Quantum Corp. v. State

APPEAL FROM THE NEW MEXICO TAXATION AND REVENUE DEPARTMENT Gerald B. Richardson, Hearing Officer {1} Taxpayer, Quantum Corporation, and certain non-profit organizations are parties to ""bingo lease"" agreements under which the non-profit organizations use space in buildings leased and renovated by Taxpayer for bingo games. Taxpayer appeals a decision and order of the hearing officer of the New Mexico Taxation and Revenue Department (Department) assessing gross receipts taxes and interest on Taxpayer's proceeds under these agreements. The hearing officer found that the agreements were licenses, not leases, and that the income was subject to gross receipts taxes under NMSA 1978, 7-9-53(A) (1991). Taxpayer raises two issues on appeal: (1) whether the hearing officer was incorrect in concluding that these arrangements were licenses and not leases; and (2) if the agreements are leases, whether rent Taxpayer received for leasing equipment within the buildings is deductible under Section 7-9-53(C). We reverse on the first issue and remand for the hearing officer to decide the second issue consistent with this opinion. Facts {2} Taxpayer is a New Mexico corporation and engages in the business of leasing three buildings which it has remodeled and customized for purposes of conducting bingo games. The remodeled interiors include large open spaces for bingo patrons, a sales counter, a public address system and speakers, storage closets, a manager's office with floor safes, and snack bar areas. Taxpayer has placed bingo game equipment such as a flashboard, a bingo blower machine, and television monitors in the building. Taxpayer enters into agreements with non-profit organizations which conduct bingo games in the building during specified sessions. The premises described in the agreements include the facility and equipment, but exclude the snack bar areas.