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

• The Geo Group, Inc., a private prison company, entered into contracts with two counties to construct and operate two prisons, providing supervision, housing, and services to prisoners under the New Mexico Corrections Department. The company claimed a deduction for gross receipts from these services, arguing they were for the resale of a license, not services. The Department of Taxation and Revenue initially approved this deduction but later reversed its decision after an audit, deeming the company ineligible for the deduction (paras 1-2).

Procedural History

• Administrative Hearing Office: The administrative hearing officer issued a fifty-page decision and order, including findings of fact and conclusions of law, determining that the taxpayer was not entitled to the claimed deduction, the good faith safe harbor provision was inapplicable, and equitable relief was not warranted (para 2).

Parties' Submissions

• Protestant-Appellant: Argued that the gross receipts were for the resale of a license rather than services, contending entitlement to the deduction under Section 7-9-47. Additionally, claimed that the good faith, safe harbor provision should apply and sought equitable relief due to the Department's initial approval of the deduction (para 2).
• Respondent-Appellee: [Not applicable or not found]

Legal Issues

• Whether the contracts between the taxpayer and the counties were for the sale of services rather than the resale of licenses, thus making the taxpayer ineligible for the deduction under Section 7-9-47.
• Whether the taxpayer was entitled to the safe harbor provision under Section 7-9-43(A) despite not accepting nontaxable transaction certificates (NTTCs) from the counties in good faith.
• Whether the taxpayer was entitled to equitable relief due to the Department's initial approval of the deduction (para 2).

Disposition

• The appellate court affirmed the decision of the administrative hearing officer, holding that the taxpayer was not entitled to the deduction, the safe harbor provision was inapplicable, and equitable relief was not warranted (para 17).

Reasons

• Per Hanisee, J. (Bogardus and Wray, JJ., concurring):
  The court found that the taxpayer's contracts with the counties predominantly involved the sale of services rather than the resale of licenses, aligning with the "predominant ingredient" test and previous case law. This determination precluded the taxpayer from the deduction under Section 7-9-47 (paras 8-9).
  Regarding the safe harbor provision, the court concluded that the taxpayer did not accept the NTTCs in good faith, as the taxpayer was aware that the counties were not the entities being billed, which was a critical factor in the denial of safe harbor protection under Section 7-9-43(A) (paras 10-13).
  On the issue of equitable relief, the court determined that the taxpayer did not demonstrate a shocking degree of aggravated and overreaching conduct by the Department that would necessitate equitable estoppel. The court noted that the Department's initial approval of the deduction, although mistaken, did not constitute such conduct (paras 14-16).