This summary was computer-generated without any editorial revision. It is not official, has not been checked for accuracy, and is NOT citable.
Facts
ITT Educational Services, Inc. (ITT), a nationwide technical-vocational school, operates a campus in Albuquerque, New Mexico, where it provides educational services, including teaching, lab work, grading, counseling, and tutoring. ITT also engages in curriculum development, financial aid services, and job placement services, some of which are performed outside New Mexico. The New Mexico Taxation and Revenue Department assessed over $800,000 in gross receipts tax, penalties, and interest on ITT's tuition receipts, asserting that all services provided in New Mexico, including those incidental to teaching, are subject to the gross receipts tax (paras 2-3).
Procedural History
- Taxation and Revenue Department, Decision and Order: The Department determined that ITT owed gross receipts tax on all services provided in New Mexico, including curriculum development, financial aid, and job placement services (para 3).
Parties' Submissions
- Appellant (ITT Educational Services, Inc.): ITT argued that its curriculum development, financial aid services, and job placement services are distinct from its teaching services and are performed outside New Mexico. Therefore, these services should not be subject to New Mexico's gross receipts tax. ITT also contended that the Department must allocate receipts between in-state and out-of-state services and that the Department's interpretation of the gross receipts tax statute was overly narrow and inconsistent with prior rulings (paras 1, 6-10, 14-16).
- Respondent (Taxation and Revenue Department): The Department maintained that ITT's curriculum development, financial aid services, and job placement services are incidental to or components of its primary service of teaching, which occurs in New Mexico. It argued that the gross receipts tax applies to all services provided in New Mexico and that ITT failed to overcome the statutory presumption that all receipts are taxable (paras 1, 6-8, 13).
Legal Issues
- Whether ITT's curriculum development, financial aid services, and job placement services performed outside New Mexico are subject to New Mexico's gross receipts tax.
- Whether the Department erred in determining that these activities are incidental to ITT's primary service of teaching in New Mexico.
- Whether the Department's interpretation of the gross receipts tax statute was consistent with statutory language and prior rulings.
Disposition
- The Court of Appeals of New Mexico affirmed the Department's decision, holding that ITT's curriculum development, financial aid services, and job placement services are incidental to its primary service of teaching in New Mexico and are subject to the gross receipts tax (para 18).
Reasons
Per Alarid J. (Apodaca and Wechsler JJ. concurring):
- The Court held that the gross receipts tax applies to services performed in New Mexico, and ITT's primary service is teaching, which occurs entirely within the state. The ancillary activities of curriculum development, financial aid, and job placement are incidental to this primary service and are not distinct services for tax purposes (paras 6-9, 13).
- The Court distinguished ITT's case from prior rulings, such as those involving legal services performed in multiple states or correspondence schools operating entirely out of state. Unlike those cases, ITT's teaching services are provided in New Mexico, and its students pay tuition for the education they receive in-state, not for preparatory activities performed elsewhere (paras 7-11).
- The Court rejected ITT's argument that the Department's interpretation of the gross receipts tax statute was inconsistent or overly narrow. It found that the Department's interpretation focused appropriately on the service for which students paid tuition—teaching—and that this interpretation was consistent with statutory language and prior rulings (paras 14-16).
- The Court upheld the assessment of penalties and interest, as ITT failed to demonstrate that no gross receipts tax was due (para 17).