N.M. Code R. § 3.1.5.8 – Sufficiency of Records

A. Books of account, documents and other records shall be kept and maintained by a taxpayer in a manner that will permit the accurate computation of state taxes and provide information required by the statutes under which the taxpayer is required to keep records. The Tax Administration Act sets no time requirement for taxpayer retention of books of account or other records but Section 7-1-18 NMSA 1978 sets the statute of limitations for the assessing of tax asserted to be due. If state taxes cannot be accurately or readily computed by the secretary or secretary's delegate from the records, the records are not sufficient or adequate for the purpose of Section 7-1-10 NMSA 1978. The adequacy or inadequacy of taxpayer records is a matter of fact to be determined by the secretary or secretary's delegate. Taxpayers have a duty to provide the secretary or secretary's delegate, upon request, with books of account and other records upon which to establish a basis for taxation.
B. Failure of a taxpayer to keep adequate books of account or other records will cause the department to use alternative methods to determine or estimate taxes due.
C. Alternative methods which may be used by the department include, but are not limited to:
(1) bank deposit method;
(2) documents and records of persons other than the taxpayer;
(3) federal returns and other government reports;
(4) cost of sales markup -- weighted percentage;
(5) net worth analysis;
(6) industry comparison; and
(7) provisional assessment of taxes based on best available information and allowing for any increase which may have occurred due to inflation, increased economic activity or other reasons.
D. Any one, or a combination, of the methods listed above or other methods may be used for taxpayer records reconstruction or verification.
[7/19/67, 11/5/85, 8/15/90, 10/31/96; 3.1.5.8 NMAC - Rn & A, 3 NMAC 1.5.8, 12/29/00]