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

• Taxpayers, owners of three separate RV storage facilities, rented out spaces for the storage of vehicles and boats on a month-to-month basis. These spaces were located in open-air dirt lots, enclosed by fences and accessible through a locked gate, with tenants having 24-hour access via an electronic key fob. The Department of New Mexico Taxation and Revenue conducted audits on these facilities for the period from 2011 to 2017 and concluded that the taxpayers had improperly deducted receipts from their rental activities, asserting that the spaces were licensed rather than leased, thereby not qualifying for a gross receipts tax deduction under NMSA 1978, Section 7-9-53(A) (1998) (paras 2-3).

Procedural History

• Administrative Hearings Office: The hearing officer upheld the Department's assessment of gross receipts tax on the taxpayers' receipts from the rental of large-vehicle storage spaces, concluding that the agreements between the taxpayers and their tenants were licenses rather than leases (para 1).

Parties' Submissions

• Taxpayers: Argued that their agreements with tenants constituted leases, entitling them to a deduction under Section 7-9-53(A), and contended that the hearing officer erred in concluding the arrangements were not leases based on the physical attributes of the spaces (para 6).
• Department: Initially argued that the absence of an enclosed structure prevented the taxpayers from providing exclusive possession, thus the agreements were licenses not leases. However, in the appeal, the Department did not advance arguments supporting the relevance of the lack of an enclosure (paras 3, 10).

Legal Issues

• Whether the Administrative Hearing Officer erred in concluding that the agreements between taxpayers and their tenants were licenses rather than leases, such that taxpayers were improperly claiming a deduction from gross receipts tax for the lease of real property under NMSA 1978, Section 7-9-53(A) (1998) (para 1).

Disposition

• The Court of Appeals reversed the hearing officer’s determination, holding that the agreements in question were "leases" within the meaning of Section 7-9-53(A), thereby allowing the taxpayers' receipts for the lease of recreational vehicle parking spaces to be deductible under the said section (para 12).

Reasons

• Per DUFFY, J. (with IVES, J., and BACA, J., concurring): The Court found that the hearing officer erred in concluding the agreements were licenses based on the physical attributes of the properties, specifically the absence of an enclosed structure. The Court determined that physical barriers or enclosures were not required for the creation of leases. The Court's decision was influenced by the lack of legal authority supporting the hearing officer's position on the necessity of physical enclosures for leases and the unchallenged findings that weighed in favor of finding that the agreements were leases. The Court concluded that the taxpayers are entitled to a deduction under Section 7-9-53(A) because their agreements with tenants constituted leases, not licenses (paras 5-11).