During COVID I paid my New Mexico gross receipts tax on time but filed the returns late — can the state still charge me a late-filing penalty?

Plain-English summary

Trane US Inc. is a large corporation that does business across the country, including New Mexico. It used an outside firm, Global Tax Management (GTM), to file and pay its New Mexico gross receipts tax (GRT). For the June, July, August, and September 2020 reporting periods, GTM couldn't file the CRS-1 returns on time: the login and password for the Department's Taxpayer Access Point (TAP) belonged to a Trane employee who had left, and during the COVID-19 pandemic — with staff working remotely and mail rerouted through several states — it took months to get access restored. All four returns were finally e-filed on November 6, 2020, after their due dates.

Importantly, Trane paid the tax on time. Only the returns were late. Because a return did not accompany each payment, the Department held the money in a suspense account and assessed late-filing penalties of $12,658.28 (June), $7,917.87 (July), $9,371.42 (August), and $2,495.42 (September). Trane protested, arguing the pandemic made the late filing non-negligent. Hearing Officer Ignacio V. Gallegos denied the protest.

Three points decided it:

• COVID relief covered payment, not filing. New Mexico's House Bill 6 (2020 special session) waived penalties under Section 7-1-69 for failure to pay gross receipts, local option, and compensating taxes due March 25–July 25, 2020. Its plain language addresses late payment. Trane paid on time and filed late, so the relief didn't reach its penalties.
• Reliance on an accountant doesn't excuse a late return. Regulation 3.1.11.11 lists situations that show non-negligence, but it expressly says a late filing "is not excused by the taxpayer's reliance on an agent." There was also no evidence of the illness/injury exception.
• The penalty is mandatory. Failure to file a required return is negligence "by inaction where action is required" (Regulation 3.1.11.10), and Section 7-1-69 says a penalty "shall" be added — mandatory whenever conduct meets the definition of negligence (Marbob Energy). Trane also offered no paper returns or proof of mailing to back its claim that it had filed on paper, so it never overcame the assessment's presumption of correctness.

What this means for you

Corporate tax departments and anyone using an outside preparer

Filing and paying are two separate duties in New Mexico, each with its own penalty. Paying on time does not protect you if the return is late — and handing the job to an accountant does not shift the blame: the regulations flatly state that reliance on an agent does not excuse a late return. Build in redundancy so one person's departure or one broken login can't stop a filing.

Businesses that file through a single login

Trane's problem started when the only TAP credential belonged to an employee who left. The decision points out that the Department now lets multiple people be delegated to a TAP account with different permission levels, and faults Trane for having no continuity or succession plan. Set up backup access and a succession plan before you need it.

Anyone counting on a disaster or emergency penalty waiver

Read the exact scope of the relief. The 2020 COVID measure was written for late payment, so a taxpayer who paid but filed late got nothing from it. Emergency relief provisions are construed by their plain text; don't assume a broad "pandemic hardship" waiver exists.

Tax professionals

A clean Section 7-1-69 late-filing case. The filing obligation is independent (Section 7-1-13; Regulation 3.2.2.14 requires a CRS-1 whether or not tax is due), HB6 relief is limited to late-payment penalties, and Regulation 3.1.11.11(D)'s agent-reliance carve-out defeats the classic "our preparer handled it" argument. Penalty is mandatory under the "shall" of Section 7-1-69 (Marbob Energy, 2009-NMSC-013), and penalties share the assessment's presumption of correctness (Sections 7-1-17(C), 7-1-3(Z)).

Common questions

Q: I paid my gross receipts tax on time but filed the return late. Can I still be penalized?
A: Yes. Filing and paying are separate obligations. New Mexico imposes a late-filing penalty under Section 7-1-69 even when the tax itself was paid on time, because the return is required on or before the payment due date.

Q: Didn't COVID relief wipe out these penalties?
A: Not here. New Mexico's 2020 relief (House Bill 6) waived penalties for failure to pay certain taxes due March 25 through July 25, 2020. It did not waive late-filing penalties, and Trane's problem was late filing, not late payment.

Q: My accountant missed the filing — isn't that their fault, not mine?
A: For penalty purposes it's still the taxpayer's responsibility. The regulation defining non-negligence says a late return "is not excused by the taxpayer's reliance on an agent," so using an outside preparer does not get you out of a late-filing penalty.

Q: We couldn't log in because the employee with the password left — doesn't that excuse it?
A: The Hearing Officer treated that as a lack of ordinary business care: there was no backup access and no succession plan, and the Department allows multiple delegated users on a TAP account. Losing access through your own single point of failure is negligence, not reasonable cause.

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 show how strictly the separate filing duty and its penalty are enforced.

Citations and references

Statutes and rules:

• NMSA 1978, § 7-1-69 (2007) — mandatory civil penalty for negligent failure to timely file a return
• NMSA 1978, § 7-1-13 — return must be filed on or before the date payment is due
• NMSA 1978, § 7-9-11 (1969) — gross receipts tax due the 25th of the month following the taxable event
• NMSA 1978, § 7-1-17(C) (2007) — assessment is presumed correct
• NMSA 1978, § 7-1-3(Z) (2019) — "tax" includes penalty and interest
• Regulation 3.2.2.14 NMAC — CRS-1 return required whether or not tax is due
• Regulation 3.1.11.10, 3.1.11.11 NMAC — definitions of negligence and nonnegligence (including the agent-reliance carve-out)
• House Bill 6 (2020 special session) — COVID-19 relief from late-payment penalties (March 25–July 25, 2020)

Cases:

• Marbob Energy Corp. v. N.M. Oil Conservation Comm'n, 2009-NMSC-013, 146 N.M. 24 ("shall" makes a statutory provision mandatory)
• N.M. Taxation & Revenue Dep't v. Casias Trucking, 2014-NMCA-099 (presumption of correctness; taxpayer's burden)
• MPC Ltd. v. N.M. Taxation & Revenue Dep't, 2003-NMCA-021, 133 N.M. 217 (burden shifts only after the taxpayer rebuts the presumption)
• Gemini Las Colinas, LLC v. N.M. Taxation & Revenue Dep't, 2023-NMCA-039, 531 P.3d 622 (threshold of "some countervailing evidence")
• Kilmer v. Goodwin, 2004-NMCA-122 (statutory interpretation; look primarily to the text)

Source

• Listing: New Mexico Decisions & Orders
• Decision post: Trane US Inc
• Decision PDF: D&O 25-02

Original ruling text

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

4 TRANE US INC.

5 v. Case Number 24.01-001A, D & O No. 25-02

6 NEW MEXICO TAXATION AND REVENUE DEPARTMENT

7 DECISION AND ORDER

8 On June 11, 2024, Hearing Officer Ignacio V. Gallegos, Esq., conducted an

9 administrative hearing on the merits in the matter of the tax protest of Trane US Inc. (Taxpayer)

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

11 hearing, David Hillegas, a CPA licensed in Pennsylvania, (Global Tax Management) appeared at

12 the hearing, accompanied by Brian Kelly, Senior Analyst (Global Tax Management), as witness.

13 Staff Attorney Richard Pener appeared, representing the opposing party in the protest, the

14 Taxation and Revenue Department (Department). Department protest auditor Nicholas Pacheco

15 appeared as a witness for the Department. Both Taxpayer and Department exhibits were

16 presented and admitted or withdrawn as detailed in the Exhibit Log.

17 Based on the evidence in the record, and after making findings of fact, the hearing officer

18 finds that Taxpayer has failed to overcome the presumption of correctness that attached to the

19 Department’s assessment. In this protest of penalties for late filing, Taxpayer contended that during

20 the COVID-19 pandemic, it filed paper returns for several months but did not retain copies of the

21 returns. Although the Department received payment for the underlying tax, the Department assessed

22 penalties for late filing. Without evidence in support of Taxpayer’s contention, Taxpayer’s protest is

23 therefore DENIED.

24 IT IS DECIDED AND ORDERED AS FOLLOWS:

In the Matter of the Protest of Trane US Inc., page 1 of 15.
1 FINDINGS OF FACT

2 Procedural findings

3 1. On November 20, 2020, the Department issued four Notice of Assessment of

4 Taxes and Demand for Payment letters to Taxpayer for the gross receipts and compensating tax

5 reporting periods of June, July, August, and September 2020. The assessments were for late-

6 filing penalties in the amounts of $12,658.28 (June), $7,917.87 (July), $9,371.42 (August), and

7 $2,495.42 (September). [Exhibit A, Letter ID# L0752123568 (June 2020); Exhibit B,

8 L1825865392 (July 2020); Exhibit C, L1880129200 (August 2020); Exhibit D, L0912178864

9 (September 2020); Administrative File].

10 2. On January 13, 2021, Taxpayer submitted a Tax Information Authorization,

11 allowing Brian Kelley and James Ford access to taxpayer information. [Administrative File].

12 3. Thereafter, Taxpayer submitted four ACD-301094 Formal Protest forms – to the

13 Department, one for each assessed month. Taxpayer alleged that payments were timely and

14 paper returns were filed, but the ongoing pandemic disrupted normal processes, leading to online

15 filing after regaining account access. The protest forms are dated incorrectly as 2/9/20 and were

16 submitted by email to the Department’s Protest Office on February 9, 2021. [Administrative

17 file].

18 4. On March 11, 2021, the Department issued a letter acknowledging a timely

19 protest of the four Assessment letters. [Administrative file; Letter ID# L1423225264].

20 5. On January 4, 2024, the Department filed a Request for Hearing asking that

21 Taxpayer’s protest be scheduled for a scheduling hearing, alleging the combined amount at

22 protest was $42,525.26. [Administrative file].

In the Matter of the Protest of Trane US Inc., page 2 of 15.
1 6. On January 4, 2024, the Department filed an Answer to Protest asserting that

2 Taxpayer timely paid gross receipts, but a penalty was imposed for Taxpayer’s failure to file

3 returns for the four corresponding monthly gross receipts tax reporting periods. [Administrative

4 file].

5 7. On January 9, 2024, the Administrative Hearings Office sent a Notice of

6 Telephonic Scheduling Hearing, giving the parties notice that a scheduling hearing would take

7 place by telephone on February 2, 2024. [Administrative file].

8 8. On January 30, 2024, the Department, through its Attorney Peter Breen, filed a

9 Stipulated Motion for Continuance of Scheduling Conference. [Administrative file].

10 9. On February 1, 2024, the Administrative Hearings Office sent an Order Granting

11 Continuance and Amended Notice of Telephonic Scheduling Hearing, giving the parties notice

12 that a scheduling hearing would take place by telephone on February 12, 2024. [Administrative

13 file].

14 10. On February 12, 2024, the undersigned Hearing Officer conducted a telephonic

15 scheduling hearing. Taxpayer’s representative David Hillegass, CPA, and accountant Brian

16 Kelley appeared at the scheduling hearing by telephone. The Department was represented by

17 Staff Attorney Peter Breen. The parties present did not object that the hearing satisfied the 90-

18 day hearing requirement of Section 7-1B-8 (F) (2019). [Administrative file; Hearing Record of

19 February 12, 2024].

20 11. On February 12, 2024, the Administrative Hearings Office sent a Notice of

21 Second Telephonic Scheduling Hearing, giving the parties notice that a second scheduling

22 hearing would take place by telephone on April 10, 2024. [Administrative file].

In the Matter of the Protest of Trane US Inc., page 3 of 15.
1 12. On April 10, 2024, the undersigned Hearing Officer conducted a second

2 telephonic scheduling hearing. Taxpayer’s representative David Hillegass, CPA, and accountant

3 Brian Kelley appeared at the scheduling hearing by telephone. The Department was represented

4 by Staff Attorney Peter Breen. [Administrative file; Hearing Record of April 10, 2024].

5 13. On May 3, 2024, the Administrative Hearings Office issued a Scheduling Order

6 and Notice of Videoconference Administrative Hearing, setting various deadlines and providing

7 notice of a merits hearing to take place June 11, 2024. [Administrative file].

8 14. On June 4, 2024, the Department submitted a Witness and Exhibit list.

9 [Administrative file].

10 15. The undersigned Hearing Officer conducted a merits hearing on June 11, 2024 by

11 videoconference. Taxpayer’s authorized representative David Hillegass, CPA, appeared at the

12 merits hearing accompanied by Brian Kelley, accountant, as witness. The Department was

13 represented by Staff Attorney Richard Pener, accompanied by protest auditor Nicholas Pacheco.

14 The Hearing Officer preserved audio recordings of the hearing in two parts. [Administrative file;

15 Hearing Records of June 11, 2024].

16 Substantive findings

17 16. Taxpayer is a corporation that engages in business in New Mexico and throughout

18 the United States. [Administrative file; Examination of B. Kelley].

19 17. Brian Kelley is an accountant and manager at Global Tax Management (GTM).

20 GTM is a third-party accountancy firm which submits tax returns on behalf of its clients.

21 Taxpayer was one of their clients during the timeframes at issue. [Administrative file;

22 Examination of B. Kelley].

In the Matter of the Protest of Trane US Inc., page 4 of 15.
1 18. In an average month, Mr. Kelly prepares and files 500-700 sales and use tax

2 returns for various clients in various states. [Administrative file; Examination of B. Kelley].

3 19. When preparing to file a June 2020 CRS-1 return for Taxpayer in July of 2020,

4 Mr. Kelley discovered that the username and password to login to Taxpayer Access Point (TAP)

5 was not functional. He contacted Taxpayer, who informed him that the employee associated with

6 the login information was no longer working for Taxpayer. Mr. Kelley worked with a different

7 Taxpayer employee, “Donna,” and understood that sometime thereafter, the Taxpayer employee

8 contacted the Department by telephone. As a result, he believed that the Department issued a

9 letter allowing Taxpayer’s tax login information to be reset. [Administrative file; Examination of

10 B. Kelley].

11 20. Department records show that the Department sent Taxpayer password reset

12 instructions and links to the email address on file for Taxpayer on August 25, 2020, on

13 September 21, 2020, on September 23, 2020, on September 25, 2020, again on September 25,

14 2020, and on October 26, 2020. [Administrative file; Examination of N. Pacheco; Exhibit F].

15 21. Mr. Kelley understood that Taxpayer received the letter allowing a reset of the

16 login information from the Department in October of 2020. Mr. Kelley understood that as a

17 result of receiving the letter, Taxpayer was able to reset the login information, and thereafter

18 provided access to Mr. Kelley for submission of returns. Mr. Kelley had no access to the letter,

19 and a letter was not provided in evidence. [Administrative file; Examination of B. Kelley].

20 22. Mr. Kelley is familiar with mail processes Taxpayer employs. The mail is

21 typically directed to an office in Wisconsin. From Wisconsin, all mail was redirected to an office

22 in North Carolina. From North Carolina, the mail was directed to another office in New Jersey.

23 Taxpayer’s employee with whom Mr. Kelley worked, Donna, was located in Piscataway, New

In the Matter of the Protest of Trane US Inc., page 5 of 15.
1 Jersey. During this time, due to the COVID-19 public health emergency, public health authorities

2 across the United States and around the world had issued social distancing measures intended to

3 prevent the spread of the COVID-19 virus, limit the burden on healthcare providers, and to save

4 lives. Mr. Kelley understood that among the restrictions were measures which affected the ability

5 for Donna to access Taxpayer’s office building in New Jersey. Mr. Kelley and Donna were both

6 working remotely (from their respective homes) during this time. [Administrative file;

7 Examination of B. Kelley; Administrative notice].

8 23. Taxpayers returns for June, July, August, and September of 2020 were all

9 electronically submitted to the Department on November 6, 2020. [Administrative file;

10 Examination of B. Kelley; Examination of N. Pacheco; Exhibit E].

11 24. Nicholas Pacheco is a protest auditor for the New Mexico Taxation and Revenue

12 Department. [Administrative file; Examination of N. Pacheco].

13 25. Taxpayer’s CRS-1 return for June of 2020 would have been due by July 25, 2020.

14 Taxpayer’s CRS-1 return for July of 2020 would have been due by August 25, 2020. Taxpayer’s

15 CRS-1 return for August of 2020 would have been due by September 25, 2020. Taxpayer’s CRS-

16 1 return for September 2020 would have been due October 25, 2020. Each of the four returns for

17 the timeframes at issue were submitted to the Department after their due dates, on November 6,

18 2020. [Administrative file; Examination of N. Pacheco; Exhibit E].

19 26. Taxpayer timely paid gross receipts tax during the timeframes at issue.

20 [Administrative file; Examination of N. Pacheco].

21 27. The GenTax system is the Department’s record-keeping system. When a

22 Department employee receives a call, the employee is required to enter a note into the GenTax

23 system. The system did not show any indication of phone calls from Taxpayer attempting to reset

In the Matter of the Protest of Trane US Inc., page 6 of 15.
1 the login information. It is unknown whether Department employees always follow their training

2 and enter a note for every call. [Administrative file; Examination of N. Pacheco].

3 28. After examination of the GenTax system, there was no indication that Taxpayer

4 had filed paper returns during the timeframes at issue. [Administrative file; Examination of N.

5 Pacheco].

6 29. No paper returns were presented as evidence of the claim that the returns were

7 filed initially using paper forms, nor was proof of mailing offered. [Administrative file;

8 Examination of N. Pacheco].

9 DISCUSSION

10 Taxpayer is a large corporation that does business across the United States and in New

11 Mexico. Taxpayer argued that for reasons outside of its control, due to the Coronavirus

12 pandemic, it was nonnegligent in the late filing of its CRS-1 returns for the months of June, July,

13 August, and September of 2020. For reasons detailed below, Taxpayer’s evidence failed to

14 overcome the presumption of correctness which attached to the assessments.

15 Presumption of correctness

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

17 presumed correct. Accordingly, it is a taxpayer’s burden to present some countervailing evidence

18 or legal argument to show that they are entitled to an abatement, in full or in part, of the

19 assessment issued in the protest. See N.M. Taxation & Revenue Dep't v. Casias Trucking, 2014-

20 NMCA-099, ¶8. When a taxpayer presents sufficient evidence to rebut the presumption, the

21 burden shifts to the Department to show that the assessment is correct. See MPC Ltd. v. N.M.

22 Taxation & Revenue Dep't, 2003-NMCA-21, ¶13, 133 N.M. 217.

In the Matter of the Protest of Trane US Inc., page 7 of 15.
1 Taxpayer’s burden established under the presumption of correctness is a burden of

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

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

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

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

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

7 Returns reporting Gross Receipts and Compensating Tax, and penalties for late filing.

8 The assessment in this protest arises from an application of the penalty provisions of the Tax

9 Administration Act. The assessment letters issued to Taxpayer imposed only penalties for late filing

10 of returns, under Section 7-1-69 (2008), since the underlying tax had already been timely paid.

11 Under the Gross Receipts and Compensating Tax Act, Taxpayers are required to pay taxes

12 imposed thereunder “on or before the twenty-fifth day of the month following the month in which

13 the taxable event occurs.” NMSA 1978, Section 7-9-11 (1969). In addition, “[e]very taxpayer shall,

14 on or before the date on which payment of any tax is due, complete and file a tax return in a form

15 prescribed…” NMSA 1978, Section 7-1-13 (B) (2021).1 Under departmental regulations,

16 “Taxpayers who are registered for gross receipts, governmental gross receipts, compensating or

17 withheld income tax purposes must file a CRS-1 Combined Report Form for each reporting period

18 whether or not any tax is due.” Regulation 3.2.2.14 NMAC (4/30/2001).

19 The Department issued its assessments of penalties upon receipt of the late filed CRS-1

20 returns for the months of June, July, August, and September of 2020. Department records showed

21 no electronic nor paper returns had been filed earlier for the tax filing periods at issue. Taxpayer did

1
NMSA 1978, Section 7-1-13 was amended in 2021, but the amendment did not affect this quoted language, which
was the law at the time, under the 2013 enactment.

In the Matter of the Protest of Trane US Inc., page 8 of 15.
1 submit timely payments for the periods at issue, however, because no returns had accompanied the

2 payments, the payments were held in a suspense account.

3 Coronavirus relief bill.

4 Taxpayer argued that the relief for taxpayers due to the Coronavirus pandemic was

5 applicable here. House Bill 62, a bill offering taxpayers relief from some of the burdens attributed to

6 the Coronavirus pandemic, was passed at a special legislative session with bipartisan support in the

7 House (69 to 1) and Senate (42 to 0) of the New Mexico Legislature and signed into law by

8 Governor Michelle Lujan Grisham in June of 2020. Among other provisions not applicable here, the

9 bill provided for immediate relief from penalties imposed under Section 7-1-69 for “gross receipts

10 tax, local option gross receipts tax or compensating tax liabilities for failure to pay any of those

11 taxes that became due March 25, 2020 through July 25, 2020.” This section of law, though it covers

12 one of the four monthly tax periods at issue here (the month of June of 2020, which became due

13 July 25, 2020), has limitations to prevent its application to the assessments at issue.

14 We first look at the language of the law to determine if it is applicable to the facts and

15 circumstances at hand. The goal of statutory interpretation is to determine legislative intent, and in

16 doing so “[w]e look primarily to the language of the statute.” Kilmer v. Goodwin, 2004-NMCA-

17 122, ¶18 (internal citations omitted). If the statute is clear and unambiguous we need go no further.

18 Id. “The text of a statute or rule is the primary, essential source of its meaning.” NMSA 1978,

19 Section 12-2A-19. The plain language of HB6 provides relief for liabilities imposed for “failure to

20 pay” taxes due. This Taxpayer timely paid the tax, but did not timely file the returns.

21 New Mexico law requires that “[e]very taxpayer shall, on or before the date on which

22 payment of any tax is due, complete and file a tax return in a form prescribed and according to the

2
The full text of the bill can be found at the New Mexico Legislature website,
https://www.nmlegis.gov/Sessions/20%20Special/final/HB0006.pdf (last visited 01/23/25).

In the Matter of the Protest of Trane US Inc., page 9 of 15.
1 regulations issued by the secretary.” NMSA 1978, Section 7-1-13. The failure to file a return in a

2 timely manner is its own trigger for penalties. See NMSA 1978, Section 7-1-69 (“in the case of

3 failure due to negligence… to file by the date required a return…there shall be added to the amount

4 assessed a penalty”). Although HB6 provided relief for late payment penalties due to the pandemic,

5 it did not extend relief for failure to file returns on time. Since Taxpayer was penalized for late

6 filing—not late payment—the relief does not apply.

7 Taxpayer Access Point (TAP) login and password.

8 Taxpayer used GTM, a third-party accountancy firm, to report and pay Taxpayer’s New

9 Mexico gross receipts taxes. The accountant at GTM bearing these responsibilities reported to a

10 certain person within Taxpayer’s office in Pennsylvania. During the timeframes at issue, while in

11 the midst of the pandemic, Taxpayer’s login and password information that had been shared with

12 GTM did not allow access to the TAP website. The Department asserts that non-filing amounts

13 to negligence.

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

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

16 reasonable taxpayers would exercise under like circumstances; inaction by taxpayers where

17 action is required; inadvertence, indifference, thoughtlessness, carelessness, erroneous belief or

18 inattention.” Not filing gross receipts tax returns or paying the taxes on time is certainly

19 negligence by inaction (not timely filing) where action (timely filing) is required under this

20 definition.

21 Taxpayer’s reliance on a tax preparer, GTM, for timely filing and payment is cognizable as

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

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

In the Matter of the Protest of Trane US Inc., page 10 of 15.
1 allowing the Department to issue an abatement. The list provided in the regulation includes: “D. the

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

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

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

5 taxpayer's reliance on an agent.” Regulation 3.1.11.11 NMAC. The last clause of the regulation

6 explicitly denies “reliance on an agent” as an excuse for not timely filing a return.

7 Likewise, the nonnegligence regulation provides relief if “the taxpayer, disabled because of

8 injury or prolonged illness, demonstrates the inability to prepare a return and make payment and

9 was unable to procure the services of another person to prepare a return because of the injury or

10 illness.” See Regulation 3.1.11.11 (B). To the extent that Taxpayer’s arguments assert the

11 application of this provision, there is no evidence on record establishing that the absence of

12 Taxpayer’s employee was due to illness or injury. Similarly, there is no evidence that Taxpayer was

13 unable to obtain assistance in preparing the return due to such circumstances. Therefore, the

14 exception does not apply.

15 Here, Taxpayer was negligent by not timely filing, which inaction was predicated on not

16 having sufficient processes in place to allow access to the responsible person’s email by more than

17 one individual. In addition, the Department now allows delegation of multiple people to have access

18 to TAP accounts, with various levels of permission.3 There is no indication on record Taxpayer had

19 processes in place which would permit more than one individual login and password to perform

20 functions on its TAP account. There is no indication on record of any continuity or succession plan

21 in place whereby Taxpayer could assure continuity of business functions in the event of an

22 employee’s lengthy absence or departure.

3
See NM TRD website: https://www.tax.newmexico.gov/wp-content/uploads/2021/12/New-TAP-functions.pdf (last
accessed 01/29/25).

In the Matter of the Protest of Trane US Inc., page 11 of 15.
1 Under NMSA 1978, Section 7-1-69 (2007), when a taxpayer fails to pay taxes due to the

2 State because of negligence or disregard of rules and regulations, but without intent to evade or

3 defeat a tax, the Department must impose a civil negligence penalty on that taxpayer. “There

4 shall be added to the amount assessed a penalty” under the statute. Id. The use of the word

5 “shall” makes the imposition of penalty mandatory in all instances where a taxpayer’s actions or

6 inactions meets the legal definition of “negligence.” See Marbob Energy Corp. v. N.M. Oil

7 Conservation Comm'n, 2009-NMSC-013, ¶22, 146 N.M. 24 (use of the word “shall” in a statute

8 indicates provision is mandatory absent clear indication to the contrary). Provisions for relief

9 from the penalty for nonnegligence do not apply here.

10 Conclusion

11 Taxpayer did not overcome the presumption of correctness of the assessment by providing

12 evidence of injury or prolonged illness or reliance on an agent that might support a finding of

13 nonnegligence. The evidence provided by Taxpayer through its third party tax preparer, was

14 insufficient both for purposes of overcoming the presumption of correctness, and as substantive

15 proof that the taxpayer was entitled to relief from failure to file CRS-1 returns.

16 CONCLUSIONS OF LAW

17 A. Taxpayer filed a timely written protest to the four Notice of Assessment of Tax and

18 Demand for Payment letters issued under Letter ID numbers L0752123568 (June 2020),

19 L1825865392 (July 2020), L1880129200 (August 2020), L0912178864 (September 2020), and

20 jurisdiction lies over the parties and the subject matter of this protest. See NMSA 1978, Section 7-1-

21 24 (D) (2019); see also NMSA 1978, Section 7-9-1, et seq. (“Gross Receipts and Compensating

22 Tax Act”).

In the Matter of the Protest of Trane US Inc., page 12 of 15.
1 B. The hearing was timely set and held within 90-days of the Department’s request for

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

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

4 22.600.3.8 (J) NMAC (8/25/20).

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

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

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

8 17 (C) (2007).

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

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

11 also receive the benefit of a presumption of correctness. See Regulation 3.1.6.13 NMAC (1/15/01).

12 E. Taxpayer bears the burden of overcoming the presumption of correctness that

13 attached to the Department’s Assessment. Taxpayer provided no evidence that prolonged illness

14 or reliance on an agent afforded relief for not timely filing returns and was unable to overcome

15 the presumption of correctness. See NMSA 1978, Section 7-1-17 (C) (2007); see also Regulation

16 3.1.8.10 NMAC (08/30/2001); see also Regulation 3.2.2.14 NMAC (4/30/2001); see also Gemini

17 Las Colinas, LLC v. New Mexico Taxation & Revenue Department, 2023-NMCA-039, ¶ 16, 531

18 P.3d 622; see also Regulation 3.1.6.12 NMAC; see also MPC Ltd. v. N.M. Taxation & Revenue

19 Dep’t, 2003-NMCA-021, ¶13, 133 N.M. 217, 62 P.3d 308.

20 F. Taxpayer’s evidence and legal argument, weighed against the Department’s

21 evidence and legal argument was insufficient to find by a preponderance of evidence that

22 Taxpayer was entitled to an abatement of penalties for not timely filing returns. See NMSA 1978,

In the Matter of the Protest of Trane US Inc., page 13 of 15.
1 Section 7-1-69; NMSA 1978, Section 7-1-13; see also Gemini Las Colinas, LLC v. New Mexico

2 Taxation & Revenue Department, 2023-NMCA-039, ¶ 29, 531 P.3d 622.

3 For the foregoing reasons, Taxpayer’s protest IS DENIED.

4 DATED: February 10, 2025.

5
6 Ignacio V. Gallegos
7 Hearing Officer
8 Administrative Hearings Office
9 Post Office Box 6400
10 Santa Fe, NM 87502

11 NOTICE OF RIGHT TO APPEAL

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

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

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

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

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

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

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

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

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

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

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

In the Matter of the Protest of Trane US Inc., page 14 of 15.
1 CERTIFICATE OF SERVICE

2 On February 11, 2025, a copy of the foregoing Decision and Order was submitted to the

3 parties listed below in the following manner:

4 First Class Mail and E-Mail First Class Mail E-Mail
5
6
7 INTENTIONALLY BLANK

In the Matter of the Protest of Trane US Inc., page 15 of 15.