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 Plaintiff, a temporary staffing agency, provided employees to clients for temporary assignments. The clients supervised the employees' day-to-day activities, but the Plaintiff paid the employees' wages, benefits, and taxes, and then billed the clients for reimbursement, including an additional fee for overhead and profit. The Plaintiff argued that these reimbursements were not taxable under New Mexico's gross receipts tax because they were received in a "disclosed agency capacity" (paras 1, 3-5).
Procedural History
- District Court of Santa Fe County: The court upheld the New Mexico Taxation and Revenue Department's assessment of gross receipts tax on the Plaintiff's reimbursements, finding that the Plaintiff failed to prove it acted in a disclosed agency capacity and that the receipts were taxable (paras 1, 7).
Parties' Submissions
- Plaintiff-Appellant: Argued that the reimbursements for payroll expenses were not taxable because they were received in a disclosed agency capacity under NMSA 1978, § 7-9-3(F)(2)(f). The Plaintiff also claimed it acted as a "joint employer" with its clients under federal labor law, which exempted the receipts from taxation (paras 2, 8-10, 16-20).
- Defendants-Appellees: Contended that the Plaintiff was not acting in a disclosed agency capacity and that the receipts were taxable. They argued that the Plaintiff was not a "joint employer" and that the Plaintiff's business did not qualify as an "employee leasing business" under the relevant regulations (paras 16, 21-24, 26).
Legal Issues
- Was the Plaintiff acting in a disclosed agency capacity under NMSA 1978, § 7-9-3(F)(2)(f), such that its reimbursements for payroll expenses were exempt from gross receipts tax?
- Did the Plaintiff qualify as a "joint employer" under federal labor law or as an "employee leasing business" under New Mexico regulations, thereby exempting its receipts from taxation?
Disposition
- The Court of Appeals of New Mexico affirmed the district court's decision, holding that the Plaintiff's receipts were taxable (para 42).
Reasons
Per Sutin J. (Bosson CJ. and Wechsler J. concurring):
The Court found that the Plaintiff failed to meet its burden of proving it acted in a disclosed agency capacity. The Plaintiff did not establish that it had the authority to bind its clients to payroll obligations or that its clients were disclosed as principals to the employees. Additionally, the Plaintiff did not comply with the bookkeeping and billing requirements necessary to qualify for the disclosed agency exemption under Regulation 3.2.1.19(C) (paras 26-27, 36-39).
The Court rejected the Plaintiff's argument that it was a "joint employer" under federal labor law, noting that the Plaintiff did not provide sufficient evidence to establish this status. The Court also held that the Plaintiff was not an "employee leasing business" as defined under New Mexico law, which further precluded the Plaintiff from claiming an exemption under Regulation 3.2.1.19(E) (paras 16-20, 36-40).
The Court distinguished the case from prior decisions, such as Carlsberg Mgmt. Co. v. Taxation & Revenue Dep't and Brim Healthcare, Inc. v. Taxation & Revenue Dep't, finding that the Plaintiff's business model and contractual arrangements did not support an agency relationship or joint employer status (paras 28-35).
The Court concluded that the Plaintiff's receipts were taxable as gross receipts under New Mexico law (para 41).