Waldroop v. O'Cheskey

• Decision Date: 21 November 1973
• Docket Number: No. 1187,1187
• Citation: 85 N.M. 736,1973 NMCA 146,516 P.2d 1119
• Parties: Edward WALDROOP, d/b/a Romeo's Bar and Package, Appellant, v. Fred L. O'CHESKEY, Commissioner of Revenue of the State of New Mexico, Appellee.
• Court: Court of Appeals of New Mexico

Page 1119

516 P.2d 1119

85 N.M. 736

Edward WALDROOP, d/b/a Romeo's Bar and Package, Appellant, v. Fred L. O'CHESKEY, Commissioner of Revenue of the State of New Mexico, Appellee.

No. 1187.

Court of Appeals of New Mexico.

Nov. 21, 1973.

Thomas L. Bonham, Albuquerque, for appellant

David L. Norvell, Atty. Gen., Susan P. Graber, Bureau of Revenue, Asst. Atty. Gen., Santa Fe, for appellee.

OPINION

WOOD, Chief Judge.

After an audit, the Bureau of Revenue issued an assessment for gross receipts and compensating tax, penalty and interest to Waldroop, the proprietor of a bar and package liquor store. Waldroop protested the assessment, and after two partial abatements of the assessment, the protest was denied. Waldroop appeals directly to this Court from the decision of the Commissioner of Revenue denying the protest. Section 72--13--39, N.M.S.A.1953 (Repl.Vol. 10, pt. 2, Supp.1973). The assessment was based on the underpayment of taxes. The underpayment was determined after the Bureau auditor computed Waldroop's gross receipts for the audit period. The issues are: (1) whether Waldroop's books and records were inadequate so that the computation of gross receipts was proper and (2) whether the method of computing the gross receipts was erroneous.

Adequacy of books and records.

Section 72--13--27(A), N.M.S.A.1953 (Repl.Vol. 10, pt. 2, Supp.1973) requires Waldroop to '* * * maintain books of account or other records in manner that will permit the accurate computation of state taxes. * * *' Waldroop asserts his books and records met this statutory requirement. On this basis, he asserts the auditor's conclusion that the books and records were inadequate and the auditor's computation of gross receipts, independently of the books and records, were erroneous, as a matter of law. We disagree.

Section 72--13--22, N.M.S.A.1953 (Repl.Vol. 10, pt. 2, Supp.1973) gives the Bureau general investigative authority in '* * * determining the extent of the liability of any person for any tax. * * *' See Torridge Corporation v. Commissioner of Revenue, 84 N.M. 610, 506 P.2d 354 (Ct.App.1972). As part of that investigative authority: 'The commissioner shall cause the records and books of account of taxpayers to be inspected or audited at such times as he deems necessary * * *.' Section 72--13--28(A), N.M.S.A.1953 (Repl.Vol. 10, pt. 2, Supp.1973).

The specially concurring opinion in Archuleta v. O'Cheskey, 84 N.M. 428, 504 P.2d 638 (Ct.App.1972) states:

'The taxpayer has a duty to provide the commissioner with books and records upon which to establish a standard for taxation as provided by law. If he fails to do so, he cannot complain of the best methods used by the commissioner.'

The adequacy of a taxpayer's books and records is a question of fact. Torridge Corporation v. Commissioner of Revenue, supra. The fact that Waldroop, in the hearing before the Commissioner, introduced evidence that his books and records were adequate did not require a ruling, as a matter of law, that they were adequate. There was conflicting evidence. This conflicting evidence will be referred to subsequently.

Waldroop entered the totals shown on his cash register tapes on other records and then disposed of the cash register tapes. Waldroop contends the denial of his protest '* * * rests upon the mere assertion of the auditor that, in the absence of cash register tapes, Appellant's records are inadequate. * * *' On the basis of this contention, Waldroop makes two 'matter of law' arguments. First, he asserts that the failure to retain cash register tapes does not mean that his records are inadequate as a matter of law. Second, he contends that the Bureau, by assessing the taxes against him, is requiring the retention of cash register tapes as support for other books and records; that no such requirement appears either in the statutes or tax regulations and, thus, the imposition of such a requirement without prior notice violates due process of law.

The answer is that nothing in this record shows any 'matter of law' decision concerning the cash register tapes, nor is there anything in the record indicating that as a 'matter of law' the tapes were required to be retained. Our review is limited to the record. Section 72--13--39, supra. Not being supported by the record, the 'matter of law' arguments concerning the cash register tapes are without merit.

Waldroop asserts that as a 'matter of fact' his books and records were adequate. The Commissioner necessarily found to the contrary in denying the protest. We consider the evidence before the Commissioner. The auditor testified: (a) there were no substantiating or source documents by which the entries in Waldroop's records could be verified; (b) the only inventory records were entries on profit and loss statements and Schedule C to the federal income tax returns, which Mrs. Waldroop indicated were estimates; (c) the profit and loss statements indicated inventory remained fairly constant on a month to month basis throughout the audit period, yet Schedule C indicated purchases higher than gross receipts reported; (d) Waldroop claimed that he had held special sales and had also sold at discount but there were no records of any kind to substantiate when or how often such sales occurred or prices charged in connection with such sales; (e) bank deposits for 1969 (a part of the audit period) exceeded $77,000.00, yet gross receipts reported were 'about $35,000' and the bank...