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

• Active Solutions, Incorporated (Taxpayer) provided family living services to developmentally disabled individuals under the Developmental Disabilities Medicaid Waiver Program (DD Waiver Program), administered by the New Mexico Department of Health. Taxpayer ceased paying gross receipts tax on the funds received from the state for these services in 2013, believing itself to be an agent of the state. In 2017, the New Mexico Taxation and Revenue Department (the Department) assessed Taxpayer for unpaid gross receipts tax, penalties, and interest totaling $795,878.57 for the period up to May 30, 2018 (paras 2-5).

Procedural History

• Administrative Hearings Office: The administrative hearing officer (AHO) affirmed the Department's assessment against Taxpayer for unpaid gross receipts tax, including penalties and interest (para 1).

Parties' Submissions

• Taxpayer: Argued that it was an agent of the state and, therefore, its receipts from providing family living services under the DD Waiver Program were not taxable gross receipts. Taxpayer also contended that the assessment of gross receipts tax was inconsistent with federal and state tax policy and that the penalty was unjust because Taxpayer acted in good faith, believing no tax was due (paras 5-7, 19-21).
• Respondent-Appellee (New Mexico Taxation and Revenue Department): Maintained that Taxpayer's receipts from the DD Waiver Program were taxable gross receipts and that Taxpayer was not a disclosed agent of the state. The Department also supported the imposition of penalties and interest on the unpaid tax (paras 6, 13-14, 22-23).

Legal Issues

• Whether the AHO erred by applying 3.2.1.19(C) NMAC rather than the law of agency when deciding Taxpayer's entitlement to the tax exclusion in Section 7-9-3.5(A)(3)(f).
• If application of 3.2.1.19(C) NMAC was not erroneous, whether the AHO erred in concluding Taxpayer did not meet the regulation's requirements as applied to the statute.
• Whether the assessment of gross receipts tax against Taxpayer under these circumstances is inconsistent with federal and state tax policy.
• Whether the AHO erred by upholding the penalty imposed on Taxpayer, given its claim of acting in good faith (paras 7, 11-13, 19, 21).

Disposition

• The Court of Appeals affirmed the AHO's decision and order, upholding the Department's assessment of unpaid gross receipts tax, penalties, and interest against Taxpayer (para 24).

Reasons

• The Court of Appeals, per Judge Bogardus, with Chief Judge Hanisee and Judge Medina concurring, found substantial evidence supporting the AHO's decision. The Court held that Taxpayer did not demonstrate error in the AHO's application of 3.2.1.19(C) NMAC or in the conclusion that Taxpayer failed to meet the requirements for the tax exemption under Section 7-9-3.5(A)(3)(f) and 3.2.1.19(C) NMAC. The Court also dismissed Taxpayer's public policy argument against the tax assessment for lack of cited authority and upheld the penalty, finding no evidence of Taxpayer's good faith and reasonable grounds for its mistake of law. The Court emphasized the presumption of correctness of tax assessments and the taxpayer's burden to overcome such presumption (paras 8-23).