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

• Ana Koeblitz (Taxpayer) operated New Mexico Depo as a sole proprietorship from 2009 until 2012, at which point she converted the business into a limited liability company (LLC). Despite this conversion, the Taxpayer did not update the business's registration with the New Mexico Taxation and Revenue Department (the Department), and the business continued to operate under the original Combined Reporting System (CRS) number assigned to the sole proprietorship. The Department later issued a tax assessment against the Taxpayer for the 2012 tax year, treating her as the sole proprietor responsible for the gross receipts tax liability, despite the business operating as an LLC during the period in question (paras 2-6).

Procedural History

• Administrative Hearings Office: The hearing officer upheld the Department's assessment of gross receipts tax liability against the Taxpayer, treating her as the sole proprietor of New Mexico Depo for the 2012 tax year (para 7).

Parties' Submissions

• Taxpayer: Argued that the Department lacked legal authority to assign tax liability generated by an LLC to a sole proprietorship and contended that she should not be held personally liable for taxes that should have been assessed against the LLC (para 6).
• Department: Implied through their actions and the hearing officer's decision that the Taxpayer was liable for the gross receipts tax as the business was registered under her CRS number as a sole proprietorship at the time the liability was incurred (paras 6-7).

Legal Issues

• Whether the Department had the authority to impose tax liability on an individual for taxes that should have been assessed against an LLC (para 9).
• Whether the Taxpayer, having converted her business from a sole proprietorship to an LLC but failing to update the registration, could be held personally liable for the LLC's gross receipts tax (para 12).

Disposition

• The Court of Appeals of the State of New Mexico reversed the hearing officer’s decision, holding that the Department lacked the authority to impose tax liability against the Taxpayer for the period during which the business operated as an LLC (para 17).

Reasons

• Per B. Zamora, J. (with Jennifer L. Attrep, J., and Zachary A. Ives, J., concurring): The court found that the Gross Receipts and Compensating Tax Act (GRCTA) imposes tax liability only on the entity actually engaging in business in New Mexico. Since the Taxpayer was not operating as a sole proprietorship during the taxable period in question but rather as an LLC, the Department erred in holding her personally liable. The court emphasized that the Department's authority to tax is limited to persons or entities engaging in business during the taxable period, and the failure to update the business's registration did not justify imposing tax liability on the Taxpayer. The decision was based on statutory interpretation of the GRCTA, the definition of "person" under the Act, and the lack of substantial evidence supporting the hearing officer's decision that the Taxpayer was the "person" engaging in business (paras 8-16).