State tries to collect back taxes on sales of elk-hunting permits

State tries to collect back taxes on sales of elk-hunting permits By Deborah Baker / Journal Staff Writer Friday, December 4th, 2015 at 12:05am SANTA FE – State officials who have been focusing their efforts on collecting delinquent gross receipts taxes have a new target in their sights: ranchers and other landowners who are issued elk-hunting permits by the state and then sell them. The Taxation and Revenue Department says it has sent hundreds of letters this fall to landowners notifying them they may owe back taxes on the transferable license authorizations they received from the state Department of Game and Fish. More letters are expected to go out. The collection effort has some landowners in an uproar. “There has been a great deal of confusion. … It’s turned the landowner industry on its head,” said Caren Cowan, executive director of the New Mexico Cattle Growers’ Association. The tax department over the past couple of years has been trying to identify and collect gross receipts taxes in a variety of areas that it says should have been paid and weren’t. Landowners in the Department of Game and Fish’s program called E-PLUS – for Elk Private Lands Use System – are given authorizations in recognition of their efforts in managing elk and their habitat, according to the department. They can ignore the authorizations, use them, give them away or sell them – to individual hunters, for example, or to outfitting companies or to brokers – at whatever price they can get. The authorizations are converted to actual hunting licenses. The tax agency’s letters to landowners say that granting a right to hunt “is a license to use the real property,” and that the receipts from the sale of that license are subject to gross receipts tax. Cowan said that was “shocking” news to some ranchers, who likely have been paying income tax on the income from the sales of authorizations but now find they may owe thousands of dollars in back gross receipts taxes. The state can go back six or seven years to collect, depending on whether the taxpayer had ever filed a gross receipts tax return, according to the department. “Unfortunately, since no one knew about the rule, the landowners are being asked for records they didn’t keep on taxes they didn’t know they were supposed to pay,” said Dalene Hodnett, communications director for the New Mexico Farm & Livestock Bureau. Some ranchers sell their authorizations to outfitters, who in turn resell them as part of larger hunting packages. In those cases, outfitters typically pay gross receipts tax on the packages, according to Kerrie Romero, executive director of the New Mexico Council of Outfitters and Guides. Cowan and Romero said they recently learned outfitters should be issuing documents called Non-Taxable Transaction Certificates to landowners so they can demonstrate the tax was paid by someone else, but that has not commonly been done. And while some ranchers might be able to work with outfitters to prove back taxes were paid by the outfitters, that doesn’t solve the problem for landowners who sold authorizations directly to hunters or others, they said. The department says it is encouraging taxpayers to do a “managed audit” under which they would report their back gross receipts for six or seven years and pay their taxes within six months, and then have penalties and interest waived.