FROM TAXATION & REVENUE DEPARTMENT Dee Dee Hoxie, Hearing
Betzer, Roybal & Eisenberg, P.C. Gary D. Eisenberg
Albuquerque, NM for Protestant
H. Balderas, Attorney General Elena M. Morgan, Special
Assistant Attorney General Santa Fe, NM for Respondent
MONICA ZAMORA, Judge
Bogle Management Co., Inc. (Taxpayer) appeals the New Mexico
Taxation and Revenue Department's (the Department)
decision to assess gross receipts tax on reimbursement
payments and management fees it received, pursuant to the New
Mexico Gross Receipts and Compensating Tax Act (the Act).
NMSA 1978, §§ 7-9-1 to -115 (1966, as amended
through 2017). On appeal, Taxpayer contends that the
Department's decision was erroneous because Taxpayer was
acting as a disclosed agent under the Act; it is located in
another state and did not perform any services in New Mexico;
and therefore, its reimbursements and management fees are
exempt from New Mexico gross receipts tax.
For the reasons set forth in this opinion, we hold that the
hearing officer's decision was not arbitrary, capricious,
an abuse of discretion, or otherwise not in accordance with
the law, and that the decision and order were supported by
substantial evidence in the record. Specifically, the hearing
officer determined that Taxpayer did not meet the
requirements for the disclosed agent exemption and was
engaged in business in New Mexico. As a result,
Taxpayer's reimbursements and management fees are subject
to New Mexico gross receipts tax. Accordingly, we affirm the
hearing officer's decision and order.
Taxpayer is an Arizona corporation whose owners reside and
conduct all of Taxpayer's business in Georgia. Taxpayer
provides agricultural management services to farms located in
New Mexico. While Taxpayer does not have a physical office in
New Mexico, it did have a physical presence in the State
through its managers.
Taxpayer's original owner owned multiple farms located in
New Mexico, known as Bogle Ltd Co. and Bill Bogle Farm (the
Farms). Taxpayer was established as a separate entity from
the Farms for the purpose of providing farm managers with
employment benefits, which the Farms did not want to provide
to general farm employees, including retirement plans and
medical reimbursement plans. In 1977 Taxpayer registered in
New Mexico for tax purposes. In 1998 and under new ownership,
Taxpayer entered into two written management agreements (the
Agreements) with the Farms, whereby Taxpayer would supply the
Farms with agricultural managers (the managers) in exchange
for a management fee equal to 10 percent of the agricultural
managers' gross salaries. Under the Agreements, Taxpayer
was an independent contractor, and was a joint venturer with
the Farms. Taxpayer provided payroll services for the Farms.
Taxpayer, as the employer of the managers, was responsible
for all calculations and physical activities related to the
payroll services, including issuing paychecks, withholding
taxes, managing the benefits programs, and issuing year-end
Internal Revenue Service Form W-2 (W-2) to each of the
The Agreements required the Farms to "reimburse"
Taxpayer for all payments Taxpayer issued to the managers,
"including salary, the cost of worker's compensation
insurance, payroll taxes, pension benefits, group insurance[,
] medical benefits[, ] and all other normal and reasonable
costs required for the employment of [the m]anagers"
(collectively, the reimbursement payments). Taxpayer sent
monthly invoices to the Farms detailing the amount of
reimbursements and management fees owed, and the Farms, as
required under the Agreements, made all payments to Taxpayer.
The Agreements also placed the ultimate responsibility
including an obligation to indemnity Taxpayer for any
indemnification on the Farms for all costs associated with
payroll and taxes on the Farms.
"Taxpayer did not recruit, interview, hire, promote, or
fire any of the managers at the Farms. There were no formal
agreements between . . . Taxpayer and the managers." The
only direct communications Taxpayer had with the managers
were when it sent them notices of eligibility for medical
reimbursement plans, a pension plan enrollment form, and
their W-2s. The Farms had complete control over hiring,
promoting and firing the managers; determination of salary
and salary increases; as well as providing supervision and
control of all work performed by the managers.
In December 2007 the Department assessed Taxpayer for gross
receipts tax "principal of $338, 079.42; penalty in the
amount of $33, 807.97; and [interest in the amount] of $194,
142.58" for the tax period of January 31, 2000 through
June 30, 2006. In January 2008 Taxpayer filed a formal
protest letter with the Department. Approximately eight years
later in February 2016 the parties participated in an
administrative hearing before a hearing officer. In May 2016
the hearing officer issued her decision and order, granting
Taxpayer's protest in part and denying it in part.
In relevant part, the hearing officer concluded: (1)
"Taxpayer was engaged in business in New Mexico by
supplying managers to the Farms"; (2) "Taxpayer was
not a disclosed agent of the Farms, and all of its receipts
were subject to the gross receipts tax"; and (3) because
Taxpayer's failure to pay taxes was based on a
"mistake of law made in good faith[, ]" and the
penalty fee was abated.
On appeal, Taxpayer broadly argues that the hearing officer
erred in finding that the management fees and reimbursement
payments were subject to gross receipts tax under the Act.
More specifically, Taxpayer argues that pursuant to the
Agreements it maintained with the Farms, it was acting as the
Farms' disclosed agent and, therefore, the reimbursement
payments should not be subject to gross receipts tax.
Taxpayer further maintains that it was not "engaging in
business" in New Mexico under the Act and was deriving
no benefit from its receipt of the management fees and the
reimbursement payments. In response, the Department argues
that the hearing officer did not abuse her discretion in
finding the management fees and reimbursement payments were
subject to gross ...