Case Name: Herzog Brothers Trucking, Inc., Also Known as Herzog Brothers, Inc., et al., Respondents, v. State Tax Commission et al., Appellants
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1986-07-31
Citations: 122 A.D.2d 518
Docket Number: 
Parties: Herzog Brothers Trucking, Inc., Also Known as Herzog Brothers, Inc., et al., Respondents, v State Tax Commission et al., Appellants.
Judges: 
Reporter: Appellate Division Reports
Volume: 122
Pages: 518–522

Head Matter:
Herzog Brothers Trucking, Inc., Also Known as Herzog Brothers, Inc., et al., Respondents, v State Tax Commission et al., Appellants.

Opinion:
— Casey, J.
Appeal from an order of the Supreme Court at Special Term (Kahn, J.), entered March 3, 1986 in Albany County, which granted plaintiffs' motion for a preliminary injunction.
Plaintiff Herzog Brothers Trucking, Inc. (Herzog) is a Pennsylvania corporation engaged in the wholesale and retail distribution and sale of motor fuels. In June 1984, wholesale distribution of motor fuels was made to the Seneca Nation of Indians on the Allegany and Cattaraugus Reservations, and sales were made to authorized retail establishments located on the reservations. These distributions and sales are the only ones made by Herzog in this State.
Prior to June 1, 1985, sales taxes were collected at the time motor fuels were sold to the ultimate consumer and the motor fuel tax was collected upon the first sale by the distributor (see, Tax Law former arts 12-A, 28). However, the Indian retailers claiming exemption from State taxation refused to pay the motor fuel tax (Tax Law art 12-A) or sales tax (Tax Law art 28). Because non-Indians were driving to the reservations and purchasing motor fuels and avoiding the payment of taxes, a statutory amendment was enacted on June 1, 1985 (L 1985, ch 44, § 20, adding Tax Law § 1102). In order to deter this tax evasion, the amendment imposed taxes at the time the fuel is imported or first sold (Tax Law § 1102 [a] [i], [ii]). As amended, the pertinent provisions of the Tax Law provide that an excise tax (Tax Law § 284 [1]) and a sales tax (Tax Law § 1102 [a]), except as prohibited by the US Constitution and the laws of the United States enacted pursuant thereto, are imposed on the importation of motor fuels by a distributor of such fuels. Both the motor fuel and sales taxes are then passed through to the retailer and are ultimately to be borne by the retail consumer (see, Tax Law § 289-c [1], [2]; § 1102 [d]; § 1132 [a]; § 1133 [a]). All such fuel imported or sold in this State is presumed to be subject to the motor fuel tax (Tax Law § 285-a). If the distributor fails to collect the tax, the purchaser of the fuel is required to remit the tax (Tax Law § 284 [3]; § 1102 [b]). Every person who imports or sells motor fuel is also required to register (Tax Law § 283 [1]; § 1134), keep detailed records of his sales (Tax Law § 287, 1136) and post bonds or deposit securities "to secure the payment of any sums due from such distributor" (Tax Law § 283 [3]). The bonding requirement appears to apply only to the distributors of motor fuel, while the other requirements apply to both distributors and retailers of motor fuels. The Tax Law further provides for a refund or credit for any tax which is collected from or paid by a person or entity which is exempt from such taxation (see, Tax Law § 289-c, 1139). The assessment in this case against Herzog is for past sales covering the period from June 1, 1984 to May 31, 1985.
In October 1984, defendants began assessing motor fuel tax and sales tax against Herzog with regard to the past sales. These assessments approximated $480,000, exclusive of penalties and interest. Herzog filed petitions challenging this assessment, claiming exemption because all their sales were to Indians or Indian reservations. In November 1985, while administrative proceedings were still pending, the instant declaratory judgment action was commenced by Herzog and its shareholders seeking a declaration of unconstitutionality of the taxes and the procedures employed to collect them. Subsequently, plaintiffs moved for a preliminary injunction to restrain defendants from taking any action in regard to imposing or collecting the taxes. Special Term granted the preliminary injunction and fixed an undertaking of $250. This appeal by defendants followed.
To obtain a preliminary injunction, the moving party must demonstrate (1) a likelihood of success on the merits, (2) irreparable injury if the relief is not granted, and (3) a balancing of the equities in his favor (Clark v Cuomo, 103 AD2d 244, 245). When the injunction is sought to restrain the enforcement of a tax, it should be granted only in the most unusual cases (Grant Co. v Srogi, 52 NY2d 496, 517). In their application, plaintiffs have not demonstrated their clear entitlement to the relief that they seek.
Facially, the pertinent statutory provisions do not appear unconstitutional. Although Federal law prohibits the imposition of State taxes on Indians who are members of a reservation (Central Mach. Co. v Arizona Tax Commn., 448 US 160), a State may impose nondiscriminatory taxes on non-Indian customers of Indian retailers who do business on the reservations (Moe v Salish & Kootenai Tribes, 425 US 463; see, California State Bd. of Equalization v Chemehuevi Indian Tribe, 474 US —, 106 S Ct 289) and may further impose the "minimal burden" of collecting the taxes from a non-Indian consumer on an Indian tribe or retailer as long as the legal incidence of the taxes falls on non-Indian purchasers (Moe v Salish & Kootenai Tribes, supra, p 483). This is precisely what the above statutory provisions require and allow. By their wording, the statutes appear to apply with an even hand in a fair, impartial and permissibly constitutional manner sufficient to meet the attack made by plaintiffs herein.
The critical question, of course, and the one which divides this court, is whether the burden of total prepayment initially imposed on Herzog as the distributor, which is subject ultimately to a refund or credit if the sales have been made to exempt entities or persons, imposes a burden on plaintiffs that exceeds the permissible "minimal burden of collection" standard. In our opinion, plaintiffs' application for a preliminary injunction does not demonstrate any such excess. Plaintiffs have, therefore, failed to establish the clear likelihood of success on the merits required for a showing of their entitlement to a preliminary injunction. Accordingly, their application for such injunction should be denied and the order of Special Term reversed.
Order reversed, on the law, without costs, and motion denied. Mahoney, P. J., Casey and Levine, JJ., concur.