This summary was computer-generated without any editorial revision. It is not official, has not been checked for accuracy, and is NOT citable.
Facts
The Taxpayer, a certified public accountant, provided accounting services to two bankruptcy debtors under a court-approved arrangement. He received payments totaling $24,832.81 for his services, which were subject to approval by the bankruptcy court. The New Mexico Department of Taxation and Revenue conducted an audit and assessed gross receipts tax, interest, and penalties on the payments received by the Taxpayer, as he had not reported or paid taxes on these amounts (paras 2-3).
Procedural History
- New Mexico Department of Taxation and Revenue, Hearing Officer: The hearing officer upheld the Department's assessment of gross receipts tax, interest, and penalties against the Taxpayer and denied his protests.
Parties' Submissions
- Appellant (Taxpayer): Argued that the audit was retaliatory and protested the timeliness of the audit notice. He also contended that the payments received were interim and conditional, subject to bankruptcy court approval, and thus not taxable until final approval. He further claimed that the Department lacked jurisdiction over the matter, as it involved bankruptcy court prerogatives (paras 6-7, 12-13, 17).
- Respondent (New Mexico Department of Taxation and Revenue): Asserted that the Taxpayer failed to timely protest the audit and that the gross receipts tax was due upon receipt of payments, regardless of bankruptcy court approval. The Department also argued that it had jurisdiction to assess the tax (paras 6-7, 11, 17).
Legal Issues
- Was the Taxpayer's protest of the audit timely filed?
- Was the Taxpayer liable for gross receipts tax on payments received for services rendered, even though the payments were subject to bankruptcy court approval?
- Did the Department have jurisdiction to assess gross receipts tax on payments related to bankruptcy proceedings?
Disposition
- The Court of Appeals affirmed the decision of the hearing officer, holding that the Taxpayer's protest of the audit was untimely and that he was liable for gross receipts tax on payments received, even if subject to bankruptcy court approval (paras 18-19).
Reasons
Per Apodaca J. (Donnelly and Flores JJ. concurring):
Timeliness of Audit Protest: The Court found that the Taxpayer failed to file a timely protest of the audit within the 30-day statutory period under NMSA 1978, Section 7-1-24(B). The evidence supported the hearing officer's finding that the protest was untimely, and the Taxpayer's January 22, 1991, letter did not meet the statutory requirements for a valid protest (paras 6-10).
Liability for Gross Receipts Tax: The Court held that the Taxpayer was liable for gross receipts tax upon receipt of payments for services rendered, as the payments were not segregated or held in trust and were treated as gross receipts. The Court rejected the Taxpayer's argument that the payments were conditional and not taxable until final approval by the bankruptcy court. The hearing officer's interpretation of "received" under NMSA 1978, Section 7-9-3(F)(3), as having its ordinary meaning, was upheld (paras 11-15).
Jurisdiction: The Court dismissed the Taxpayer's argument that the Department lacked jurisdiction, noting that the Taxpayer failed to provide authority or evidence to support this claim. The Court also observed that the Taxpayer could have sought clarification or relief from the bankruptcy court if he believed the payments were exempt from taxation (para 17).
The Court concluded that the hearing officer's findings were supported by substantial evidence and affirmed the decision (paras 18-19).