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

• In 2012, Tiller Design owned and rented out two single-family homes in Albuquerque through the VRBO website for short-term vacation stays, with no stay exceeding thirty days. In 2015, the New Mexico Taxation and Revenue Department assessed Tiller Design for gross receipts tax on the rental income, plus a penalty and interest for nonpayment. Tiller Design protested, claiming exemption under a specific Department regulation pertaining to leases of three or fewer units of real property (para 2-3).

Procedural History

• Administrative Hearings Office: Upheld the Department's assessment of gross receipts tax on Tiller Design's rental income, but found Tiller Design not liable for a civil negligence penalty due to reasonable and good faith reliance on a Department regulation (para 3).

Parties' Submissions

• Tiller Design: Argued that it is exempt from gross receipts tax under 3.2.116.10 NMAC, claiming the regulation applies due to leasing only two rental units. Additionally, contended that its receipts are subject to a rental deduction specified in Section 7-9-53 (para 4).
• New Mexico Taxation and Revenue Department: Maintained that 3.2.116.10 NMAC does not apply to Tiller Design and that the receipts fall under an exclusion to the deduction, making them subject to the tax (para 4).

Legal Issues

• Whether receipts received from lodgers for vacation rentals of homes are subject to the gross receipts tax (para 1).
• Whether Tiller Design's rental activities are exempt from gross receipts tax under 3.2.116.10 NMAC (para 4, 22-24).
• Whether Tiller Design's receipts can be deducted from gross receipts under Section 7-9-53 (para 8-21).

Disposition

• The Court of Appeals affirmed the Administrative Hearings Office's decision and order, holding that Tiller Design's receipts from short-term vacation rentals are subject to the gross receipts tax and that Tiller Design is not exempt under 3.2.116.10 NMAC. Tiller Design's request for an award of reasonable litigation costs was denied (para 26-28).

Reasons

• The Court, per Judge Kristina Bogardus with Judges Linda M. Vanzi and Jacqueline R. Medina concurring, concluded that Tiller Design's receipts from short-term vacation rentals are subject to gross receipts tax. The Court applied a de novo standard of review, acknowledging a presumption that the Department's assessment is correct. It found that the Gross Receipts and Compensating Tax Act presumes all receipts are taxable and that statutory exceptions to tax are construed strictly in favor of the taxing authority. The Court determined that Tiller Design's rental activities did not qualify for a deduction under Section 7-9-53 because the rentals were akin to transient lodging facilities, which are excluded from the definition of "leasing real property" for tax deduction purposes. Furthermore, the Court found that 3.2.116.10 NMAC, which exempts persons renting three or fewer units from registering for gross receipts tax, did not apply to Tiller Design because its activities did not constitute "leasing real property" as defined by the relevant statute and regulation (paras 5-25).