AI Generated Opinion Summaries

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 case concerns a taxpayer, Dean Baldwin Painting, Inc., which operated a facility in New Mexico and provided airplane painting services to out-of-state customers. The customers' flight crews transported the airplanes to and from the facility under Federal Aviation Administration (FAA) ferry permits. The airplanes were inspected and recertified for use outside New Mexico. The New Mexico Taxation and Revenue Department assessed gross receipts taxes on the services, which the taxpayer protested, arguing that the services qualified for a deduction under NMSA 1978, § 7-9-57(A) (paras 2-5).

Procedural History

• Taxation and Revenue Department, Hearing Officer, Date Unspecified: The hearing officer denied the taxpayer's protest, concluding that the customers made initial use of and took delivery of the airplanes in New Mexico, except for an amount not at issue in the appeal (para 5).

Parties' Submissions

• Appellant (Dean Baldwin Painting, Inc.): Argued that it was entitled to deductions under § 7-9-57(A) because the services were provided to out-of-state customers, and delivery and initial use of the airplanes occurred outside New Mexico. The taxpayer contended that delivery was completed only after inspection and acceptance at the customers' out-of-state locations (paras 5, 11, 15).
• Appellee (New Mexico Taxation and Revenue Department): Asserted that the customers made initial use of and took delivery of the airplanes in New Mexico, as the airplanes were physically handed over to the customers' crews at the taxpayer's New Mexico facility (paras 5, 11).

Legal Issues

• Whether the customers made "initial use" of the airplanes in New Mexico, disqualifying the taxpayer from claiming a deduction under § 7-9-57(A) (para 7).
• Whether the customers took "delivery" of the airplanes in New Mexico, disqualifying the taxpayer from claiming a deduction under § 7-9-57(A) (para 11).

Disposition

• The Court of Appeals reversed the hearing officer's conclusion that the customers made initial use of the airplanes in New Mexico (para 27).
• The Court of Appeals affirmed the hearing officer's conclusion that the customers took delivery of the airplanes in New Mexico, thereby affirming the denial of the taxpayer's protest (para 27).

Reasons

Per Wechsler J. (Sutin CJ. and Alarid J. concurring):

• Initial Use: The court held that "initial use" under § 7-9-57(A) refers to the first employment of the product for its intended purpose. The airplanes' transport by maintenance crews under FAA ferry permits did not constitute initial use, as the airplanes were not yet recertified for their intended purposes (paras 9-10). The hearing officer's conclusion on this point was incorrect (para 10).

• Delivery: The court found substantial evidence supporting the hearing officer's conclusion that delivery occurred in New Mexico. The taxpayer failed to meet its burden of proof to show that delivery occurred outside New Mexico. The only clear documentation, including service agreements, indicated that delivery took place at the taxpayer's New Mexico facility. The taxpayer's CEO's testimony was deemed inconsistent and not credible, and the taxpayer failed to produce sufficient records to support its claim (paras 12-22).

• Distinction from TPL Case: The court distinguished this case from TPL, Inc. v. N.M. Taxation & Revenue Dep't, 2003-NMSC-007, where the taxpayer met its burden of proof. Here, the taxpayer's customers were present in New Mexico to take physical possession of the airplanes, which could be construed as acceptance of delivery (paras 24-25).

• Policy Considerations: While the court acknowledged the policy intent of § 7-9-57(A) to avoid competitive disadvantages for New Mexico businesses, it emphasized that the taxpayer must meet its burden of proof to claim a deduction (para 26).