of New Mexico” so the exemption provided by

4 Section 7-9-13.1 did not apply. The Hearing Officer agrees.

5 Yet, even if Section 7-9-13.1 did apply, Vista still falls short of establishing entitlement

6 to its application. Vista explained that its service product was referrals of Medical Professionals,

7 and Healthcare Operators merely used such referrals to fill placements in New Mexico. This

8 position is not persuasive because Healthcare Operators do not pay Vista for referrals or the

9 work it performs in preparation to make such referrals. Healthcare Operators pay for actual

10 placements at their facilities located in New Mexico.

11 The analysis is analogous to ITT Educ. Services, Inc. v. Taxation & Revenue Dept. of

12 State of N.M., 1998-NMCA-078, 125 N.M. 244, 959 P.2d 969, in which the Court of Appeals

13 observed that the focus should be on the service contracted for and where it is performed.

14 The taxpayer in ITT was a nationwide technical-vocational school with several facilities

15 in New Mexico. It argued that receipts for curriculum development, financial aid services, and

16 job placement services, all of which were performed outside New Mexico, were not subject to

17 the New Mexico gross receipts tax. ITT claimed, “each of the activities ITT performed outside

18 New Mexico was free standing, substantial, substantively different than ‘teaching,’ and not

19 ‘merely incidental to’ or a ‘component of’ teaching which ITT actually performed in New

20 Mexico.” See ITT, 1998-NMCA-078, ¶ 9. In this case, Vista seems to make a similar distinction

21 between its recruiting activities and its placement activities from which it derives fees.

22 The Court of Appeals observed “the fact that ITT prepared for teaching out of state does

23 not change the fact that the service occurs in state. Focusing on the service contracted for and

In the Matter of the Protest of Vista Staffing Solutions, Inc.
Page 36 of 57
1 where ITT performs it, ITT's primary service clearly takes place in New Mexico.” See ITT, 1998-

2 NMCA-078, ¶ 13; See also Mountain States Advert., Inc. v. Bureau of Revenue, 1976-NMCA-

3 058, 89 N.M. 331, 552 P.2d 233.

4 The same logic applies here. Just as ITT performed some services outside of New

5 Mexico, the focus rests on the service contracted for and where that service is performed.

6 Healthcare Operators contracted for Locum Tenens services in New Mexico (See Taxpayer Ex.

7 2.2 (Para. I – Purpose)). Although accomplishing that service may have required out-of-state

8 effort, such as recruiting, that fact does not overcome the reality that Vista derived its revenue

9 exclusively from placements made inside New Mexico.

10 Thus, focusing on the service contracted for and where Vista performs it, Vista’s primary

11 service clearly takes place in New Mexico and it consists of the actual placement of Medical

12 Professionals at facilities in New Mexico in exchange for compensation. Healthcare Operators

13 contract for placement of Medical Professionals. Placements are accomplished in New Mexico.

14 Recruiting can occur from any of Vista’s locations, but that activity generates no income for

15 Vista without a subsequent placement.

16 Vista did not establish any right to relief under the exemption contained in NMSA 1978,

17 Section 7-9-13.1 because the evidence failed to establish that the services for which Healthcare

18 Operators contracted were performed or sold outside of New Mexico. To the contrary, the

19 evidence established that the service for which the parties contracted, which was to place

20 Medical Professionals with New Mexico Healthcare Operators occurred in New Mexico.

21 Exclusion of Receipts Received Solely on Behalf of Another in a Disclosed Agency Capacity

22 Vista asserts that compensation received from Healthcare Operators and paid to Medical

23 Professionals represented amounts received solely on behalf of another in a disclosed agency

In the Matter of the Protest of Vista Staffing Solutions, Inc.
Page 37 of 57
1 capacity which should be excluded from the computation of taxable gross receipts. See NMSA

2 1978, Section 7-9-3.5 A (3) (f) (2007).

3 That provision excludes from gross receipts “amounts received solely on behalf of

4 another in a disclosed agency capacity.” The Department, under Regulation 3.2.1.19 (C) (1)

5 NMAC, determines that “(a)n agency relationship exists if a person has the power to bind a

6 principal in a contract with a third party so that the third party can enforce the contractual

7 obligation against the principal.” If such relationship should exist, then Regulation 3.2.1.19 (C)

8 (2) NMAC further requires that any reimbursements for expenses incurred as an agent be

9 separately stated on the respective invoice and marked as reimbursements in the agent’s books

10 and records.

11 Although MPC Ltd. has been the seminal case for more than two decades, the law

12 establishing the current analysis has been developing for more than 50 years beginning in

13 Westland Corporation v. Commission of Revenue, 1971-NMCA-083, ¶38, 83 N.M. 29. In that

14 case, the New Mexico Court of Appeals found no support for the imposition of gross receipts tax

15 on the receipts of a person who served as a “friendly agent” for the limited purpose of “receiving

16 and paying out sums for debts or obligations owing” from another company.

17 In Carlsberg Mgmt. Co. v. State, 1993-NMCA-121, 116 N.M. 247, the New Mexico

18 Court of Appeals again considered agency in the gross receipts tax context. Carlsberg involved a

19 property management group that managed an apartment complex for that property’s owner. The

20 rent at the apartment complex was subsidized by a federal agency. The taxpayer claimed that the

21 federal agency mandated the form of the agreement in place between that taxpayer and the owner

22 and that agreement identified the taxpayer as “agent.” See Carlsberg, ¶¶ 3-4. Under an agency

23 theory, the taxpayer argued that money it received from the owner’s reimbursements of

In the Matter of the Protest of Vista Staffing Solutions, Inc.
Page 38 of 57
1 payments of employee wages was not subject to gross receipts tax. See Carlsberg, ¶5-11.

2 The New Mexico Court of Appeals explained “that a principal’s control over the agent is

3 the key characteristic of an agency relationship.” See Carlsberg, ¶12. Further, the Court of

4 Appeals instructed that it was a factual determination whether there was an agency relationship

5 between a purported principal and agent. The Court of Appeals began that factual determination

6 by looking at the terms of the relevant agreement and explained that when the contract is

7 unambiguous, the language of the contract determines the intent of the parties without further

8 interpretation. See Carlsberg, ¶¶ 16-17. The Court of Appeals went on to conclude that the

9 contract created an unambiguous agent-principal relationship and rejected the Department’s

10 requirement that an agent be disclosed, instead opting to adopt a California rule that “if a party

11 only receives money either as an advance for future payment of, or reimbursement for past

12 payment of, another's employment-related obligations, then an agency relationship exists

13 sufficient to avoid taxation of those funds as gross receipts. Carlsberg, 1993-NMCA-121 (citing

14 Programming-Enterprises, Inc. v. City of Los Angeles, 215 Cal.App. 3d 281, 263 Cal.Rptr. 558

15 (Ct.App.1989).

16 The Court of Appeals ultimately determined that “[t]he level of control [o]wner exercised

17 over [t]axpayer left [t]axpayer with no discretion concerning when and how much to pay the

18 employees.” For this reason, it concluded that the taxpayer “never possessed funds representing

19 the wages paid to the on-site employees to use as [t]axpayer saw fit.” See Carlsberg, 1993-

20 NMCA-121, ¶ 19. Also of importance to the Court of Appeals was the fact that the relevant

21 agreement contained an indemnification clause requiring the owner to pay the taxpayer for

22 employment expenses. Id.

23 In Brim Healthcare, Inc. vs. State, 1995-NMCA-055, 119 N.M. 818, the Court of

In the Matter of the Protest of Vista Staffing Solutions, Inc.
Page 39 of 57
1 Appeals again had an opportunity to consider whether an agency relationship existed to exclude

2 that taxpayer’s claimed reimbursements from the imposition of gross receipts tax. In rejecting the

3 taxpayer’s claim of an agency relationship, the Court observed several reasons why the facts in

4 that case were distinguishable from Carlsberg. The most significant distinguishing factor was the

5 lack of an indemnification clause in the agreement at issue in Brim. See id. Yet, another

6 distinction cited in Brim was that the relevant contracts expressly noted that the taxpayer was

7 “not an agent… but rather is an independent contractor.” Ultimately, Brim affirmed the hearing

8 officer’s conclusion that the money was not received as “reimbursement of expenses as an

9 agent.” See Brim, ¶18.

10 While Carlsberg expressly rejected the Department’s previous policy and regulation

11 allowing for exemption of gross receipts only when there is a disclosed agency relationship, a

12 subsequent legislative enactment limited the Carlsberg holding. See MPC, 2003-NMCA-021,

13 ¶14.

14 At the time of Carlsberg, the gross receipts tax definition contained no provision

15 excluding from the computation of gross receipts tax any receipts received solely on behalf of

16 another in a disclosed agency capacity. After Carlsberg, the Legislature enacted an explicit

17 provision excluding receipts of a disclosed agent from the definition of “gross receipts.” See

18 Section 7-9-3.5 (A) (3) (f). The new provision simply read that “gross receipts” excluded

19 “amounts received solely on behalf of another in a disclosed agency capacity.”

20 In 2003, the Court of Appeals in MPC, Ltd. considered agency relations in the context of

21 the gross receipts tax system for the first time since enactment of the exclusion. In so doing, the

22 Court of Appeals cautioned that Carlsberg and Brim were both decided before the Legislature’s

23 enactment of the “disclosed agency” exclusion under Section 7-9-3.5 (A) (3) (f), and therefore

In the Matter of the Protest of Vista Staffing Solutions, Inc.
Page 40 of 57
1 those cases had limited instructive value. See MPC, Ltd., 2003-NMCA-021, ¶34.

2 MPC, Ltd. involved a taxpayer that provided temporary staffing services to its clients in

3 New Mexico. Although that taxpayer had mostly verbal contracts with its clients, there were a

4 few written agreements in place. The taxpayer’s clients supervised the activities of the assigned

5 employees, but the client did not pay the employees. Instead, the clients paid the taxpayer which

6 in turn, then paid the employee’s wages, benefits, and withholdings. The taxpayer claimed those

7 receipts should not be included in gross receipts because it “received the amounts purely as a

8 conduit between its clients and its employees.”

9 The argument in MPC, Ltd. required the Court of Appeals to consider both a regulation

10 addressing joint employers3 and the statutory and regulatory disclosed agent requirements. In

11 addition to addressing how the enactment of the disclosed agency exclusion under Section 7-9-

12 3.5 (A) effected the Carlsberg holding, the Court of Appeals also considered application of

13 Department Regulation 3.2.1.19 (C) (1) NMAC which interpreted and implemented Section 7-9-

14 3.5 (A) (3) (f).

15 The Court of Appeals in MPC, Ltd., ¶36, construed Regulation 3.2.1.19 (C) (1) NMAC to

16 mean that:

17 (1) the agent [taxpayer] has the authority to bind the principal (the
18 client)… to an obligation (to the employee) created by the agent
19 [taxpayer], and (2) the beneficiary of that obligation (the
20 employee) is informed by contract that he or she has a right to
21 proceed against the principal (the client) to enforce the obligation.

22 The Court of Appeals continued by stating:

23 Section 7-9-3 (F) (2) (f) requires a disclosure to the employee of an
24 agency relationship. This breaks down into the requirements that

3
MPC, Ltd. devoted significant discussion to a regulation addressing a joint employer relationship which is not in
dispute in this protest. In fact, during the Department’s cross-examination of Mr. Murphy, he acknowledged that
Vista has not sought nor received any ruling from the Department of Labor or the IRS finding Vista to be a joint
employer.

In the Matter of the Protest of Vista Staffing Solutions, Inc.
Page 41 of 57
1 there be a relationship by which the principal is liable (and knows
2 he is liable) to the employee for payroll if the agent fails to pay,
3 and that the agent disclose this relationship and obligation to the
4 employee.

5 Additionally, when interpreting Regulation 3.2.1.19 (C) (2), the Court of Appeals noted

6 that it imposed additional bookkeeping requirements that must be met in order to exclude

7 receipts received in a disclosed agency capacity from gross receipts. See MPC, Ltd., ¶36.

8 MPC, Ltd. remains controlling and has been central to the analysis of this issue since it

9 was published approximately 20 years ago. Within this framework, Vista’s claim to the disclosed

10 agency exclusion is not supported by the facts or sufficient to satisfy the basic elements

11 expounded by MPC, Ltd.

12 First, the Hearing Officer is not persuaded that Vista had authority to obligate Healthcare

13 Operators in a contract with Vista’s Medical Professionals, or that Vista’s Medical Professionals

14 were informed of any right to proceed directly against the Healthcare Operators to enforce such

15 obligations if they existed.

16 The Hearing Officer recognizes that Vista was under a contractual obligation with

17 Hospital Service Corporation to require certain terms and conditions in contracts between Vista

18 and its Medical Professionals, but those requirements do not transform Vista into an agent

19 satisfying the agency requirements in MPC, Ltd. See e.g. Taxpayer Ex. 2.46. Vista simply had no

20 authority to bind Hospital Service Corporation or any Healthcare Operators to contractual

21 obligations with Vista’s Medical Professionals. Moreover, the relevant agreements fail to permit

22 Medical Professionals to proceed directly against Hospital Service Corporation or any of its

23 Healthcare Operators if they perceived that Vista had failed to satisfy any of its contractual

24 obligations to them (i.e. the right for a Medical Professional to proceed directly against a

25 Healthcare Operator if Vista failed to compensate the Medical Professional).

In the Matter of the Protest of Vista Staffing Solutions, Inc.
Page 42 of 57
1 If such authority could be implied in the LT Agreement, such implication was nullified

2 by the explicit disclaimer of an agency relationship at Taxpayer Ex. 2.26 (Sec. XIV) which

3 clearly and unambiguously states:

4 “Nothing in this Agreement shall be construed as creating anything
5 other than an independent contractor relationship between Agency
6 [Vista], Agency Healthcare Provider [Medical Professional], HSC
7 [Healthcare Service Corporation] and participating Institutions
8 (Including their respective employees, contractors or affiliate
9 entities).”

10 It goes on to essentially disclaim any and all obligations that might arise over the duration

11 of a placement, including provision of benefits and withholding of or payment of applicable

12 taxes.

13 In contrast, Vista emphasizes other provisions in Taxpayer Ex. 2 in which it is agreeing

14 to certain obligations with respect to its Medical Professionals, but none of those provisions

15 suggest creation of a disclosed agency relationship as contemplated by MPC, Ltd. in that those

16 provisions are not authorizing or otherwise suggesting that Vista has the authority to contract on

17 behalf of Healthcare Service Corporation or any other Healthcare Operator.

18 To the extent support for such authority may be extrapolated from the indemnification

19 clause at Taxpayer Ex. 2.25 – 2.26 (Sec. XIII), the Hearing Officer observed that each provision

20 in which either Healthcare Service Corporation or Vista agreed to indemnify, defend, and hold

21 harmless contained an explicit exclusion for “Agency Healthcare Providers,” which under the LT

22 Agreement means Vista’s Medical Professionals. See Taxpayer Ex. 2.3 (Sec. I.B (definition of

23 “Agency Healthcare Provider”)). Another indemnification clause at Taxpayer Ex. 2.14 (Sec.

24 III.D.3) does not create any enforceable obligation between a Healthcare Operator and Vista and

25 its Medical Professionals unless arising from the Healthcare Operator’s medical billing or

26 collection errors. In other words, for example only, if a billing error resulted in an overpayment

In the Matter of the Protest of Vista Staffing Solutions, Inc.
Page 43 of 57
1 by a payor for which the payor sought reimbursement from the Medical Professional, then the

2 Medical Professional could seek indemnification from the Healthcare Operator that received the

3 overpayment. See e.g. Taxpayer Ex. 2.37.

4 But on the whole, the LT Agreement, when read in its entirety, does not authorize Vista

5 to bind a principal in a contract with a third party so that the third party can enforce the

6 contractual obligation against the principal. See MPC, Ltd., 2003-NMCA-021, ¶ 37.

7 Because the relevant agreements make clear that no agency relationship existed between

8 Vista and Healthcare Service Corporation, or any Healthcare Operators, Vista’s assertions that it

9 was an agent consistent with the guidance of MPC, Ltd. is simply not supported by the evidence.

10 The same observations are true for assertions that Vista could be a disclosed agent of the

11 federal government and Indian Health Services (IHS). A review of the primary contract

12 (Taxpayer Ex. 3) failed to reveal any explicit terms that could be construed as granting Vista the

13 authority of an agent to the federal government, or any of its agencies, consistent with the

14 elements illustrated in MPC, Ltd.

15 Even if there was sufficient evidence for the Hearing Officer to find that Vista had actual

16 authority to bind a Healthcare Operator to an obligation made to a Medical Professional, Vista’s

17 claim to the exclusion would still fail.

18 Vista must also prove that the beneficiary of such obligation (or in this case, the Medical

19 Professional) is informed by contract that he or she has a right to proceed against the principal

20 (Healthcare Service Corporation or any other Healthcare Operator) to enforce the obligation.

21 Vista emphasizes several places in the various agreements where Medical Professionals

22 were made aware of Vista’s role in their placements, stressing frequent use of the term “agent.”

23 For example, Vista highlights that Vista and its Medical Professionals entered into PSP

In the Matter of the Protest of Vista Staffing Solutions, Inc.
Page 44 of 57
1 Agreements in which Vista was identified as “agent for [Medical] Professional and Clients in

2 arranging Locum Tenens placements.” See Taxpayer Ex. 4.2 (Para. 11). Having reviewed this

3 clause, as well as all the others to which the Hearing Officer was directed, in addition to

4 reviewing the contracts in full, the Hearing Officer was unable to conclude that Medical

5 Professionals were explicitly informed of any right to proceed directly against Healthcare

6 Service Corporation or any Healthcare Operators, nor did the Hearing Officer observe any

7 provisions actually establishing such right, except perhaps in the limited situation involving

8 “claims, suits, fine[s], penalties, and damages which may arise from [Healthcare Operator’s]

9 billing and collection activities relating to services provided by [Vista] and [Medical

10 Professional].” See Taxpayer Ex. 2.14.

11 This, however, does not create the authority for Medical Professionals to proceed with

12 claims directly against Healthcare Operators if, for example, Vista fails or refuses to pay Medical

13 Professionals for their services. Use of the word, “agent,” without some evidence of actual

14 authority consistent with MPC, Ltd., did not prove existence of an actual disclosed agency

15 relationship in which Vista had the authority of an agent as contemplated by MPC, Ltd. or the

16 regulations it considered. Along the same line, there is also no indication that Healthcare Service

17 Corporation or any Healthcare Operators knew they would be liable directly to a Medical

18 Professional if Vista failed to compensate them for their services under a Placement Agreement.

19 Finally, even if Vista had established the essential elements under MPC, Ltd., its claim

20 against the Assessment under the disclosed agency exception would still fall short because there

21 is insufficient evidence to establish adherence to Regulation 3.2.1.19 (C) (2) which establishes

22 mandatory and minimal bookkeeping requirements necessary to exclude receipts received as a

23 disclosed agent. See MPC, Ltd., ¶36.

In the Matter of the Protest of Vista Staffing Solutions, Inc.
Page 45 of 57
1 Regulation 3.2.1.19 C (2) NMAC (2010, Rp. 10/13/2021) provides that “[r]eceipts from

2 the reimbursement of expenses incurred as agent on behalf of a principal while acting in a

3 disclosed agency capacity are not included in the agent’s gross receipts if the expenses are

4 separately stated on the agent’s billing to client and are identified in the agent’s books and

5 records as reimbursements of expenses incurred on behalf of the principal party.” (Emphasis

6 Added). In this case, Mr. Murphy, upon reference to one of Vista’s invoices (Taxpayer Ex. 18.5)

7 admitted on cross-examination, without any attempt to correct or clarify on re-direct

8 examination, that Vista’s invoices do not contain any differentiation between amounts due to

9 Medical Professionals and service fees due to Vista. (Hrg’ Tr. 2:31:13 – 16). Vista nevertheless

10 claims that its clients knew that their payments to Vista included payments for the services of

11 Vista’s Medical Professionals. However, this argument is unavailing since the regulations

12 require something more specific which Vista admittedly did not do.

13 For these reasons, Vista has not satisfied the requirements of Section 7-9-3.5 (A) (3) (f)

14 and Regulation 3.2.1.19 (C) (1) NMAC, as construed by MPC, Ltd., ¶36. Accordingly, there is

15 insufficient evidence on which to conclude that money received by Vista to be paid to Vista’s

16 Medical Professionals is excluded from taxation. Such receipts, under the facts of this case, are

17 taxable. See MPC, Ltd., 2003-NMCA-021, ¶14 (“Receipts include payments received for one’s

18 own account and then expended to meet one’s own responsibilities.”)

19 The Hearing Officer notes that the Legislature, in 2022, enacted a definition for the term

20 “disclosed agency” which became effective on July 1, 2022. See NMSA 1978, Section 7-9-3 D

21 (2022). The Legislature then amended the definition of “disclosed agency” in 2023 that will

22 become effective on July 1, 2023. See 2023 New Mexico Laws Ch. 85 (S.B. 147). Because there

23 is no explicit or contextual indication of the Legislature’s intention for either the 2022 or the

In the Matter of the Protest of Vista Staffing Solutions, Inc.
Page 46 of 57
1 2023 enactments to apply retrospectively, they are not considered in this protest. See NMSA

2 1978, Section 12-2A-8 (“A statute or rule operates prospectively only unless the statute or rule

3 expressly provides otherwise or its context requires that it operate retrospectively.”) The audit

4 periods underlying the Assessment in this protest extend from 2010 to 2017 and precede the

5 more recently enacted and amended “disclosed agency” definition by several years.

6 Whether Certain Receipts are Consideration to Vista

7 In the alternative to Vista’s argument that it was a disclosed agent as discussed in the

8 previous section, Vista asserts that the receipts that funded the compensation paid to the Medical

9 Professionals for their services were not consideration to Vista. Vista’s position that receipts

10 which may have been expended to compensate Medical Professionals were not “consideration”

11 similarly fails to persuade.

12 “Consideration is the bargained-for exchange between the parties.” See Smith v. Vill. of

13 Ruidoso, 1999-NMCA-151, ¶ 33, 128 N.M. 470, 478, 994 P.2d 50, 58. The definition of the term

14 as provided at Regulation 3.2.1.7 B NMAC explains that “consideration” in the gross receipts tax

15 context is “any benefit, interest, gain or advantage to one party, usually the seller, or any

16 detriment, forbearance, prejudice, inconvenience, disadvantage, loss of responsibility, act or

17 service given, suffered, or undertaken by the other party, usually the buyer.”

18 It usually applies in the gross receipts tax context when someone engaging in business is

19 compensated with something of value other than money. Note that the definition of gross

20 receipts includes the “total amount of money or the value of other consideration received[.]” See

21 Section 7-9-3.5. For example, this might apply in situations where an auto mechanic repairs a

22 carpenter’s truck and the carpenter, in exchange for the service, builds the mechanic a bookshelf, in

23 which case the value of the bookshelf would form the basis for the gross receipts tax owed by the

In the Matter of the Protest of Vista Staffing Solutions, Inc.
Page 47 of 57
1 mechanic. See also Regulation 3.2.1.14 C NMAC.

2 Taxpayer asserts that the term is significant because receipts received and paid to Medical

3 Professionals did not represent consideration, or anything of value, to Vista. It relies on Stohr v.

4 New Mexico Bureau of Revenue, 1976-NMCA-118, ¶ 12, 90 N.M. 43, 47, 559 P.2d 420, 424 for the

5 proposition that “‘[c]onsideration’ does not include amounts to cover incidental purchases for

6 another when the taxpayer does not receive an independent benefit from such amounts.” Reliance

7 on Stohr under the facts at issue in this protest is problematic. More than 40 years have elapsed

8 since Stohr during which time the relevant statute has been amended and MPC, Ltd. has laid the

9 groundwork for the present-day analysis. That is not to suggest that Stohr is no longer good law, but

10 its analysis in the context of this protest is limited in similar manner to Carlsberg, Brim, and any

11 other case which was decided under the prior version of the law. Moreover, MPC, Ltd. also

12 observed under circumstances more analogous to the issues presented in this protest that, “[r]eceipts

13 include payments received for one’s own account and then expended to meet one’s own

14 responsibilities.” See MPC, Ltd., 2003-NMCA-021, ¶14.

15 Moreover, Vista’s receipt of those funds did convey a benefit in that having control of the

16 money flow was advantageous to its business strategy. Mr. Murphy explained that Vista’s ongoing

17 involvement in the transaction augmented opportunities to establish, maintain, and expand its New

18 Mexico market.

19 Double Taxation

20 Vista suggests that it should not be liable for the tax consequences of its independent

21 contractors (Medical Professionals) because each taxpayer is liable for the tax consequences of

22 its own activities. The Hearing Officer agrees that this reflects the general policy of New

23 Mexico.

In the Matter of the Protest of Vista Staffing Solutions, Inc.
Page 48 of 57
1 However, to the extent Vista asserts that application of New Mexico’s gross receipts tax

2 under the circumstances in this protest results in an impermissible double taxation, that argument

3 is unsupported by the evidence. The fact that both Vista and its Medical Professionals might4

4 both be liable for gross receipts tax on receipts received by Vista and paid to Medical

5 Professionals is not necessarily prohibited. New Mexico imposes a gross receipts tax on the

6 receipts of a person or entity engaged in business. In this instance, Vista is a distinct and separate

7 taxpayer from the Medical Professionals. Even though a portion of the receipts derived in a

8 placement transaction eventually get passed on to the Medical Professional as compensation for

9 their services, it is still paid to Vista in satisfaction for the placement. The Medical Professional

10 receives their share through Vista for performing medical services for the Healthcare Operator.

11 Healthcare Operator’s payments to Vista and Vista’s subsequent payments to Medical

12 Professionals constitute separate transactions in the absence of a genuine disclosed agency

13 relationship. Only those payments from Healthcare Operators to Vista have been assessed as

14 Vista’s gross receipts. This does not constitute double taxation. See House of Carpets, Inc. v.

15 Bureau of Revenue, 1973-NMCA-034, ¶ 19, 84 N.M. 747, 750, 507 P.2d 1078, 1081.

16 Taxpayer Not Entitled to Health Care Services Deductions.

17 The Department argued that Vista’s Post-Hearing Brief ostensibly waived claims for

18 relief under NMSA 1978, Section 7-9-93 and 7-9-77.1 because it did not present any argument in

19 support of relief under those statutes. Vista proceeded to argue application of those statutes in its

20 Reply Brief. The Hearing Officer agrees with the Department’s perspective on waiver. Issues

21 raised for the first time in a reply brief will not be considered. See Hale v. Basin Motor Co.,

4
The Hearing Officer will not speculate with respect to the potential tax liability of Medical Professionals because
that issue is not before the tribunal. “Every person is charged with the reasonable duty to ascertain the possible tax
consequences of his action.” See Tiffany Const. Co., Inc. v. Bureau of Revenue, 1976-NMCA-127, ¶ 5, 90 N.M. 16,
17, 558 P.2d 1155, 1156

In the Matter of the Protest of Vista Staffing Solutions, Inc.
Page 49 of 57
1 1990-NMSC-068, ¶ 23, 110 N.M. 314, 321, 795 P.2d 1006, 1013.

2 However, this will not preclude the Hearing Officer from discussing the issue anyway to

3 complete the record. The application of NMSA 1978, Sections 7-9-93 and 7-9-77.1 was

4 previously raised even though it was not expressly argued in Taxpayer’s Post-Hearing Brief. See

5 e.g. Taxpayer Ex. 13.8.

6 As previously observed, “[w]here an exemption or deduction from tax is claimed, the

7 statute must be construed strictly in favor of the taxing authority, the right to the exemption or

8 deduction must be clearly and unambiguously expressed in the statute, and the right must be clearly

9 established by the taxpayer.” See Wing Pawn Shop, 1991-NMCA-024, ¶ 16; See also TPL, , 2003-

10 NMSC-7, ¶ 9. After reviewing the language of the two deductions and the facts of this case, Vista

11 did not establish entitlement to the two cited deductions.

12 In pertinent part, Section 7-9-77.1 (A) provides a deduction for “receipts of a health care

13 practitioner from payments by the United States government or any agency thereof for provision

14 of medical and other health services by a health care practitioner or of medical or other health

15 and palliative services by hospices or nursing homes to medicare beneficiaries…”

16 Similarly, Section 7-9-93 (A) provides:

17 Receipts from payments by a managed health care provider or
18 health care insurer for commercial contract services or medicare
19 part C services provided by a health care practitioner that are not
20 otherwise deductible pursuant to another provision of the Gross
21 Receipts and Compensating Tax Act may be deducted from gross
22 receipts, provided that the services are within the scope of practice
23 of the person providing the service. Receipts from fee-for-service
24 payments by a health care insurer may not be deducted from gross
25 receipts. The deduction provided by this section shall be separately
26 stated by the taxpayer.

27 While these deductions might potentially apply to some of Vista’s Healthcare Operator

28 clients, their benefits would not extend to, nor encompass, a business that generates revenue

In the Matter of the Protest of Vista Staffing Solutions, Inc.
Page 50 of 57
1 from placing Medical Professionals with those Healthcare Operators because of the nature of

2 services provided and how they are billed. Vista is not in the business of performing medical

3 services. Vista is engaged in the business of providing staffing services to medical facilities. It is

4 the facilities, not the staffing company, that provide the services potentially subject to the

5 deductions under Sections 7-9-77.1 and 7-9-93.

6 Even if the deductions did apply to a third-party staffing company, Vista did not

7 demonstrate that its receipts were eligible for deduction as payments from a qualifying entity. In

8 order to qualify for a deduction under Section 7-9-93, a taxpayer must establish that receipts

9 received were paid by a managed health care provider or health care insurer. See e.g. Benvenuti

10 v. New Mexico Taxation & Revenue Dep't, 2022 WL 17959156, at *3 (N.M. Ct. App. Dec. 27,

11 2022) (non-precedential). The same is true for Section 7-9-77.1 which requires both that the

12 services be provided pursuant to Medicare and that the people receiving the services be Medicare

13 beneficiaries. See e.g. Four Corners Healthcare Corp. v. New Mexico Taxation & Revenue

14 Dep't, 2022 WL 17663616, at *4 (N.M. Ct. App. Dec. 14, 2022) (non-precedential).

15 Vista’s evidence, however, established that payments were received from Vista’s

16 Healthcare Operator clients. The Healthcare Operator clients compensated Vista for its services

17 and the services of its Medical Professionals on an hourly basis (i.e. hourly rate x number of

18 hours worked). See Taxpayer Ex. 18. Vista did not bill Healthcare Operators or qualified payors

19 for specific medical services performed for the benefit of eligible patients. This is significant

20 because a Medical Professional working a 12-hour shift would be compensated based on those

21 hours regardless of the number of patients they treated or the service they rendered.

22 For this reason, there is no evidence in which to conclude that any qualifying entity (a

23 managed health care provider or health care insurer in the case of Section 7-9-93 or Medicare

In the Matter of the Protest of Vista Staffing Solutions, Inc.
Page 51 of 57
1 under Section 7-9-77.1) would compensate a Healthcare Operator, Vista, or a Medical

2 Professional for merely being on duty or on call for a specified number of hours, yet that was the

3 obligation Healthcare Operators incurred to Vista and Vista incurred to Medical Professionals

4 (payment per hour at a specified rate). Vista did not establish entitlement to either deduction

5 under the evidence presented.

6 Penalty.

7 Vista argued that in the event it was found liable for the assessed tax principal, penalty

8 should nevertheless be abated because it acted with reasonable business care and prudence and was

9 not negligent. Moreover, it also asserts that error, if any, resulted from a mistake of law made in

10 good faith and on reasonable grounds.

11 When any taxpayer fails to pay taxes due to the State because of negligence or disregard

12 of rules and regulations, but without intent to evade or defeat a tax, NMSA 1978 Section 7-1-69

13 (2007) requires:

14 there shall be added to the amount assessed a penalty in an amount
15 equal to the greater of: (1) two percent per month or any fraction of
16 a month from the date the tax was due multiplied by the amount of
17 tax due but not paid, not to exceed twenty percent of the tax due
18 but not paid.

19 (Emphasis Added)

20 The statute’s use of the word “shall” makes the imposition of penalty mandatory in all instances

21 where a taxpayer’s actions or inactions meet the legal definition of “negligence.” See Marbob

22 Energy Corp. v. N.M. Oil Conservation Comm'n, 2009-NMSC-013, ¶22, 146 N.M. 24 (use of the

23 word “shall” in a statute indicates the provision is mandatory absent clear indication to the

24 contrary). Regulation 3.1.11.10 NMAC defines negligence in three separate ways: (A) “failure to

25 exercise that degree of ordinary business care and prudence which reasonable taxpayers would

26 exercise under like circumstances;” (B) “inaction by taxpayer where action is required”; or (C)

In the Matter of the Protest of Vista Staffing Solutions, Inc.
Page 52 of 57
1 “inadvertence, indifference, thoughtlessness, carelessness, erroneous belief or inattention.”

2 Taxpayer meets this definition of negligence, and thus is potentially subject to civil negligence

3 penalty under Section 7-9-69. This conclusion is reached due to the absence of any reliable and

4 trustworthy evidence which would have established that Vista exercised a degree of ordinary

5 business care and prudence which reasonable taxpayers would exercise under like circumstances.

6 Vista’s reliance on its “tax department” or its “tax compliance department,” without more

7 explanation of the information it relied upon in making its determination that tax reporting and

8 payment was not necessary, is insufficient to relieve Vista of liability for penalty.

9 However, in instances where a taxpayer might otherwise fall under the definition of civil

10 negligence generally subject to penalty, Section 7-1-69 (B) provides a limited exception: “[n]o

11 penalty shall be assessed against a taxpayer if the failure to pay an amount of tax when due

12 results from a mistake of law made in good faith and on reasonable grounds.” Here, there is no

13 evidence that Taxpayer engaged in any formal consultation or study of the issue before

14 determining that tax reporting and payment were not required. See C & D Trailer Sales v.

15 Taxation and Revenue Dep’t, 1979-NMCA-151, ¶8-9, 93 N.M. 697 (penalty upheld where there

16 was no evidence that the taxpayer “relied on any informed consultation” in deciding not to pay

17 tax). See also In the Matter of the Protest of Santa Fe Tow and Emergency Lock & Key, Decision

18 and Order No. 15-21 (June 30, 2015) (non-precedential) (hearing officer abated penalty on a

19 disclosed agent case when that taxpayer presented evidence that a CPA had advised the receipts

20 were non-taxable reimbursements under the disclosed agency exclusion).

21 In this case, Taxpayer is negligent for failure to exercise that degree of ordinary business

22 care and prudence which reasonable taxpayers would exercise under like circumstances or

In the Matter of the Protest of Vista Staffing Solutions, Inc.
Page 53 of 57
1 inadvertence, erroneous belief, or inattention. Vista has not established entitlement to an abatement

2 of penalty.

3 Overall, the parties presented thorough and compelling arguments in support of their

4 positions. Yet, Vista nevertheless failed to persuade the Hearing Officer through its evidence and

5 arguments that it was entitled to the relief sought.

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

7 CONCLUSIONS OF LAW

8 A. Taxpayer filed a timely, written protest of the Department’s Assessment and

9 jurisdiction lies over the parties and the subject matter of this protest.

10 B. Under NMSA 1978, Section 7-9-3.3 (2002), Taxpayer engaged in business in New

11 Mexico.

12 C. Under NMSA 1978, Section 7-9-5 (2002), all of Taxpayer’s receipts in New

13 Mexico are presumed subject to New Mexico’s gross receipts tax.

14 D. Taxpayer failed to establish legally and factually that it was a disclosed agent of

15 its clients, as interpreted by Regulation 3.2.1.19 (C) (1) NMAC and MPC, Ltd. v. TRD, 2003-

16 NMCA-021, 133 N.M. 217, and thus the receipts in question are not excludable from gross

17 receipts taxation under NMSA 1978, Section 7-9-3.5 (A) (3).

18 E. Taxpayer did not establish entitlement to deductions under NMSA 1978, Section

19 7-1-77.1 or NMSA 1978, Section 7-9-93. See Wing Pawn Shop v. Taxation and Revenue

20 Department, 1991-NMCA-024, ¶16, 111 N.M. 735 (internal citation omitted).

21 F. Taxpayer did not establish entitlement to exemption under NMSA 1978, Section

22 7-9-13.1. See Wing Pawn Shop v. Taxation and Revenue Department, 1991-NMCA-024, ¶16, 111

23 N.M. 735 (internal citation omitted).

In the Matter of the Protest of Vista Staffing Solutions, Inc.
Page 54 of 57
1 G. Under NMSA 1978, Section 7-1-67 (2007), Taxpayer is liable for accrued interest

2 under the Assessment. Interest continues to accrue until the tax principal is satisfied.

3 H. Under NMSA 1978, Section 7-1-69 (2007), Taxpayer is liable for civil negligence

4 penalty because Taxpayer’s inaction in failing to file and pay gross receipts tax during the relevant

5 period met the definition of civil negligence under Regulation 3.1.11.10 NMAC.

6 I. Taxpayer did not establish a good faith, mistake of law made on reasonable grounds

7 that would allow for abatement of penalty under Section 7-1-69 (2007).

8 J. None of the indicators of non-negligence found under Regulation 3.1.11.11 NMAC

9 allow for abatement of penalty under the facts established in this protest.

10 For the foregoing reasons, Taxpayer’s protest IS DENIED. Taxpayer is ordered to pay

11 the assessed tax, penalty, and interest.

12 DATED: April 7, 2023

13
14 Chris Romero
15 Hearing Officer
16 Administrative Hearings Office
17 P.O. Box 6400
18 Santa Fe, NM 87502

In the Matter of the Protest of Vista Staffing Solutions, Inc.
Page 55 of 57
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.

13

In the Matter of the Protest of Vista Staffing Solutions, Inc.
Page 56 of 57
1 CERTIFICATE OF SERVICE

2 I hereby certify that I served the foregoing on the parties listed below this 7th day of April,

3 2023 in the following manner:

4 First Class U.S. Mail and Email First Class U.S. Mail and Email
5
6 INTENTIONALLY BLANK

In the Matter of the Protest of Vista Staffing Solutions, Inc.
Page 57 of 57