This memorandum opinion was not selected for publi cation in the New Mexico Reports. Please see Rule 12-405 NMRA for restrictions on the citation of unpublished memorandum opinions. Please also note that this electronic memorandum opinion may contain computer-generated errors or other deviations from the official paper version file d by the Court of Appeals and does not include the filing date. IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO 1

IN THE MATTER OF THE PROTEST 2 OF TINDALL CORPORATION 3 NEW MEXICO TAXATION AND 4 REVENUE DEPARTMENT, 5 Plaintiff-Appellant, 6

v. NO. 31,194 7 TINDALL CORPORATION, 8 Defendant-Appellee. 9

APPEAL FROM THE TAXATION AND REVENUE DEPARTMENT 10 Monica Ontiveros, Hearing Officer 11 Gary K. King, Attorney General 12 Peter A. Breen, Special Assistant Attorney General 13 Santa Fe, NM 14 for Appellant 15 Joe Lennihan 16 Santa Fe, NM 17 for Appellee 182 MEMORANDUM OPINION 1 WECHSLER, Judge. 2 Appellant New Mexico Taxation and Rev enue Department (the Department) 3 issued Appellee Tindall Corporation (Tindall) a tax assessment for receipts from the 4 sales of precast concrete prison cells (thecells) sold to six New Mexico counties. 5 After an administrative hearing, a hearing officer concluded thatthe receipts from the 6 sales of the cells were tax deductible sales of tangible personal property to a 7 government under NMSA 1978, Section 7-9-54(A) (2003). The Department argues 8 that the hearing officer erred by not determin ing that the receipts from the sales of the 9 cells were either receipts from construc tion activities or receipts from the sale of 10 construction materials , both of which are considered a sale of a service and therefore 11 not eligible for the tax deduction unde r Section 7-9-54(A). We affirm. 12 BACKGROUND 13 On June 30, 2005, the Department issueda tax assessment to Tindall, resulting 14 from an audit that began on October 19, 2004. The De partment assessed Tindall a 15 gross receipts tax of $227,173.29 in principal, plus interest, for the tax period of 16 December 31, 1999 through August 31, 2004. The assessment arose out of the 17 receipts from the sales of the cells manuf actured by Tindall and sold to six New 18 Mexico counties. Tindall f iled a written protest to the assessment on September 25, 193 2005. 1 A hearing officer conducte d a two-day administrativ e hearing on September 24- 2 25, 2008 and issued a decision and order on March 21, 2011. In the portion relevant 3 to this appeal, the hearing officer conclude d that the receipts from the sales of the cells 4 were receipts from the sale of tangible personal property to the government and 5 therefore were deductible from gross receipt s under Section 7-9-54(A). Further, the 6 hearing officer concluded that the receipts from the sales of the cells were not from 7 sales of construction material s or components or ingredients of a construction project, 8 which are taxable under Secti on 7-9-54(A)(3). The Department filed a timely appeal. 9 On appeal, the Department argues that Tindall’s receipts from the sales of the 10 cells were receipts from the sale of c onstruction services, not tangible personal 11 property, and therefore were subject to the gross receipts tax. The Department argues 12 that the “record shows unquestionably that the activities of [Tindall] were 13 construction.” Alternatively, the Departme nt argues that the receipts from the sales 14 of the cells were receipts fro m the sale of construction materials and therefore taxable 15 under Section 7-9-54(A)(3). 16 STANDARD OF REVIEW 17 In an appeal from an administrative pr oceeding, this Court will reverse the 18 hearing officer’s decision only if it was arbitrary and capricious, not supported by 194 substantial evidence, or not in accordan ce with the law. NMSA 1978, § 7-1-25(C) 1 (1989). “Substantial evidence is relevant evidence that a reasonable mind would find 2 adequate to support a conclusion.” Disabled Am. Veterans v. Lakeside Veterans Club, 3 Inc. , 2011-NMCA-099, ¶ 9, 150 N.M. 569, 263 P.3d 911 (internal quotation marks 4 and citation omitted). “We will not disturb the agency’s factual findings if supported 5 by substantial evidence[.]” Montaño v. N.M. Real Es tate Appraiser’s Bd. , 2009- 6 NMCA-009, ¶ 8, 145 N.M. 494, 200 P.3d 544. To the extent th at we engage in 7 statutory interpretation or apply the fact s to the law, our review is de novo. GEA 8 Integrated Cooling Tech. v. State Taxation & Revenue Dep’t , 2012-NMCA-010, ¶ 5, 9 __ N.M. __, 268 P.3d 48. However, we give some deference to the hearing officer’s 10 reasonable interpretation or application of the law. Id. 11 RECEIPTS FROM SALE OF CONSTRUCTION 12 The Department argues that Tindall’s receipts from the cells were from 13 construction activities and therefore were taxable as r eceipts from the performance of 14 services. New Mexico law imposes an ex cise tax on gross receipts from the sales of 15 tangible personal property as well as for the performance of services. NMSA 1978, 16 § 7-9-3.5(A)(1) (2007); NMSA 1978, § 7-9- 4 (2010). NMSA 1978, Section 7-9-3(M) 17 (2007) defines “service” as including “construction activities and all tangible personal 18 property that will become an ingredient or component part of a construction project.” 195 NMSA 1978, Section 7-9-3.4(A)(1)(b) (2003) , defines “construction” as including 1 “the building, altering, repairing[,] or demolishing in the ordinary course of business 2 any . . . building, stadium[,] or other structure[.]” 3 Under the Department’s regulations, construction includes any prefabricated 4 buildings that are designed to be permanently affixed to the land, even if 5 manufactured off-site and assembled at the building site. NMAC 3.2.1.11(F)(1) 6 (12/30/03). However, the regulations provide that a portable building or a modular 7 relocatable building is not considered the sale of construction and therefore is the sale 8 of tangible personal property eligible for the governmental deduction in Section 7-9- 9 54(A). See NMAC 3.2.1.11(F)(2). The regulation defines a portable or modular 10 building as one that is usually manufacturedoff-site, and which is (1) designed to be 11 relocatable, and (2) when delivered to the installation site, generally requires only the 12 blocking, levelling, and in the case of modular relocatable buildings, joining of 13 modules. Id. The hearing officer concluded thatthe cells were portable or modular 14 buildings under NMAC 3.2.1.11 (F)(2), and therefore the recei pts from the sales of the 15 cells were deductible as receipts from selling tangible personal property to a 16 government under Section 7-9-54(A). 17 The Department directs us to eviden ce adduced at the hearing to support its 18 contention that Tindall engage d in construction activities. First, the Department 196 points out that the cells weighed twenty-five to thirty tons each; contained fixtures, 1 plumbing, wiring, and 2000 pounds of rebar; were installed onto a precast foundation 2 that required fastening with high strength steel dowels and grout over several days; 3 would be fully enclosed and unrecognizableonce the jail was completed; and were 4 built to withstand natural disasters and “600 blows from a sledgehammer.” The 5 Department argues that the cells are therefore permanen t and not portable buildings. 6 Second, the Department argues that other ev idence at the hearing indicates that Tindall 7 is a company that is engage d in construction, including that Tindall (1) has a general 8 contractor’s license in New Mexico and other states, (2) used American Institute of 9 Architecture form contracts and used a bid form that “contained terms commonly 10 associated with construction,” (3) fabricated the modules based on customer 11 specifications, (4) participated in the safety meetings of the gene ral contractor and a 12 post-construction walk through with the other contractors, (5) sent employees 13 experienced and trained in construction trades to install the cells, and (6) applied for 14 payment of overtime and for partial completi on. Third, the Department points out that 15 Tindall refers to itself as a contractor in se veral documents or stat es that it is engaged 16 in construction and characterizes itself as a contractor in its tax returns in Georgia. 17 Although this evidence may support a conclusion that Tindall was engaged in 18 construction activities, this C ourt will only reverse the factual findings of the hearing 197 officer when the findings are unsupported by substantial evidence. See § 7-1- 1 25(C)(2); Montaño , 2009-NMCA-009, ¶ 8. 2 In determining whether substantial evidence supported the hearing officer’s 3 opposite conclusion that Tindall was not engaged in construction activities, we are 4 guided by the definition of a portable or modular building set forth in NMAC 5 3.2.1.11(F)(2). As we noted, the sale of a portable building is not a sale of 6 construction activities under this regulation and instead is considered the sale of 7 tangible personal property eligible for th e governmental deduction in Section 7-9- 8 54(A). We therefore turn to whether substantial evidence supports the hearing 9 officer’s conclusion that the cells were portable buildings based on the definition that 10 a portable building is (1) designed to be re locatable, and (2) when delivered to the 11 installation site, generally requires only the blocking, le velling, and in the case of 12 modular relocatable buildings, joining of modules. See NMAC 3.2.1.11(F)(2). 13 First, substantial evidence supported the hearing officer’s conclusion that the 14 cells were designed to be relocatable. The hearing officer cited testimony in its 15 findings that Tindall fully constructed the cells at its plant in Georgia and delivered 16 them by truck or train to its customers. Further, a Tindall sales executive testified that 17 Tindall is in negotiations to sell precast concrete cells overseas for use as hunting 18 lodges and storage units and that the potential customers expressed interest due to the 198 ability to move the cells from one hunting club to another. Further, the sales executive 1 testified that the manner of placing and removing the cells is substantially similar to 2 placing or removing a mobile home, and, thatin many states, these cells are required 3 to be registered as mobile homes. Th is evidence is sufficient for a reasonable 4 factfinder to conclude that the cells are designed to be relocatable. See Disabled Am. 5 Veterans , 2011-NMCA-099, ¶ 9. 6 Second, substantial evidence supported the hearing officer’s conclusion that the 7 cells only required the blocki ng, levelling, or joining of modules when delivered to 8 the installation site. Jerry Long, a crane operator, erector, and rail supervisor for 9 Tindall, testified that, although cranes ar e used to unload the cells, once Tindall 10 delivered the cells to the installation site, a crew of three to four employees can install 11 the cells to the foundation in thirty minutes , using only a level, a pry-bar, a hammer, 12 and a pipe wrench. The cells are held into place by four to six metal rods that are 13 screwed into the cells and th en are grouted to the foundati on. The employees level the 14 cells on the foundation using non-stick plastic shims. Again, a reasonable factfinder 15 could conclude from this testimony that th e installation proce ss does not require on16 site assembly and instead only requires bloc king, levelling, and the joining of modules 17 of the cells. See id. ¶ 9. The hearing officer’s determination that the cells were 18 portable or modular relocatable buildings is supported by substantial evidence. 199 RECEIPTS FROM CONSTRUCTION MATERIALS 1 Alternatively, the Department argues that the receipts from th e sales of the cells 2 are receipts from a sale of construction material and are therefore taxable under 3 Section 7-9-54(A)(3). Section 7-9-54(A)(3 ) states that the deduction for sale of 4 tangible goods to the government does not apply to “receipts from selling construction 5 material[.]” The Department’s regul ations, NMAC 3.2.212.10(B)(2) (5/31/01), 6 provide that the sale of construction materials is the taxable sale of a service. Section 7 7-9-3.4(B) defines construction material as “tangible personal property that becomes 8 or is intended to become an ingredient or component part of a construction project[.]” 9 The hearing officer determined that the Department failed to present credible evidence 10 that the cells became an ingredient or co mponent of a construction project or that 11 Tindall intended the cells to become an i ngredient or component of a construction 12 project. 13 The Department apparently concedes th at it did not present any evidence that 14 the cells actually became an ingredient orcomponent of a construction project and 15 argues that the “record is replete” with evidence that the cells were intended to 16 become a part of a construction project. In support, the Department again focuses on 17 evidence regarding the appearance, size, we ight, and manner of installation of the 18 cells. Further, the Department again argue s that the way Tindall conducts its business 1910 is characteristic of a contractor. Finally, the Department points out that removing the 1 cells from the finished jail would require th at a portion of the jail be destroyed, that 2 Tindall has only removed two cells out of a total of 8000 that it has installed over the 3 years, and that Tindall has never moved a cell to a different location once it has 4 installed the cell. However, again, we re view whether substantial evidence exists to 5 support the hearing officer’s findings, notwhether evidence exists to support an 6 opposite conclusion. See § 7-1-25(C)(2); Montaño , 2009-NMCA-009, ¶ 8. 7 Substantial evidence supported the hearing officer’s conclusion that Tindall did 8 not intend for the cells to become an ingredient or component of a construction 9 project. The hearing officer relied on “numerous documents,” including bid forms, 10 contracts with the counties and applications for payment, that contained “no 11 reference” to a construction project and only indicate that Tindall delivered and 12 erected precast concrete cells to the countie s. After reviewing these documents, the 13 hearing officer did not err in how she ch aracterized the documents. The documents 14 only refer to the transactions involving the cells. Further, two of Tindall’s employees 15 testified that cells are sold as separate units and that Tindall has no control over the 16 cells once it delivers the cells to the custom ers. This evidence is sufficient for a 17 reasonable factfinder to conclude that Tindall sold the cells without the intent that the 18 cells become an ingredient or component of a construction project. See Disabled Am. 1911 Veterans , 2011-NMCA-099, ¶ 9. We therefore affirm the hearing officer’s 1 determination that the cells are not construction materials. 2 CONCLUSION 3 For the foregoing reason, we affirm the hearing officer’s decision and order. 4 IT IS SO ORDERED. 5

______________________________ 6 JAMES J. WECHSLER, Judge 7 WE CONCUR: 8

_______________________________ 9 RODERICK T. KENNEDY, Judge 10

_______________________________ 11 J. MILES HANISEE, Judge 12