Source: https://supreme.justia.com/cases/federal/us/313/283/
Timestamp: 2019-04-21 14:15:51+00:00

Document:
1. The question whether an obligation to a State is a tax entitled to priority under § 64 of the Bankruptcy Act is a federal question. P. 313 U. S. 285.
2. The Bankruptcy Act is of nationwide application, and § 64 thereof is not to be construed or varied by the particular characterization by local law of the state's demand. P. 313 U. S. 285.
Provisions of the state law creating the obligation and decisions of the state courts interpreting them are resorted to not to learn whether they have denominated the obligation a "tax," but to ascertain whether its incidents are such as to constitute a tax within the meaning of § 64.
3. The tax imposed by the New York City Sales Tax Law is a tax on the seller within the meaning of § 64 of the Bankruptcy Act, as well as on the buyer, since both are made liable for payment in invitum and subject to distraint of their property for its collection. P. 313 U. S. 287.
It is not any the less a tax laid on the seller because the statute places a like burden in the alternative on the purchaser, or because it affords to the seller facilities, of which he did not avail himself, to pass the tax on to the buyer.
Certiorari, post, p. 552, to review the affirmance of an order of the District Court refusing priority of payment to a tax claim asserted by the City of New York under § 64 of the Bankruptcy Act.
The question is whether the obligation imposed upon sellers by a New York City sales tax (No. 20, Local Laws of New York City, 1934, p. 143, as amended, No. 24, Local Laws of New York City, 1934, p. 164) to pay a tax laid upon receipts from sales of personal property and collectible alternatively from the buyer or the seller is a "tax" entitled to priority of payment in bankruptcy under § 64 of the Bankruptcy Act.
Petitioner, New York City, filed its claim against the estate of the bankrupt for taxes on sales of tangible property by the bankrupt during the five years following January 10, 1934. In the proceeding before the referee, it appeared that the bankrupt had failed to collect most of the taxes from its buyers as required by the applicable law, and that the sole issue was with respect to the right of the City to priority of payment of the City's claim over those of general creditors. The District Court set aside the referee's order allowing the priority, and the Court of Appeals for the Second Circuit affirmed, In re National Studios, Inc., 118 F.2d 329, 330, holding that the sum claimed was not a tax, but that the "bankrupt was liable to the city as a taxpayer who owes a tax or as a tax collector who owes as a debt the amount of taxes collected or to be collected." We granted certiorari, 313 U.S. 552, because of the suggested failure of the court below to follow our decision in New York City v. Goldstein, 299 U.S. 522, reversing Matter of Lazaroff, 84 F.2d 982, and of the asserted conflict in principle of the decision below with that of the Court of Appeals for the Tenth Circuit in Barbee v. Oklahoma Tax Commission, 103 F.2d 114.
Section 64 of the Bankruptcy Act, as amended June 22, 1938, 52 Stat. 840, 874, awards priority of payment in bankruptcy to "taxes legally due and owing by the bankrupt to the United States or any State or any subdivision thereof. . . ." Whether the present obligation is a "tax" entitled to priority within the meaning of the statute is a federal question. New Jersey v. Anderson, 203 U. S. 483, 203 U. S. 491; cf. Burnet v. Harmel, 287 U. S. 103, 287 U. S. 110; Palmer v. Bender, 287 U. S. 551, 287 U. S. 555; cf. United States v. Pelzer, 312 U. S. 399. Intended to be nationwide in its application, nothing in the language of § 64 or its legislative history suggests that its incidence is to be controlled or varied by the particular characterization by local law of the state's demand. Hence, we look to the terms and purposes of the Bankruptcy Act as establishing the criteria upon the basis of which the priority is to be allowed.
As was pointed out in New Jersey v. Anderson, supra, 203 U. S. 491, the priority commanded by § 64 extends to those pecuniary burdens laid upon individuals or their property, regardless of their consent, for the purpose of defraying the expenses of government or of undertakings authorized by it. The particular demand for which the City now claims priority of payment as a tax is created and defined by state enactment. We turn to its provisions, and to the decisions of the state courts in interpreting them, not to learn whether they have denominated the obligation a "tax," but to ascertain whether its incidents are such as to constitute a tax within the meaning of § 64. Cf. Morgan v. Commissioner, 309 U. S. 78, 309 U. S. 80-81, and cases cited; United States v. Pelzer, supra; Ryerson v. United States, 312 U. S. 405.
"all taxes for the period for which a return is required to be filed shall be due from the vendor and payable to the comptroller on the date limited for the filing of the return for such period, without regard to whether the return is filed or whether the return which is filed correctly shows the amount of receipts and the taxes due thereon."
But, if the seller fails to collect the tax, § 2 also makes it the duty of the purchaser to file a return with the Comptroller, and commands that "such tax shall be payable by the purchaser directly to the Comptroller."
action for its recovery or, as an alternative remedy, the Comptroller is authorized to issue a warrant directed to the sheriff of the county, commanding him to levy upon and sell the real and personal property of the seller or the purchaser and apply the proceeds to the payment of the tax. In construing these provisions, the New York Court of Appeals has held that, while the Comptroller may proceed under § 2 to collect the tax from the purchaser if he has not paid it to the seller, see Matter of Kesbec, Inc. v. McGoldrick, 278 N.Y. 293, 16 N.E.2d 288, the duty to pay the tax is also laid upon the seller whether he has in fact collected it and regardless of his ability to collect it from the buyer. Matter of Atlas Television Co., 273 N.Y. 51, 6 N.E.2d 94; Matter of Brown Printing Co., Inc., 285 N.Y. 47, 32 N.E.2d 787.
the tax on to the buyer. While an action in debt may be resorted to for the recovery of a tax, it is evident that, in this case, the bankrupt is liable to the state only because it owes a tax. Price v. United States, 269 U. S. 492, 269 U. S. 500; Milwaukee County v. White Co., 296 U. S. 268, 296 U. S. 271.
In New York City v. Goldstein, supra, we reversed per curiam, citing Matter of Atlas Television Co., supra, a decision of the Court of Appeals for the Second Circuit that a claim of the City for payment of tax by the seller was not entitled to priority under § 64 of the Bankruptcy Act. The court below attributed our reversal to the circumstances that at that time, though not now, § 64 allowed priority to debts entitled to priority under state law, and to the decision of the state court in the Atlas case, that, upon a general assignment for the benefit of creditors made under state law a claim against the seller for the sales tax was entitled to priority. But, in placing this interpretation upon our decision in the Goldstein case, the court below overlooked the fact that the Court of Appeals ruled in the Atlas case that an ordinary debt due the state is not entitled to priority by state law, and it sustained the priority in that case only on the ground that the demand was for a tax, the unqualified duty to pay which was placed by the statute on the seller. This interpretation of the state statute was reaffirmed by that court in the Matter of Brown Printing Co., Inc., supra. For reasons already given, the duty imposed upon the seller by the taxing act thus construed is also a tax within the meaning of § 64 of the Bankruptcy Act.

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