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

• A private prison corporation, CCA of Tennessee, LLC (Taxpayer), contracted with Torrance County, New Mexico, to provide prison facilities and services, including housing, security, and medical care for inmates. Taxpayer also undertook obligations under an intergovernmental service agreement between the County and the United States Marshals Service Prisoner Services Division (USMS) for housing federal prisoners, despite not being a party to the agreement. Taxpayer received payments from the USMS for these services and sought a deduction from gross receipts tax, claiming the payments were for the sale and resale of a license to use the detention center. The New Mexico Taxation and Revenue Department assessed Taxpayer for unpaid gross receipts taxes, penalties, and interest, which Taxpayer protested (paras 2-4).

Procedural History

• Administrative Hearings Office: The administrative hearing officer (AHO) denied Taxpayer's protest against the New Mexico Taxation and Revenue Department's assessment of unpaid gross receipts taxes, including penalties and interest, from January 31, 2010, to September 30, 2015.

Parties' Submissions

• Taxpayer: Argued that it was entitled to a deduction from applicable gross receipts tax under NMSA 1978, Section 7-9-47, for payments received from the USMS, and if not entitled to the deduction, it was entitled to safe harbor protection because it received a nontaxable transaction certificate (para 1).
• Respondent-Appellee (New Mexico Taxation and Revenue Department): Contended that Taxpayer was not entitled to the deduction or safe harbor protection, asserting that the payments received were for services provided, not for the sale and resale of a license.

Legal Issues

• Whether Taxpayer was entitled to a deduction under NMSA 1978, Section 7-9-47, for payments received from the USMS for the use of its detention center (para 1).
• Whether Taxpayer was entitled to safe harbor protection under NMSA 1978, Section 7-9-43(A), due to receiving a nontaxable transaction certificate, even if the payments were not eligible for the deduction (para 1).

Disposition

• The AHO’s decision that Taxpayer was not entitled to take advantage of the deduction set out in Section 7-9-47 was affirmed.
• The AHO’s decision that Taxpayer was not entitled to safe harbor protection was reversed (para 1).

Reasons

• Per VARGAS, J., with BOGARDUS, J., and HENDERSON, J., concurring:
  The court found that Taxpayer's activities under the contracts predominantly involved the performance of services rather than the sale of a license, thus not qualifying for a deduction under Section 7-9-47. The contracts with the County and the USMS required Taxpayer to provide extensive services, which were the primary subject of the agreements, rather than the sale of a license to use the detention center (paras 6-21).
  The court held that Taxpayer was entitled to safe harbor protection under Section 7-9-43(A) because it accepted a nontaxable transaction certificate in good faith from the County. The court distinguished this case from McKinley Ambulance Service, finding that the facts were controlled by the decision in Leaco Rural Telephone Coop., Inc. v. Bureau of Revenue. The court concluded that once Taxpayer accepted the NTTCs in good faith, it was protected from tax liability under the safe harbor provision, despite the NTTCs being improperly issued (paras 23-27).