NMSA 1978, § 7-1-11 — 7-1-11

Inspection of books of taxpayers; exception for marketplace
providers and marketplace sellers; credentials.

# A.

To determine the correct amount of tax due, the department shall cause the
records and books of account of taxpayers to be inspected or audited at such times as
the department deems necessary for the effective execution of the department's
responsibilities.

# B.

The department shall audit a marketplace provider, but not a marketplace seller,
with respect to gross receipts from transactions facilitated by a marketplace provider
and for which the marketplace seller may claim a deduction pursuant to Section 36 of
this 2019 act, unless an audit of the marketplace seller is necessary to determine the
correct amount of tax due, including examining the marketplace seller:
(1) to determine compliance with Section 36 [7-9-117 NMSA 1978] of this
2019 act;
(2) to determine if the marketplace provider should be relieved of liability
pursuant to Subsection C of Section 7-9-5 NMSA 1978; or
(3) to enforce any other provision of the Tax Administration Act.

# C.

Auditors and other officials of the department designated by the secretary are
authorized to request and require the production for examination of the records and
books of account of a taxpayer. Auditors and officials of the department designated by
the secretary shall be furnished with credentials identifying them as such, which they
shall display to any taxpayer whose books are sought to be examined.

# D.

Taxpayers shall upon request make their records and books of account available
for inspection at reasonable hours to the secretary or the secretary's delegate who
presents proper identification to the taxpayer.

# E.

If the taxpayer's records and books of account do not exist or are insufficient to
determine the taxpayer's tax liability, if any, the department may use any reasonable
method of estimating the tax liability, including using information about similar persons,
businesses or industries to estimate the taxpayer's liability.

# F.

The secretary or the secretary's delegate shall develop and maintain written audit
policies and procedures for all audit programs in which the department routinely
conducts field audits of taxpayers, including policies and procedures concerning audit
notification, scheduling, records that may be examined, analysis that may be done,
sampling procedures, gathering information or evidence from third parties, policies
concerning the rights of taxpayers under audit and related matters. Department audit
policies and procedures shall be made available to a person who requests them, at a
reasonable charge to defray the cost of preparing and distributing those policies and
procedures.

# G.

Nothing in this section shall be construed to require the department to provide
the following:
(1) information that is confidential pursuant to Section 7-1-8 NMSA 1978; or
(2) methods, techniques and analysis used to select taxpayers for audit,
including the use of:
(a) data analytics;
(b) data mining;
(c) a scoring model;
(d) internal controls; and
(e) metadata used to detect fraud and noncompliance.

# H.

For purposes of this section:
(1) "data analytics" means the science of examining data with the purpose of
drawing conclusions about the information;
(2) "data mining" means the process of analyzing data from different
perspectives and summarizing it into useful information by collecting data into data sets
for the purpose of discovering patterns;
(3) "scoring model" means a predictive model that can predict the chance of
occurring of a fact and its occurrence;
(4) "methods, techniques and analysis" means a systematic way to
accomplish a tactic, qualitative or quantitative component of research and the use of a
specific method;
(5) "internal controls" means a process of assuring achievement of an
organization's objectives in operational effectiveness and efficiency, reliable financial
reporting and compliance with laws, regulations and policies;
(6) "marketplace provider" means a "marketplace provider", as that term is
used in the Gross Receipts and Compensating Tax Act [Chapter 7, Article 9 NMSA
1978];
(7) "marketplace seller" means a "marketplace seller", as that term is used in
the Gross Receipts and Compensating Tax Act; and
(8) "metadata" means data that provides information about other data.