I'm a self-employed contractor who filed my federal taxes but never filed New Mexico gross receipts tax — do I still owe the tax, penalty, and interest?

Plain-English summary

Jimmy Lopez is a self-employed home and building inspector who works from his home in Santa Teresa, New Mexico, inspecting properties (mostly for banks) in New Mexico and parts of Texas. For tax years 2016 through 2019 he reported his business income on federal Schedule C but never registered for a New Mexico combined reporting (CRS) number and never filed the monthly gross receipts tax (GRT) returns. A Department audit compared his Schedule C income to its CRS records, found the gap, and on September 19, 2022 assessed $10,973.84 in tax, $2,194.68 in penalty, and $1,826.98 in interest (interest kept growing after that). Lopez protested, saying he simply did not know he had to file GRT.

Hearing Officer Ignacio V. Gallegos denied the protest in part and granted it in part:

• The tax stands. Performing building inspections in New Mexico is "engaging in business," so all of Lopez's receipts are presumed taxable (Sections 7-9-4, 7-9-5(A)). The assessment is presumed correct, and Lopez offered only his own uncorroborated testimony — no exhibits — which was not enough to overcome that presumption.
• The negligence penalty stands. When tax goes unpaid through negligence (even without intent to evade), the penalty is mandatory ("shall") under Section 7-1-69. Negligence includes an "erroneous belief" or "inaction where action is required." Not filing at all fits that definition.
• TurboTax was not a defense. The non-negligence rule excuses a failure only for reasonable reliance on competent tax counsel or an accountant after full disclosure — and even then, reliance on an agent does not excuse a late-filed return. TurboTax handles personal income tax, not GRT, and is not "competent tax counsel." The hearing officer agreed with the U.S. Tax Court (Morales) that using tax-prep software is not a defense to negligence penalties.
• Interest was frozen for the Department's delay. Interest is also mandatory (Section 7-1-67), so the interest that accrued before the hearing stands. But the Department took 309 days to request a hearing — far past the roughly 201 days the law allows (a prompt acknowledgment within about 21 days plus 180 days to request a hearing under Section 7-1B-8). Reviewing the deadlines on his own initiative, the hearing officer halted the accrual of interest as of April 18, 2023, the date the Department should have acted.

The result: Lopez owes the tax and penalty and the interest that accrued up to April 18, 2023, but no interest accrues after that date.

What this means for you

Self-employed people and independent contractors in New Mexico

Reporting business income on a federal Schedule C does not satisfy New Mexico. If you perform services in New Mexico, you generally must register for a CRS/business tax identification number and file gross receipts tax returns — a separate, monthly obligation from your income tax. Not knowing about it does not erase the tax, and it adds a mandatory negligence penalty on top.

Anyone who prepares their own return with software

Consumer tax software calculates your income tax; it does not flag or file New Mexico gross receipts tax. Courts and the Hearings Office treat "the software didn't tell me" as negligence, not an excuse. If your situation is at all unusual — self-employment, a new business, multi-state work — confirm your filing duties with a professional, and keep proof of that advice.

Taxpayers who think reliance on a preparer will waive the penalty

The non-negligence exception is narrow: it needs reasonable reliance on competent tax counsel or an accountant after full disclosure of all the facts — and it still will not excuse a late-filed return. General reliance on software, or on a preparer who was never asked about the specific tax, will not meet that bar.

One silver lining: the state's own delays can help you

New Mexico law puts deadlines on the Department, too. If it is slow to acknowledge your protest or to request your hearing (here, missing the ~201-day mark by more than 100 days), the hearing officer can stop interest from accruing — even raising the issue on their own. It does not erase the tax or penalty, but it can cap a growing interest balance, so it is worth noting how long your protest has been sitting.

Common questions

Q: I filed my federal Schedule C. Do I still owe New Mexico gross receipts tax?
A: Yes. Gross receipts tax is separate from income tax. If you perform services in New Mexico, your receipts are presumed taxable and you must file GRT returns even though you already reported the income federally.

Q: I didn't know I had to file. Isn't that a reasonable excuse?
A: No. New Mexico treats not knowing — an "erroneous belief" or failing to act when action is required — as negligence, and the negligence penalty is mandatory.

Q: I used TurboTax (or similar software). Doesn't that count as relying on a professional?
A: No. The rule excuses reliance only on competent tax counsel or an accountant, not on software. Tax-prep software also generally addresses only personal income tax, not gross receipts tax.

Q: Why was part of the protest "granted" if he lost on the tax?
A: Because the Department was too slow. It took 309 days to bring the protest to a hearing, past the roughly 201 days allowed, so the hearing officer halted the accrual of interest as of April 18, 2023. The tax, penalty, and pre-April-2023 interest still stand.

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 reliably illustrate that Schedule C income triggers GRT, that "I didn't know" is negligence, and that software is not a defense.

Citations and references

Statutes and regulations:

• NMSA 1978, § 7-9-4 (2010); § 7-9-5(A) (2019) — GRT on the privilege of doing business; all receipts of a person in business are presumed taxable
• NMSA 1978, § 7-9-3.5 (2019); § 7-9-3(S) — "gross receipts" includes performing services in New Mexico; inspections are services
• NMSA 1978, § 7-1-17(C) (2007); 3.1.6.12(A), 3.1.6.13 NMAC — assessment (including penalty and interest) presumed correct; taxpayer's burden to rebut
• NMSA 1978, § 7-1-69 (2007); 3.1.11.10, 3.1.11.11(D) NMAC — mandatory negligence penalty; negligence includes an erroneous belief; reliance on an agent does not excuse a late filing
• NMSA 1978, § 7-1-67 (2013) — mandatory interest on unpaid tax
• NMSA 1978, § 7-1B-8(A), (B), (E) (2019); 22.600.3.18(E), 22.600.3.8 NMAC — protest deadlines (prompt acknowledgment; 180 days to request a hearing); interest accrual may be halted if the Department misses them

Cases:

• Gemini Las Colinas, LLC v. N.M. Taxation & Revenue Dep't, 2023-NMCA-039, 531 P.3d 622 (the presumption of correctness and the taxpayer's burden to produce supporting evidence)
• Marbob Energy Corp. v. N.M. Oil Conservation Comm'n, 2009-NMSC-013, 146 N.M. 24 ("shall" makes the penalty and interest mandatory)
• El Centro Villa Nursing Center v. Taxation & Revenue Dep't, 1989-NMCA-070, 108 N.M. 795 (an inadvertent error meets the definition of civil negligence)
• Morales v. Comm'r, T.C. Memo 2012-341, aff'd 633 Fed. Appx. 884 (9th Cir. 2015) (using tax-preparation software is not a defense to negligence penalties)
• N.M. Taxation & Revenue Dep't v. Casias Trucking, 2014-NMCA-099; Archuleta v. O'Cheskey, 1972-NMCA-165, 84 N.M. 428; Sec. Escrow Corp. v. State Taxation & Revenue Dep't, 1988-NMCA-068, 107 N.M. 540 (burden to overcome the assessment; deductions/exemptions construed strictly against the taxpayer)

Source

• Listing: New Mexico Decisions & Orders
• Decision post: Jimmy Lopez
• Decision PDF: D&O 24-03

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 JIMMY LOPEZ
6 TO THE ASSESSMENT OF TAX ISSUED UNDER
7 LETTER ID NO. L0591682672

8 v. Case Number 23.08-032A, D&O 24-03

9 NEW MEXICO TAXATION AND REVENUE DEPARTMENT

10 DECISION AND ORDER

11 On September 28, 2023, Hearing Officer Ignacio V. Gallegos, Esq., conducted an

12 administrative hearing on the merits in the matter of the tax protest of Jimmy Lopez (Taxpayer)

13 pursuant to the Tax Administration Act and the Administrative Hearings Office Act. At the

14 hearing, Jimmy Lopez, Taxpayer, appeared representing himself. Staff Attorney Peter Breen

15 appeared, representing the opposing party in the protest, the Taxation and Revenue Department

16 (Department). Department protest auditor Mitchell Bartholemew appeared as a witness for the

17 Department. No exhibits were provided nor admitted into the record. The contents of the

18 Administrative File are considered part of the record of this proceeding.

19 Based on the evidence in the record, after making findings of fact, the hearing officer finds

20 that, Taxpayer has failed to overcome the presumption of correctness that attached to the

21 Department’s assessment. Because the Taxpayer failed to overcome the presumption of correctness,

22 the Taxpayer’s protest must be denied. However, due to the Department’s unfounded delay in

23 bringing the protest to hearing, the accrual of interest is stayed. IT IS DECIDED AND ORDERED

24 AS FOLLOWS:

In the Matter of the Protest of Jimmy Lopez, page 1 of 16.
1 FINDINGS OF FACT

2 1. On September 19, 2022, the Department issued a Notice of Assessment of Taxes

3 and Demand for Payment for the gross receipts tax reporting periods beginning January 1, 2016

4 and ending December 31, 2019. The assessment was for audit gross receipts tax of $10,973.84,

5 penalty of $2,194.68, and interest of $1,826.98, for a total assessment due of $14,995.50. [Letter

6 ID# L1465495664].

7 2. On September 26, 2022, the Taxpayer submitted a letter of protest requesting

8 review of the assessment. The protest was stamped as received by the Department protest office

9 on September 29, 2022. [Administrative file].

10 3. On April 29, 2023, the Department issued a letter acknowledging a timely protest

11 of the Notice of Assessment. [Letter ID# L0591682672].

12 4. On August 4, 2023, the Department filed a Request for Hearing asking that the

13 Taxpayer’s protest be scheduled for a scheduling hearing, alleging the amount at protest was

14 $14,995.50. [Administrative file].

15 5. On August 4, 2023, the Department filed an Answer to Protest asserting that the

16 Taxpayer must report and pay gross receipts taxes on business income for New Mexico

17 businesses. The discrepancy was discovered because Taxpayer reported Schedule C income

18 without corresponding gross receipts and compensating tax returns. [Administrative file].

19 6. On August 7, 2023, the Administrative Hearings Office sent a Notice of

20 Administrative Hearing, giving the parties notice that the merits hearing would take place by

21 videoconference on September 28, 2023. [Administrative file].

22 7. The Notice of Administrative Hearing in Albuquerque was sent via U.S. Mail to:

23 5898 Megan St., Santa Teresa, NM 88008-5200 which was the mailing address for the Taxpayer,

In the Matter of the Protest of Jimmy Lopez, page 2 of 16.
1 provided by the Department as the address used in the initial submission of the Department’s

2 correspondence. [Administrative file].

3 8. Taxpayer appeared on his own behalf, by telephone only, at the videoconference

4 Merits hearing September 28, 2023, and testified under oath or affirmation. [Administrative file].

5 9. The Department was represented by Staff Attorney Peter Breen, accompanied by

6 protest auditor Mitchell Bartholemew, by video conference. The Hearing Officer preserved an

7 audio recording of the hearing. [Administrative file; Hearing Record].

8 10. Mr. Lopez is an independent contractor who works from his home in Santa

9 Teresa, New Mexico. [Testimony of J. Lopez].

10 11. Mr. Lopez is a home and building inspector, focusing on inspections for banks.

11 He travels in New Mexico and some parts of Texas for this work. [Testimony of J. Lopez].

12 12. Mr. Lopez has never registered for a combined reporting system (CRS) tax

13 identification number with the Department. As a result of the audit, a number [BTID: 03-

14 599433-00-9] was assigned to Mr. Lopez. [Testimony of J. Lopez; Testimony of M.

15 Bartholemew].

16 13. The Department audit compared the Taxpayer’s federal Schedule C, business

17 income, with CRS return information, and discovered a discrepancy existed insofar as no CRS

18 returns were filed or CRS taxes paid on behalf of Taxpayer. [Testimony of M. Bartholemew].

19 14. Mr. Lopez was unaware of the business tax requirements to pay gross receipts

20 taxes. During the timeframes at issue, Mr. Lopez did not submit the required monthly CRS-1 tax

21 returns to report and pay gross receipts taxes. [Testimony of J. Lopez; Testimony of M.

22 Bartholemew].

In the Matter of the Protest of Jimmy Lopez, page 3 of 16.
1 15. The Department provided an update concerning Taxpayer liabilities: $10,973.84

2 in tax principal; $2,194.66 in penalties; and $2,562.37 in interest. The balance outstanding has

3 increased from the original assessment because interest accrues monthly. [Testimony of M.

4 Bartholemew].

5 16. On December 12, 2023, the Administrative Hearings Officer issued an Order

6 Requesting Additional Briefing to the parties. The Order imposed a fourteen-day response

7 requirement on the Department. As of the writing of this Decision and Order, no additional briefing

8 has been submitted to the tribunal, therefore, as explained in the Order Requesting Additional

9 Briefing, the Department is deemed to have consented to the halting of the accrual of interest.

10 [Administrative File].

11 DISCUSSION

12 For tax years, 2016, 2017, 2018 and 2019, Jimmy Lopez worked as an independent

13 contractor. As part of his personal income tax reporting for the business income, he filed

14 Schedule C forms as part of his federal personal income tax returns. The Schedule Cs reported

15 business income. The Taxpayer did not file gross receipts tax returns on the combined reporting

16 system (CRS-1) forms to the State of New Mexico during the same years. Taxpayer claimed he

17 was unaware he was required to file gross receipts.

18 Presumption of correctness

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

20 presumed correct. Consequently, Taxpayer has the burden to overcome the assessment. See

21 Archuleta v. O'Cheskey, 1972-NMCA-165, ¶11, 84 N.M. 428. Unless otherwise specified, for the

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

23 NMSA 1978, Section 7-1-3 (Z) (2019); see also Regulation 3.1.1.16 (12/29/2000). Under

In the Matter of the Protest of Jimmy Lopez, page 4 of 16.
1 Regulation 3.1.6.13 NMAC, the presumption of correctness under Section 7-1-17 (C) extends to

2 the Department’s assessment of penalty and interest. See Chevron U.S.A., Inc. v. State ex rel. Dep't

3 of Taxation & Revenue, 2006-NMCA-50, ¶16, 139 N.M. 498, 503 (agency regulations interpreting

4 a statute are presumed proper and are to be given substantial weight). Accordingly, it is a

5 taxpayer’s burden to present some countervailing evidence or legal argument to show that they

6 are entitled to an abatement, in full or in part, of the assessment issued in the protest. See N.M.

7 Taxation & Revenue Dep't v. Casias Trucking, 2014-NMCA-099, ¶8. When a taxpayer presents

8 sufficient evidence to rebut the presumption, the burden shifts to the Department to show that the

9 assessment is correct. See MPC Ltd. v. N.M. Taxation & Revenue Dep't, 2003-NMCA-21, ¶13, 133

10 N.M. 217.

11 The Taxpayer’s burden established under the presumption of correctness is a burden of

12 producing evidence that tends to support Taxpayer’s position. Gemini Las Colinas, LLC v. New

13 Mexico Taxation & Revenue Department, 2023-NMCA-039, ¶ 16, 531 P.3d 622. Once the

14 Taxpayer has produced the evidence in support of Taxpayer’s position, the Department may present

15 its evidence in support of the assessment, then it is the responsibility of the Hearing Officer to weigh

16 the evidence and determine the outcome of the protest. Id., ¶ 17.

17 The burden is also on taxpayers to prove that they are entitled to an exemption or

18 deduction, if one should potentially apply. See Pub. Serv. Co. v. N.M. Taxation & Revenue Dep't,

19 2007-NMCA-050, ¶141 N.M. 520, 157 P.3d 85; See also Till v. Jones, 1972-NMCA-046, 83

20 N.M. 743, 497 P.2d 745. “Where an exemption or deduction from tax is claimed, the statute must

21 be construed strictly in favor of the taxing authority, the right to the exemption or deduction must

22 be clearly and unambiguously expressed in the statute, and the right must be clearly established

23 by the taxpayer.” See Sec. Escrow Corp. v. State Taxation & Revenue Dep't, 1988-NMCA-068,

In the Matter of the Protest of Jimmy Lopez, page 5 of 16.
1 ¶8, 107 N.M. 540, 760 P.2d 1306. See also Wing Pawn Shop v. Taxation & Revenue Dep't, 1991-

2 NMCA-024, ¶16, 111 N.M. 735, 809 P.2d 649. See also Chavez v. Comm'r of Revenue, 1970-

3 NMCA-116, ¶7, 82 N.M. 97, 476 P.2d 67.

4 Receipts under the Gross Receipts and Compensating Tax Act.

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

6 Compensating Tax Act, NMSA 1978, Sections 7-9-1 through 7-9-117, which imposes a tax for the

7 privilege of engaging in business, on the receipts of any person engaged in business in New Mexico.

8 See NMSA 1978, Section 7-9-4 (2010). There is a statutory presumption that all receipts of a

9 person engaged in business activities are taxable. See NMSA 1978, Section 7-9-5(A) (2019). The

10 business activity of inspecting homes in New Mexico was engaging in business which triggers the

11 statutory presumption that all receipts of a person engaging in business are taxable. See Section 7-9-

12 3(P) (2019), Section 7-9-3.3 (2019), and Section 7-9-5(A) (2019). Yet, despite the general

13 presumption of taxability, a taxpayer may qualify for the benefits of various deductions and

14 exemptions.

15 There is no dispute that Taxpayer’s Schedule C income was derived from the business of

16 building inspections in New Mexico. The statutory definition of “gross receipts” under Section 7-9-

17 3.5 (2019) states, in pertinent part: “‘gross receipts’ means the total amount of money or the value

18 of other consideration received … from selling services performed outside New Mexico, the

19 product of which is initially used in New Mexico, or from performing services in New Mexico.” It

20 is undisputed that performing building inspections is performing services. See NMSA 1978, Section

21 7-9-3 (S). Since the Department is entitled to the presumption that all receipts of a person engaging

22 in business are taxable, it is Taxpayer’s burden to present some evidence or legal argument to

23 show that the Taxpayer is entitled to an abatement, in full or in part, of the assessment issued in

In the Matter of the Protest of Jimmy Lopez, page 6 of 16.
1 the protest. See Section 7-9-3.3(2019) and Section 7-9-5(A) (2019); see also N.M. Taxation &

2 Revenue Dep't v. Casias Trucking, 2014-NMCA-099, ¶8. Taxpayer provided his testimony alone,

3 without support of exhibits or other corroboration, and in doing so did not suggest any theory, apart

4 from his own unawareness of the law, to excuse his non-filing and non-payment of gross receipts

5 tax returns. Taxpayer’s unsubstantiated statements through testimony were insufficient to overcome

6 the presumption of correctness that attached to the assessment of tax. See Regulation 3.1.6.12(A)

7 NMAC; see also Gemini Las Colinas, LLC v. New Mexico Taxation & Revenue Department, 2023-

8 NMCA-039, ¶ 16.

9 Penalty.

10 Mr. Lopez did not know he was required to file and pay gross receipts tax returns but had no

11 obvious intention to evade a tax. Taxpayer claimed he did not receive information of a need to file

12 from Turbo Tax or, later, from a tax preparer. Under NMSA 1978, Section 7-1-69 (2007), when a

13 taxpayer fails to pay taxes due to the State because of negligence or disregard of rules and

14 regulations, but without intent to evade or defeat a tax, the Department must impose a civil

15 negligence penalty on that taxpayer. “There shall be added to the amount assessed a penalty” under

16 the statute. Id.

17 The use of the word “shall” makes the imposition of penalty mandatory in all instances

18 where a taxpayer’s actions or inactions meets the legal definition of “negligence.” See Marbob

19 Energy Corp. v. N.M. Oil Conservation Comm'n, 2009-NMSC-013, ¶22, 146 N.M. 24 (use of the

20 word “shall” in a statute indicates provision is mandatory absent clear indication to the contrary).

21 Negligence can be found in several ways. Regulation 3.1.11.10 NMAC (1/15/01) defines

22 “negligence” as “failure to exercise that degree of ordinary business care and prudence which

23 reasonable taxpayers would exercise under like circumstances; inaction by taxpayers where action is

In the Matter of the Protest of Jimmy Lopez, page 7 of 16.
1 required; inadvertence, indifference, thoughtlessness, carelessness, erroneous belief or inattention.”

2 Not filing gross receipts tax returns or paying the taxes on time is certainly negligence by inaction

3 where action is required under this definition.

4 Taxpayer’s statement of reliance on Turbo Tax and a tax preparer for proper advice is

5 cognizable as an imperfect claim of nonnegligence. Regulation 3.1.11.11 NMAC (1/15/01) defines

6 “nonnegligence” by describing several situations which may indicate an absence of negligence,

7 allowing the Department to issue an abatement. The list provided in the regulation includes: “D. the

8 taxpayer proves that the failure to pay tax or to file a return was caused by reasonable reliance on

9 the advice of competent tax counsel or accountant as to the taxpayer's liability after full disclosure

10 of all relevant facts; failure to make a timely filing of a tax return, however, is not excused by the

11 taxpayer's reliance on an agent.” Regulation 3.1.11.11 NMAC.

12 Taxpayer’s credible testimony established that he used TurboTax software to complete his

13 federal and New Mexico personal income tax returns. Generally speaking, the software requests

14 input of certain information and computes a taxpayer’s liability and any amount owed or due for

15 refund. It is the understanding of the Hearing Officer that the software is limited to personal income

16 taxes and does not address any gross receipts taxes. The software, although a helpful tool, does not

17 substitute for “competent tax counsel or accountant,” as required under Regulation 3.1.11.11

18 NMAC to establish nonnegligence upon reasonable reliance. The Hearing Officer concurs with the

19 observations of the United States Tax Court in Morales v. Comm’r, T.C. Memo 2012-341, 2012

20 Tax Ct. Memo LEXIS 342, 104 T.C.M. (CCH) 741, affirmed, 633 Fed. Appx. 884 (9th Cir. 2015)

21 (non-precedential), which held that the use of tax preparation software is not a defense to negligence

22 penalties. Taxpayer did not show evidence to support any reasonable reliance on information

23 provided by TurboTax or a tax preparer. There was no evidence of whether the subject of gross

In the Matter of the Protest of Jimmy Lopez, page 8 of 16.
1 receipts was broached between accountant and Taxpayer. Yet, even if it had been, under the plain

2 language of the regulation, the reliance on the CPA does not excuse the failure to timely file a gross

3 receipts tax return for the business income reported on the Schedule C. See El Centro Villa Nursing

4 Center v. Taxation and Revenue Department, 1989-NMCA-070, ¶10, 108 N.M. 795 (inadvertent

5 error meets the definition of civil negligence). No abatement of penalty under Regulation 3.1.11.11

6 NMAC (01/15/01) is allowed.

7 Interest.

8 NMSA 1978, Section 7-1-67 (2013) provides that interest accrues on deficient tax principal.

9 Interest “shall be paid” on taxes that are not paid on or before the date on which the tax is due.

10 NMSA 1978, Section 7-1-67 (A). By the use of the word “shall” the legislature intended that the

11 assessment of interest is mandatory. See Marbob Energy Corp. v. N.M. Oil Conservation Comm’n.,

12 2009-NMSC-013, ¶ 22, 146 N.M. 24; see also NMSA 1978, Section 12-2A-4 (A) (1997). Likewise,

13 under Regulation 3.1.6.13 NMAC, the presumption of correctness under Section 7-1-17 (C)

14 extends to the Department’s assessment of penalty and interest. See Regulation 3.1.6.13 NMAC

15 1/15/01); see also Chevron U.S.A., Inc. v. State ex rel. Dep't of Taxation & Revenue, 2006-NMCA-

16 50, ¶16, 139 N.M. 498, 503 (agency regulations interpreting a statute are presumed proper and are

17 to be given substantial weight). Taxpayer’s unsubstantiated statements through testimony were

18 insufficient to overcome the presumption of correctness that attached to the assessment of interest

19 imposed against delinquent tax. See Regulation 3.1.6.12(A) NMAC; see also Gemini Las Colinas,

20 LLC v. New Mexico Taxation & Revenue Department, 2023-NMCA-039, ¶ 16.

21 Nevertheless, the legislature also enacted time deadlines to ensure timely disposition of tax

22 protests. See NMSA 1978, Section 7-1B-8 (2019). The Department’s failure to adhere to statutory

23 time deadlines can result in the stay of accrual of interest. See NMSA 1978, Section 7-1B-8 (E).

In the Matter of the Protest of Jimmy Lopez, page 9 of 16.
1 Regulations allow the hearing officer, upon request of the taxpayer or on their own initiative, to

2 review whether the Department satisfied applicable statutory requirements, and if finding the

3 Department did not, to stay the accrual of interest. See Regulation 22.600.3.18 (E) (8/25/2020). In

4 this instance, the Taxpayer did not raise or argue the issue of compliance with statutory deadlines,

5 nor did the Department argue for finding compliance. The Hearing Officer, upon review of the

6 deadlines, issued an Order Requesting Additional Briefing to the parties. Neither party responded by

7 providing additional briefing. The Order Requesting Additional Briefing imposed a fourteen-day

8 timeframe for the Department to respond. Within that time and thereafter the Department did not

9 respond. The Order Requesting Additional Briefing stated, in pertinent part, that “[f]ailure of the

10 Department to respond within the deadline specified herein shall be deemed as consent to halt the

11 accrual of interest on the protested liability consistent with NMSA 1978, Section 7-1B-8 (E)

12 (2019).”

13 Upon independent review, as allowed by regulation, the Hearing Officer takes this

14 opportunity to express dismay that the Department delayed the submission of a request for hearing a

15 total of 309 days – from the date of the Taxpayer’s protest on September 29, 2022, until the date of

16 submission of the Department’s request for hearing on August 4, 2023. The statute allows the

17 Hearing Officer’s independent review of the adherence to deadlines, therefore, the Hearing Officer,

18 sua sponte, outlines herein the basis for halting further accrual of interest. NMSA 1978, Section 7-

19 1B-8 (E) (2019) and Regulation 22.600.3.18 (E) NMAC (8/25/2020).

20 There are two deadlines of note under the 2019 statute, “[i]f the hearing officer finds that the

21 taxation and revenue department failed to comply with the deadlines set forth in Subsections A and

22 B of this section, the hearing officer may order that no further interest may accrue on the protested

In the Matter of the Protest of Jimmy Lopez, page 10 of 16.
1 liability.” NMSA 1978, Section 7-1B-8 (E) (2019); see also Regulation 22.600.3.18 (E)

2 (8/25/2020).

3 Beginning with Section A of the statute, the Department is required to promptly issue an

4 acknowledgement of the protest. Here, the Taxpayer’s protest was stamped as received by the

5 Department on September 29, 2022. The Department issued an acknowledgement of protest on

6 April 29, 2023. A simple calculation indicates that the acknowledgment of protest was dated 212

7 days after the protest was received by the Department. A determination of “promptness” is certainly

8 a subjective standard, and the hearing officer may take into account a variety of factors that might

9 contribute to a delay. Regulation 22.600.3.18 (E) (8/25/2020). The statute provides “[i]f the

10 department determines that the protest has not been filed in accordance with that section [7-1-24

11 NMSA 1978], the department shall, within twenty-one days of the receipt of the protest, inform the

12 taxpayer of the deficiency and provide the taxpayer within twenty-one days of the taxpayer being

13 informed, one opportunity to correct it.” There is no evidence on record that the Department found

14 fault with the initial submission of the protest for the tax years in question, therefore, a prompt

15 acknowledgment should have occurred within this 21-day grace-period. The record is void as to

16 whether there was any behind-the-scenes activity that might have justified a delay of longer than 21-

17 days such as, for example, holding an informal conference or making amendments to the protest.

18 Because of the relatively uncomplicated nature of the case and no evidence of behind-the-scenes

19 activity, a delay of 212 days cannot be found to be prompt, as it should have occurred within 21-

20 days of the receipt of the protest.

21 Turning then to Section B, the Department has one hundred eighty (180) days from the date

22 of the protest, within which to request a hearing. Regulations identify the date, on which the 180

23 days begin, to be the date of the prompt acknowledgment of protest. See Regulation 22.600.3.8

In the Matter of the Protest of Jimmy Lopez, page 11 of 16.
1 NMAC. In this case, the Taxpayer’s initial protest was stamped as received by the Department on

2 September 29, 2022. The Department issued an acknowledgment of protest outside the 21-day

3 boundary of promptness articulated by the Legislature, on April 29, 2023, then submitted its request

4 for hearing on August 4, 2023. A simple calculation indicates that the request for hearing was filed

5 97 days after the actual acknowledgement of protest, but allowing for (subtracting) 21-days for

6 promptness, 288 days from what should have been a prompt acknowledgement, and a total of 309

7 days from the initial protest. By filing the request for hearing after the expiration of the 180-day

8 deadline, the Department did not comply with the statutory deadline expressed under 7-1B-8 (B).

9 Therefore, the Hearing Officer finds that the Department failed to comply with deadline set forth in

10 Subsection B of Section 7-1B-8.

11 New Mexico law imposes time limits to expedite the adjudication of protests. The law

12 allows “[i]f the hearing officer finds that the taxation and revenue department failed to comply with

13 the deadlines set forth in Subsections A and B of this section, the hearing officer may order that no

14 further interest may accrue on the protested liability.” NMSA 1978, Section 7-1B-8 (E) (2019).

15 Here, the Department’s acknowledgment of the protest was not prompt, a violation of Section A.

16 Likewise, the Department’s filing of the request for hearing, was greater than 180 days from what

17 would be considered a prompt acknowledgement, so it also violated Section B. Therefore, the

18 Department failed to comply with the deadlines as set forth by the legislature, and the imposition of

19 a stay of accrual of interest is justified.

20 The date at which the halting or suspension of accrual of interest shall be effective, is,

21 according to the regulation, “the day after the date on which TRD should have, but did not act, or

22 from another date considering the unique circumstances at issue in the protest.” Regulation

23 22.600.3.18 (E).

In the Matter of the Protest of Jimmy Lopez, page 12 of 16.
1 Generally, there is a 21-day grace period from the receipt of a tax protest. See Section 7-

2 1B-8 (A). During this time, a protest may be evaluated by the Department for adherence to

3 Section 7-1-24 requirements. If there is no issue with the protest, the prompt acknowledgement

4 should be before the expiration of the 21-day grace period. The request for hearing should be

5 submitted to the Administrative Hearings Office within 180-days thereafter. Since there have

6 been no reasons articulated or provided in the record for additional delay, the Department should

7 have acted to request a hearing within 201 days after receipt of the Taxpayer’s protest. The

8 receipt of the protest was September 29, 2022. Adding 201 days to that date, the Department’s

9 request for hearing should have occurred on or before April 18, 2023. The date on which the stay

10 shall cease to accrue is the date “on which TRD should have, but did not act.” Regulation

11 22.600.3.18 (E). The accrual of interest shall be halted as of April 18, 2023, the date on which the

12 Department should have but did not act.

13 The Department, by virtue of its non-response to the Order Requesting Additional Briefing,

14 is deemed to consent to the relief granted herein under Sec. 7-1B-8 E and Regulation 22.600.3.18

15 (E) (8/25/2020).

16 Conclusion.

17 Mr. Lopez provided no evidence to support his misunderstanding that he was not required to

18 report or pay the gross receipts tax on income received from his work as a building inspector.

19 Taxpayer was engaged in business, as an independent contractor providing the service of building

20 inspections. A reduction of the statutory penalty for negligence is not justified on the Taxpayer’s

21 suggestion that he was not given competent advice is not proper in this case as no gross receipts tax

22 returns were filed. See Regulation 3.1.11.11 (D) NMAC. Likewise, interest is statutorily required,

23 and the interest which accured prior to the hearing is justified. However, because of delays in

In the Matter of the Protest of Jimmy Lopez, page 13 of 16.
1 bringing the matter to hearing on the part of the Department, the further accrual of interest on the

2 outstanding tax is halted as of April 18, 2023.

3 The protest is denied in part and granted in part.

4 CONCLUSIONS OF LAW

5 A. The Taxpayer filed a timely written protest to the Notice of Assessment of Tax and

6 Demand for Payment issued under Letter ID number L1465495664, and jurisdiction lies over the

7 parties and the subject matter of this protest. See NMSA 1978, Section 7-1-24 (D) (2019); see also

8 NMSA 1978, Section 7-9-1, et seq. (“Gross Receipts and Compensating Tax Act”).

9 B. The hearing was timely set and held within 90-days of the Department’s request for

10 hearing under NMSA 1978, Section 7-1B-8 (F) (2019). Parties did not object that the merits

11 hearing satisfied the 90-day hearing requirement of Section 7-1B-8 (F). See also Regulation §

12 22.600.3.8 (J) NMAC (8/25/20).

13 C. Any assessment of tax made by the Department is presumed to be correct.

14 Therefore, it is the taxpayer’s burden to come forward with evidence and legal argument to establish

15 that the Department’s assessment should be abated, in full or in part. See NMSA 1978, Section 7-1-

16 17 (C) (2007).

17 D. “Tax” is defined to include not only the tax program’s principal, but also interest and

18 penalty. See NMSA 1978, Section 7-1-3 (Z) (2019). Assessments of penalties and interest therefore

19 also receive the benefit of a presumption of correctness. See Regulation § 3.1.6.13 NMAC

20 (1/15/01).

21 E. By presenting no evidence in support of Taxpayer’s claims for abatement, Taxpayer

22 in this case failed to meet his burden of production and the burden of proof. See NMSA 1978,

In the Matter of the Protest of Jimmy Lopez, page 14 of 16.
1 Section 7-1-16 (2019); see also Regulation § 22.600.3.22 NMAC (8/25/20); see also NMSA 1978,

2 Section 7-1B-8 (H) (2019); see also Regulation § 22.600.3.12 NMAC (8/25/20); see also Gemini

3 Las Colinas, LLC v. New Mexico Taxation & Revenue Department, 2023-NMCA-039, ¶ 16.

4 F. The Department failed to issue a prompt acknowledgement of protest and a timely

5 request for hearing on the protest without good cause shown. See NMSA 1978, Section 7-1B-8

6 (A) and (B); see also Regulation 22.600.3.18 (E). The accrual of additional interest is halted as

7 of the date on which the Department should have but did not act. See Regulation 22.600.3.18 (E).

8 For the foregoing reasons, the Taxpayer’s protest IS DENIED IN PART AND

9 GRANTED IN PART.

10 DATED: January 12, 2024.

11
12 Ignacio V. Gallegos
13 Hearing Officer
14 Administrative Hearings Office
15 Post Office Box 6400
16 Santa Fe, NM 87502

17 NOTICE OF RIGHT TO APPEAL

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

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

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

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

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

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

In the Matter of the Protest of Jimmy Lopez, page 15 of 16.
1 Hearings Office contemporaneous with the Court of Appeals filing so that the Administrative

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

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

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

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

6 CERTIFICATE OF SERVICE

7 On January 12, 2024, a copy of the foregoing Decision and Order was submitted to the

8 parties listed below in the following manner:

9 First Class Mail E-Mail
10
11
12 INTENTIONALLY BLANK

In the Matter of the Protest of Jimmy Lopez, page 16 of 16.