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State and Local Tax Blog

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Taxes in New York (TiNY) is a blog by the Hodgson Russ LLP State and Local Tax Practice Group. The weekly reports are intended to go out within 24 hours of the Division of Tax Appeals’ (DTA) publication of new ALJ Determinations and Tribunal Decisions. In addition to the weekly reports TiNY may provide analysis of and commentary on other developments in the world of New York tax law.  

Belated TiNY Report covering DTA cases issued November 1, 2018

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Was it something we said?

So, at about 11:00 last Friday we posted our Report grumbling about the death of DTA output over the last few weeks.  Then I went away for a long weekend and 7 ALJ Determinations magically appeared on the DTA’s website while I was away.  Ergo, it has taken a few days to get this report out to you.  Apologies. 

ALJ DETERMINATIONS

Matters of Nigri; Judge: Connolly; Division’s Rep: Kileen Davies; Taxpayer’s Rep: Isaac Sternheim; Review of Notice of Proposed Driver License Suspension Referral under Tax Law § 171-v.  These were two separate ALJ Determinations, for Albert Nigri and Lina Nigri, addressing Notices of Proposed Driver License Suspension for the same underlying 2013 personal income tax liability.  Petitioners failed to get the license suspension notice canceled at BCMS and then timely protested the conciliation order at DTA.  The Division moved for summary determination and Petitioners did not respond.  Maybe if the Nigris had read TiNY they would have seen the umpteen times we’ve made the point that one must allege one of the six statutory defenses to have a fighting chance in these types of cases.  But they didn’t. So, the Judge summarily sustained the Notices.     

Matter of McIntyre; Judge: Friedman; Division’s Rep: Christopher O’Brien; Taxpayer’s rep: pro se; Article 22.  Petitioner protested a Notice and Demand for personal income tax due and an income execution.  Taxpayers are prohibited from protesting Notices and Demands, and the Tax Law also does not provide hearing rights to challenge income executions.  Thus, DTA did not have jurisdiction to consider the petition, and on his own motion Supervising ALJ Friedman dismissed it.   

Matter of Herbert Bender Estate; Judge: Friedman; Division’s Rep: Mary Hurteau; Taxpayer’s Rep: pro se (administrator of the estate); Redetermination of a Deficiency or for Refund of Estate under Article 26.  Petitioner protested an Estate Tax Notice and Demand for the 2018 year.  Tax Law § 998 provides that the Surrogates Court has the exclusive jurisdiction to hear challenges to Estate Tax Notices of Deficiency or Notices of Disallowance.  Thus, DTA did not have jurisdiction to consider the petition, and on his own motion Supervising ALJ Friedman dismissed it.

Matter of Capobianco; Judge: Friedman; Division’s Rep: Mary Hurteau; Taxpayer’s Rep: pro se; Article 22.  The Division issued to Petitioner a Notice and Demand for personal income tax for the 2016 year, which Petitioner did not pay.  The Division docketed a warrant against Petitioner for that assessment.  Petitioner filed a DTA petition protesting the warrant, asserting that she did not receive any statutory documents such as the Notice of Deficiency.  The Judge determined that once the warrant was docketed, it became a lien and judgment for the unpaid tax, penalties, and interest, and a warrant is not a document giving Petitioner a right to a hearing at DTA.  Thus, DTA did not have jurisdiction to consider the petition, and on his own motion Supervising ALJ Friedman dismissed it.

Matter of Bruno; Judge: Friedman; Division’s Rep: Christopher O’Brien; Taxpayer’s Rep: pro se; Under Article 40 of the Tax Law.  Petitioner filed a DTA petition challenging a writ of error coram nobis (essentially an order of an appeals court to a trial court to consider whether facts not in the trial record might affect the outcome of the case) issued by the Appellate Division, Second Department on May 2, 2018 in connection with a tax crimes matter.  The DTA does not have jurisdiction to address criminal issues, so on his own motion Supervising ALJ Friedman dismissed the petition.  Seems like maybe someone was a little confused about the difference between the Court of Appeals and the Division of Tax Appeals.  Oops.

Matter of Apple Inc.; Judge: Law; Division’s Rep: David Gannon; Taxpayer’s Rep: Peter Faber, Mark Yopp, and Stephen Krantz; Articles 28 and 29.  The issue was whether Petitioner properly collected and remitted sales tax on qualifying device sales made during its 2011 and 2012 Back to School Promotion.  As part of the promotion, customers who purchased qualifying Apple computers or iPads received gift cards for either $100 or $50 depending on the product purchased.  The dispute resulted from an alleged tax underpayment disclosed by a one-day test period audit where customer invoices from Petitioner’s retail stores were reviewed and the invoice subtotals multiplied by the applicable tax rate.  Petitioner explained that it computed tax on the price of the qualifying device net of the value of the gift card.  The Judge found that the promotion was structured such that the gift card was required to be purchased, and a discount against the taxable portion of the invoice was applied for the face value of the gift card, because Petitioner’s point of sale system could not process the transaction otherwise.  Gift cards are not subject to sales tax, so if the customer purchased the gift card with the device, then there would be sales tax due only on the price of the device.  But if, as the Judge found, the customer received the gift card “for free” then sales tax was required to be collected on the value of the device without offset for the value of the gift card.  The Judge reviewed the promotion terms and conditions and concluded that the promotion required the purchase of a qualifying device in order to receive a gift card for free.  So Judge Law sustained the Notice of Determination.  Petitioner argued credibly that such a ruling would improperly result in double tax.  But the Judge found that the sale of the device and subsequent purchases using the gift cards were separate transactions and therefore double taxation was permissible.  Given our pro-taxpayer leanings, it would be easy for us to line up behind Petitioner’s position.   But there has been debate in our office regarding the proper treatment of the novel issues in this case, and a consensus has not yet developed.  So we hope Petitioner takes the dispute onward to the Tribunal for further analysis. 

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