BLOOMFIELD — Several cities, including Farmington and Bloomfield, are alleging the New Mexico Taxation and Revenue Department does not provide any warning or explanation prior to adjusting their gross receipts tax distributions.

Gross receipts taxes are similar to sales taxes but are levied on the seller instead of the buyer. A portion of the proceeds from every sale is sent to the state taxation and revenue department, which then distributes portions to the cities where the transaction took place.

Sometimes, a business will amend its filing and request a refund, claiming it paid taxes it wasn't obligated to pay. When that happens, the department will adjust the amount sent to the city to make up for past distributions. The city then will get a smaller monthly distribution of money than it was expecting, and city attorneys for Farmington and Bloomfield say no explanation is provided when that happens.

"The state refuses to disclose to the city why they're taking money back from the city," Bloomfield City Attorney Ryan Lane said during a City Council meeting Monday night.

The taxation and revenue department did not respond to an email by The Daily Times requesting comment on the issue.

The cities, which include at least three others besides Bloomfield and Farmington, are being represented in a planned lawsuit against the agency by Gallagher & Kennedy, a law firm with offices in New Mexico and Arizona. Lane said the legal fees will be divided between the cities involved. The lawsuit is being drafted and likely will be filed in the weeks ahead against the taxation and revenue department, according to Farmington City Attorney Jennifer Breakell.

Breakell said the tax and revenue department adjustments have ranged from $100,000 to $1 million. She said after Farmington submitted public records requests to the agency to see records related to the changes in the distributions, it was referred to confidentiality training to view the tax records. But Farmington officials still were not able to access those documents detailing why the adjustments are being made.

After the Monday meeting, Lane said the adjustments have not caused a cash flow problem for Bloomfield, but he said the city is mainly concerned about an apparent lack of accountability. He said the taxation and revenue department does not give a warning or an explanation when it takes back the money.

Breakell echoed Lane's statement that the lawsuit is not about cash shortfalls. She said it is about the ability to protect the city's budget and ensure that the tax and revenue department is following state law.

"We really feel like this lawsuit is about fairness," Breakell said.

Hannah Grover covers government for The Daily Times. She can be reached at 505-564-4652.

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