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

• CCA of Tennessee, LLC (CCA), a private prison corporation, operated the Torrance County Detention Center and housed federal prisoners for Torrance County under a contract. CCA directly invoiced and received payments from the United States Marshals Service for these services. CCA sought a refund of gross receipts taxes for the period from January 1, 2010, through December 31, 2012, claiming it overpaid taxes on the receipts from the Marshals Service. To support its refund claim, CCA obtained a nontaxable transaction certificate (NTTC) from the County, asserting that the services provided were resold to the Marshals Service, thereby qualifying for a deduction. The New Mexico Taxation and Revenue Department (the Department) issued a refund based on this assertion. However, upon audit, the Department concluded that CCA was not entitled to the refund or deduction, as the services provided did not qualify under the NTTC's intended use, leading to a tax liability assessment against CCA (paras 4-7).

Procedural History

• The administrative hearing officer concluded CCA did not accept the NTTC in good faith and was not entitled to a deduction (para 2).
• The Court of Appeals reversed the hearing officer's decision, finding in favor of CCA (para 2).

Parties' Submissions

• Appellant-Respondent (CCA): Argued that it accepted the NTTC in good faith, based on its understanding and representations to the Department, and was therefore entitled to a deduction for the gross receipts from housing federal prisoners (paras 5-6, 23).
• Appellee-Petitioner (New Mexico Taxation and Revenue Department): Contended that CCA did not accept the NTTC in good faith because CCA's services did not qualify for the deduction under the NTTC, as there was no resale of services or license to the Marshals Service, and CCA directly received payments from the Marshals Service (paras 7, 26-27).

Legal Issues

• Whether CCA accepted the NTTC in good faith, entitling it to safe harbor protection from the payment of gross receipts tax (paras 1, 3, 9).

Disposition

• The Supreme Court of the State of New Mexico reversed the Court of Appeals' decision, holding that CCA did not accept the NTTC in good faith and was not entitled to safe harbor protection from the payment of gross receipts tax (para 3).

Reasons

• The Supreme Court, per Justice Zamora, with Justices Bacon, Vigil, Thomson, and Judge Eichwald concurring, based its decision on the interpretation of "good faith" within the context of accepting an NTTC. The Court determined that the standard for good faith acceptance of an NTTC is objective, focusing on the facts and circumstances reasonably known to the seller at the time of acceptance. The Court found that CCA's misrepresentation to the Department about the nature of its receipts from the Marshals Service precluded a good faith belief that its services were being resold in a manner qualifying for the deduction. The Court emphasized that the purpose of the NTTC and the safe harbor provision is to protect sellers from tax liability when buyers do not use goods or services in the intended nontaxable manner, not to protect sellers who are aware that their sales do not qualify for the deduction claimed. The decision was supported by substantial evidence, including CCA's acknowledgment of its misstatement and direct transactions with the Marshals Service, which contradicted the requirements for a nontaxable transaction under the NTTC (paras 11-27).