Court Opinion

ID: 5885237
Source: CourtListenerOpinion
Date Created: 2022-01-13 02:29:53.107004+00
Date Added: 2024-06-11T08:45:09.123238
License: Public Domain

OPINION OF THE COURT
Kane, J. P.
The pertinent stipulated facts are as follows. Petitioner owns and operates a chain of retail department stores in the States of New York, New Jersey, Connecticut, Massachusetts and Pennsylvania. In 1976, the State Department of Taxation and Finance issued a notice of determination and demand for sales and use taxes due for the period September 1, 1971 through August 31, 1974. This assessment, as is relevant to this case, was based on the purchase of merchandise by non-New York residents (nonresidents), as gifts for New York residents, at petitioner’s out-of-State stores. These gifts were shipped by those stores to the New York donees via common carrier at the request of the nonresident purchasers.
Petitioner challenged the assessment, claiming that it was not liable for sales or use taxes based upon these out-of-State sales to nonresidents. The State Tax Commission upheld the assessment as a sales tax and this CPLR article 78 proceeding ensued.
Applying regulations promulgated subsequent to the tax years at issue, the Tax Commission noted in its decision: "That the New York sales tax is both a 'transactions tax’ and a 'destination tax’ (20 NYCRR 525.2 [a] [2] and [a] [3]). Liability for the sales tax arises at the time of the transaction (20 NYCRR 525.2 [a] [2]). Moreover, '* * * the point of delivery or the point at which possession is transferred by the vendor to the purchaser or designee controls both the tax incident and the tax rate’ (20 NYCRR 525.2 [a] [3]). Since the merchandise was transferred to the purchasers’ designees in New York, the Audit Division properly determined that New York sales tax should have been collected” (emphasis supplied). Petitioner *43contends that the Tax Commission’s interpretation of the above-referenced regulations improperly extended the application of the State sales tax statute beyond that intended by the Legislature. In essence, petitioner asserts that the receipt of a gift by a New York resident, purchased out of State by a nonresident, does not constitute a "sale” subject to taxation under the Tax Law. We agree.
It is well established that the construction given to statutes and regulations by the agency responsible for their administration will, if not irrational or unreasonable, be upheld (Matter of Howard v Wyman, 28 NY2d 434, 438). However, where, as here, the question is merely one of statutory reading and analysis dependent only on accurate apprehension of legislative intent, there is little reason to rely on the administrative agency’s expertise (see, Kurcsics v Merchants Mut. Ins. Co., 49 NY2d 451, 459; see also, Matter of Trump-Equitable Fifth Ave. Co. v Gliedman, 57 NY2d 588, 597). Accordingly, an administrative agency’s expertise and interpretive regulations are given much less weight (Kurcsics v Merchants Mut. Ins. Co., supra, p 459). Moreover, it is settled that when exercising its rule-making power, an administrative agency may not extend or enlarge, by interpretation, the meaning of the statutory language to apply to situations not intended to be covered by the statute (Matter of Trump-Equitable Fifth Ave. Co. v Gliedman, supra, p 595; see, 51 NY Jur, Sales & Use Taxes, § 4, at 351 [1966]). The agency also cannot promulgate a rule out of harmony or inconsistent with the ordinary meaning of the statutory language (Matter of Trump-Equitable Fifth Ave. Co. v Gliedman, supra). Such regulations would be contrary to the statute and void (see, 51 NY Jur, Sales & Use Taxes, § 71, at 399-400 [1966]). Furthermore, sales tax laws and regulations are strictly construed in favor of the taxpayer (Matter of Petrolane Northeast Gas Serv. v State Tax Commn., 79 AD2d 1043, 1044, lv denied 53 NY2d 601). Consequently, if doubt exists as to the meaning or application of a tax law, it must be resolved in favor of the taxpayer (Matter of American Cyanamid & Chem. Corp. v Joseph, 308 NY 259, 263; Matter of Higgins & McLaughlin v New York State Tax Commn., 109 AD2d 1029, 1031).
In light of the above, we annul the Tax Commission’s determination on the ground that its interpretation of its regulations in this case improperly extended and enlarged Tax Law § 1105 (a) to apply to situations not intended to be covered by the sales tax law. Tax Law § 1105 (a) imposes a tax *44on "[t]he receipts from every retail sale of tangible personal property” (emphasis supplied). In this regard, the statute defines sale, selling or purchase as: "Any transfer of title or possession or both * * * in any manner or by any means * * * for a consideration, or any agreement therefor” (Tax Law § 1101 [b] [5]; emphasis supplied). The. statute itself is clear. The tax is imposed on the sale of the property. Here, the Tax Commission attempts to characterize the receipt of a gift as the transaction constituting a sale. However, it is submitted that an ordinary person reading this statute (see, Howitt v Street & Smith Pub., 276 NY 345, 351) would conclude that the actual "sale” occurred not in New York, but in the States where the nonresidents purchased the goods. It is an improper extension of the word "sale” to conclude that a sale occurred when a person received merchandise as a gift. Such a donee exchanged no consideration for the item. Consequently, the actual transaction constituting a sale occurred when the nonresident paid for the goods in petitioner’s out-of-State stores and not when the goods were received by the donees in New York (see, 51 NY Jur, Sales & Use Taxes, § 43, at 382 [1966]).
Although it appears that a sales or use tax can be imposed on a transaction involving a purchaser’s designee, this situation usually arises where the designee is some type of commercial agent for the purchaser, i.e., a purchasing agent or a common carrier (see, e.g., Matter of Savemart, Inc. v State Tax Commn., 105 AD2d 1001, 1003, lv denied 65 NY2d 604). Here, the New York donee is not a true agent of the nonresident. He is merely a passive beneficiary of a gift.
Moreover, even if the receipts of these gifts could be construed as constituting a "sale” for sales tax purposes, such application is not clear from the wording of the statute and the issue should be resolved in favor of the taxpayer. If the Legislature intended to reach such transactions, it should have clearly so stated. Lending support to this conclusion is the fact that the Tax Commission had never before taxed such a transaction. The failure to consider a transaction taxable for a lengthy period of time has been held to create a presumption in favor of the taxpayer (see, New York State Cable Tel. Assn. v State Tax Commn., 59 AD2d 81). The Tax Commission’s determination should therefore be annulled. Having reached this conclusion, we find it unnecessary to address petitioner’s remaining contentions.