2023 New Mexico Statutes › Chapter 7 - Taxation › Article 1 - Administration › Section 7-1-69 - Civil penalty for failure to pay tax or file a return.

A. Except as provided in Subsection C of this section, in the case of failure due to negligence or disregard of department rules and regulations, but without intent to evade or defeat a tax, to pay when due the amount of tax required to be paid, to pay in accordance with the provisions of Section 7-1-13.1 NMSA 1978 when required to do so or to file by the date required a return regardless of whether a tax is due, there shall be added to the amount assessed a penalty in an amount equal to the greater of:
(1) two percent per month or any fraction of a month from the date the tax was due multiplied by the amount of tax due but not paid, not to exceed twenty percent of the tax due but not paid;
(2) two percent per month or any fraction of a month from the date the return was required to be filed multiplied by the tax liability established in the late return, not to exceed twenty percent of the tax liability established in the late return; or
(3) a minimum of five dollars ($5.00), but the five-dollar ($5.00) minimum penalty shall not apply to taxes levied under the Income Tax Act, Corporate Income and Franchise Tax Act or taxes administered by the department pursuant to Subsection B of Section 7-1-2 NMSA 1978.
B. No penalty shall be assessed against a taxpayer if the failure to pay an amount of tax when due results from a mistake of law made in good faith and on reasonable grounds.
C. If a different penalty is specified in a compact or other interstate agreement to which New Mexico is a party, the penalty provided in the compact or other interstate agreement shall be applied to amounts due under the compact or other interstate agreement at the rate and in the manner prescribed by the compact or other interstate agreement.
D. In the case of failure, with willful intent to evade or defeat a tax, to pay when due the amount of tax required to be paid, there shall be added to the amount fifty percent of the tax or a minimum of twenty-five dollars ($25.00), whichever is greater, as penalty.
E. If demand is made for payment of a tax, including penalty imposed pursuant to this section, and if the tax is paid within ten days after the date of such demand, no penalty shall be imposed for the period after the date of the demand with respect to the amount paid.
F. If a taxpayer makes electronic payment of a tax but the payment does not include all of the information required by the department pursuant to the provisions of Section 7-1-13.1 NMSA 1978 and if the department does not receive the required information within five business days from the later of the date a request by the department for that information is received by the taxpayer or the due date, the taxpayer shall be subject to a penalty of two percent per month or any fraction of a month from the fifth day following the date the request is received. If a penalty is imposed under Subsection A of this section with respect to the same transaction for the same period, no penalty shall be imposed under this subsection.
G. No penalty shall be imposed on:
(1) tax due in excess of tax paid in accordance with an approved estimated basis pursuant to Section 7-1-10 NMSA 1978;
(2) tax due as the result of a managed audit; or
(3) tax that is deemed paid by crediting overpayments found in an audit or managed audit of multiple periods pursuant to Section 7-1-29 NMSA 1978.
History:
1953 Comp., § 72-13-82, enacted by Laws 1965, ch. 248, § 70; 1970, ch. 20, § 1; 1973, ch. 146, § 1; 1982, ch. 18, § 16; 1985, ch. 65, § 18; 1986, ch. 20, § 25; 1987, ch. 169, § 6; 1988, ch. 99, § 4; 1990, ch. 86, § 9; 1992, ch. 55, § 16; 1996, ch. 15, § 9; 1997, ch. 67, § 8; 2000, ch. 28, § 13; 2001, ch. 16, § 9; 2003, ch. 398, § 14; 2007, ch. 45, § 4; 2021, ch. 65, § 5.
ANNOTATIONS
Cross references.
— For managed audits,
see
7-1-11.1 NMSA 1978.
For collection of penalties and interest,
see
7-1-30 NMSA 1978.
The 2021 amendment,
effective July 1, 2021, provided that a five dollar minimum late filing penalty shall not apply to taxes levied under the Corporate Income and Franchise Tax Act; and in Subsection A, Paragraph A(3), after "Income Tax Act", added "Corporate Income and Franchise Tax Act".
The 2007 amendment,
effective January 1, 2008, changed the maximum rate from ten to twenty percent in Paragraphs (1) and (2) of Subsection A.
The 2003 amendment,
effective July 1, 2003, in Subsection A substituted "C" for "B" following "provided in Subsection" near the beginning, inserted "department" preceding "rules and regulations" near the middle, substituted "assessed a" for "as" following "added to the amount" near the end, and inserted "in an amount equal to" preceding "the greater of" near the end; and added present Subsection B and redesignated the subsequent subsections accordingly.
The 2001 amendment,
effective July 1, 2001, added Subsection F.
The 2000 amendment,
effective July 1, 2000, added Subsection E.
The 1996 amendment,
effective July 1, 1996, added "Except as provided in Subsection B of this section," at the beginning of Subsection A, added Subsection B, and redesignated former Subsections B and C as Subsections C and D.
The 1992 amendment,
effective July 1, 1992, rewrote Subsection A, restructured the former three sentences of Subsection C so as to constitute a single sentence, while making minor stylistic changes therein, and, in Subsection C, substituted all of the present language following "imposed by this subsection" for "shall be in addition to any penalty due under Subsection A of this section".
The 1990 amendment,
effective July 1, 1990, added Subsection C.
I. GENERAL CONSIDERATION.
Section is divided into two parts:
penalty for fraud and penalty for negligence.
Stohr v. N.M. Bureau of Revenue
, 1976-NMCA-118, 90 N.M. 43, 559 P.2d 420, cert. denied, 90 N.M. 254, 561 P.2d 1347 (1977) (decided under prior law).
Presumption of correctness,
in 7-1-17 NMSA 1978, also applies to this penalty section.
Tiffany Constr. Co. v. Bureau of Revenue
, 1976-NMCA-127, 90 N.M. 16, 558 P.2d 1155, cert. denied, 90 N.M. 255, 561 P.2d 1348 (1977).
Penalty provision not denial of equal protection.
— Penalties imposed on taxpayers based upon negligent failure to pay taxes when due did not deny the taxpayers equal protection of the law.
Gathings v. Bureau of Revenue
, 1975-NMCA-016, 87 N.M. 334, 533 P.2d 107.
The date of assessment determines the applicable penalty to be imposed.
— The statutory penalty is determined at the time of assessment and the law in place at the time of assessment governs the penalty to be imposed.
GEA Integrated Cooling Technology v. N.M. Taxation & Rev. Dep't
, 2012-NMCA-010, 268 P.3d 48.
Application of increased penalty to prior tax period was not retroactive.
— The application of a new statutory penalty in place at the time of the assessment of tax liabilities that arose for tax periods occurring prior to the effective date of the statutory amendment that imposes the new penalty gives the amendment proper prospective effect.
GEA Integrated Cooling Technology v. N.M. Taxation & Rev. Dep't
, 2012-NMCA-010, 268 P.3d 48.
The date of assessment determines the applicable penalty to be imposed.
— Where the taxpayer failed to pay gross receipts taxes for periods between June 1, 2006 and July 1, 2007; effective January 1, 2008, the legislature increased the maximum statutory penalty to twenty percent of the amount of unpaid taxes; prior to January 1, 2008, the maximum statutory penalty was ten percent; and in 2009, the N.M. taxation and revenue department assessed the taxpayer for unpaid taxes due for periods June 1, 2006 and July 1, 2007 and imposed the twenty percent penalty, the new statutory penalty of twenty percent was the applicable maximum penalty, because it was in effect at the time of the outstanding taxes were assessed.
GEA Integrated Cooling Technology v. N.M. Taxation & Rev. Dep't
, 2012-NMCA-010, 268 P.3d 48.
Every person is charged with reasonable duty
to ascertain possible tax consequences of his action. This can be done by consultation with one's legal advisor.
Tiffany Constr. Co. v. Bureau of Revenue
, 1976-NMCA-127, 90 N.M. 16, 558 P.2d 1155, cert. denied, 90 N.M. 255, 561 P.2d 1348 (1977).
Responsibility to ascertain tax consequences.
— Every person is charged with the reasonable duty to ascertain the possible tax consequences of his action or inaction, and a taxpayer cannot abdicate this responsibility merely by appointing an accountant as its agent in tax matters.
El Centro Villa Nursing Ctr. v. Taxation & Revenue Dep't
, 1989-NMCA-070, 108 N.M. 795, 779 P.2d 982.
II. NEGLIGENCE.
Taxpayers were not negligent
in failing to pay natural gas processor's tax on operation which removed carbon dioxide from coal seam gas where, at the time the applicable tax was enacted, coal seam gas was not processed and the applicable tax law accordingly did not directly address whether the removal of carbon dioxide from coal seam gas constituted "processing."
Amoco Prod. Co. v. N.M. Taxation & Revenue Dep't
, 2003-NMCA-092, 134 N.M. 162, 74 P.3d 96.
Propriety of penalty.
— Taxpayer's penalty was proper where her failure to pay gross receipts tax was negligent based on the hearing officer's finding that the failure was due to the taxpayer's lack of knowledge and her erroneous belief that gross receipts tax was not due on certain transactions.
Grogan v. N.M. Taxation & Revenue Dep't
, 2003-NMCA-033, 133 N.M. 354, 62 P.3d 1236, cert. denied, 133 N.M. 413, 63 P.3d 516.
Reliance on manufacturer's advice.
— Where taxpayer, who operated a retail tobacco store, failed to pay gross receipts tax from buy-down and shelf-display contracts with cigarette manufacturers in reliance upon discussions of taxpayer's tax liability with the manufacturers was negligent because taxpayer did not reasonably attempt to determine whether taxpayer's actions were justifiable under the tax statutes and regulations.
Grogan v. N.M. Taxation & Revenue Dep't
, 2002, NMCA-033, 133 N.M. 354, 62 P.3d 1236, cert. denied, 133 N.M. 413, 63 P.3d 516.
Minimum penalty for negligence when no tax due under equitable recoupment.
— When the amount erroneously paid by the taxpayer for a particular tax equals the amount that should have been paid for another tax and, under the doctrine of equitable recoupment, no further sums are due from the taxpayer, there is no basis for assessing a penalty as a percentage of the tax due, but the taxpayer may be required to pay the $5 minimum penalty if the error resulted from the taxpayer's negligence.
Teco Invs. v. Taxation & Revenue Dep't
, 1998-NMCA-055, 125 N.M. 103, 957 P.2d 532.
Ordinary business care required.
— Taxpayer was liable for civil penalties when taxpayer's failure to pay the gross receipts tax due was based on its erroneous beliefs, inattention, inaction where action would be reasonably required, or a failure to exercise the degree of ordinary business care that similarly situated businesses would exercise.
Arco Materials, Inc. v. State, Taxation & Revenue Dep't
, 1994-NMCA-062, 118 N.M. 12, 878 P.2d 330,
rev'd on other grounds sub nom
.
Blaze Constr. Co. v. Taxation & Revenue Dep't
, 1994-NMSC-110, 118 N.M. 647, 884 P.2d 803, cert. denied, 514 U.S. 1016, 115 S. Ct. 1359, 131 L. Ed. 2d 216 (1995).
Negligence not excused by actions of auditors.
— A negligence penalty assessed against a taxpayer for its total failure to pay any compensating tax for a period of years was proper, since the taxpayer's sole excuse was that the failure to pay the tax was not uncovered by the accountants who certified the accuracy of the taxpayer's financial statements for the annual reports to shareholders required by federal securities law. The taxpayer offered no evidence that the outside auditors reviewed the taxpayer's monthly state tax returns, did not explain why the audit for the annual reports should have uncovered the failure to pay the compensating tax, and did not explain why the failure of the auditors to discover the error would excuse the taxpayer's failure to comply with clear state law.
Vivigen, Inc. v. Minzner
, 1994-NMCA-027, 117 N.M. 224, 870 P.2d 1382.
Substantial evidence of negligence.
— Substantial evidence supported hearing officer's finding that nursing home's failure to pay tax was due to negligence, since the home failed to show the hearing officer that it acted reasonably in not reporting a medicaid readjustment to income payments as gross receipts.
El Centro Villa Nursing Ctr. v. Taxation & Revenue Dep't
, 1989-NMCA-070, 108 N.M. 795, 779 P.2d 982.
Taxpayer's erroneous belief tantamount to negligence.
— A taxpayer's mere belief that he is not liable to pay taxes is tantamount to negligence within the meaning of this section and invocation of the penalty is appropriate.
C & D Trailer Sales v. Taxation & Revenue Dep't
, 1979-NMCA-151, 93 N.M. 697, 604 P.2d 835.
Taxpayer's erroneous belief and no further investigation constituted negligence.
— When taxpayer, an Arizona corporation headquartered in Phoenix, failed to file a return for work performed on the Navajo reservation within New Mexico (the first road job taxpayer had done in New Mexico), its belief that no taxes were due and that there were no taxes that they had to file for or register for, without further investigation, constituted negligence so as to justify the penalty imposed.
Tiffany Constr. Co. v. Bureau of Revenue
, 1976-NMCA-127, 90 N.M. 16, 558 P.2d 1155, cert. denied, 90 N.M. 255, 561 P.2d 1348 (1977).
"Negligent" means
indifferent, careless or off-hand or lacking reasonable cause.
Tiffany Constr. Co. v. Bureau of Revenue
, 1976-NMCA-127, 90 N.M. 16, 558 P.2d 1155, cert. denied, 90 N.M. 255, 561 P.2d 1348 (1977).
Negligence is general standard defining director's duties.
— "Negligence" as used in Subsection A is a general standard capable of reasonable application and sufficient to limit and define the commissioner's (now director's) powers in imposing a penalty.
Gathings v. Bureau of Revenue
, 1975-NMCA-016, 87 N.M. 334, 533 P.2d 107.
Negligence should be equated with federal standard.
— "Negligence," as used in Subsection A, should be equated with the federal standard of "lack of reasonable cause" as set forth in 26 U.S.C. § 6651(a).
Gathings v. Bureau of Revenue
, 1975-NMCA-016, 87 N.M. 334, 533 P.2d 107.
III. PROTEST.
Evidence of diligent protest based on informed consultation and advice.
— Conclusory and self-serving statements in affidavits of an officer of the taxpayer and a tax attorney were insufficient to give rise to a genuine issue of material fact as to the existence of any acceptable ground for excusing the taxpayer's failure to report and pay gross receipts tax.
Sonic Indus., Inc. v. State
, 2000-NMCA-087, 129 N.M. 657, 11 P.3d 1219,
rev'd on other grounds
, 2006-NMSC-038, 140 N.M. 212, 141 P.3d 1266.
"Diligent protest" negates negligence.
— When a taxpayer's failure to pay taxes is the result of a "diligent protest" and his decision to challenge a tax is based on informed consultation and advice (
i.e.
, from his attorney or accountant), the taxpayer negates any inference of negligence and the application of the penalty provision is inappropriate.
C & D Trailer Sales v. Taxation & Revenue Dep't
, 1979-NMCA-151, 93 N.M. 697, 604 P.2d 835.
Reasonable doubt negates disregard of rules.
— Penalty was improperly assessed and taxpayer is not liable for penalty and interest where diligent protest by the taxpayer negated the possibility of negligence, and the taxpayer did not disregard the rules and regulations because there was reasonable doubt as to the correctness of the taxes imposed by the commissioner (now secretary).
Stohr v. N.M. Bureau of Revenue
, 1976-NMCA-118, 90 N.M. 43, 559 P.2d 420, cert. denied, 90 N.M. 254, 561 P.2d 1347 (1977).
Not negligence to protest rulings or disregard where reasonable doubt.
— This section provides that a penalty shall be added to the amount owed only in the event of failure to pay an assessed amount due to negligence or disregard of rules and regulations. Taxpayers were neither negligent nor heedless of any rules and regulations where they carried forward a thorough protest against the rulings of the commissioner (now secretary) with reasonable doubt as to the interpretation and applicability of the various taxes sought to be imposed by his order. Any presumptions of correctness which might have attached to the commissioner's (now secretary's) decision had been sufficiently overcome. The decision to assess penalties, not being in accordance with the law, was reversed in its entirety.
Co-Con, Inc. v. Bureau of Revenue,
1974-NMCA-134, 87 N.M. 118, 529 P.2d 1239, cert. denied, 87 N.M. 111, 529 P.2d 1232.
Am. Jur. 2d, A.L.R. and C.J.S. references.
— 72 Am. Jur. 2d State and Local Taxation §§ 856 to 865.
Retroactive effect of statutes relation to interest on or penalties in respect of delinquent taxes, 77 A.L.R. 1034.
Liability to penalty imposed for failure to pay tax of one who in good faith contested its validity, 96 A.L.R. 925, 147 A.L.R. 142.
Penalty for nonpayment of taxes when due as affected by lack of notice to taxpayer, 102 A.L.R. 405.
Doubt as to liability for, or as to person to whom to pay, tax, as affecting liability for penalties and interest, 137 A.L.R. 306.
Time of mailing or time of receipt as determinative of liability for penalty or additional amount for failure to pay tax or license fee within prescribed time, 158 A.L.R. 370.
What amounts to reasonable cause for failure to file, or delay in filing, tax return, 3 A.L.R.2d 617.
Penalties or interest incurred because of delinquency of execution, administration or trustee, in respect of taxes as a charge against him personally or against estate, 47 A.L.R.3d 507.
Retailer's or buyer's defenses against exaction of penalties for failure to file, or deficiency in, state or local sales tax return, 20 A.L.R.4th 952.
85 C.J.S. Taxation §§ 1529 et seq.