TiNY Report for April 16, 2024

There are two Determinations and two Orders this week. Of the three timies, two were resolved against the Division, which is statistically unusual. The other case involves the State’s dubious sales tax acceleration rule for motor vehicle leases. This case shows another instance in which New York is unjustly enriched by the lease rule which, in operation, results in New York collecting sales tax on lease payments even when the vehicle is registered outside of the State for extended periods during the lease. That’s just wrong.

And this week TiNY continues on its mission to disprove the adage that “sarcasm is the lowest form of wit” by offering a pun that would fit easily under the belly of even the most gravity-bound sarcastic comment.    

Determinations

Matter of Brogan-Dillon (ALJ Chu-Fong, April 4, 2024); Div’s Rep. Elizabeth Lyons, Esq.; Petitioner’s Rep. Jennifer Koo, Esq.; Articles 28 and 29/Timy (Zoe Peppas).

The Division mailed a notice of determination on August 12, 2013, to Petitioner at his address in Brooklyn, New York. Petitioner did not request a conciliation conference with BCMS until August 11, 2021, almost nine years later. That request was dismissed by BCMS as untimely.

Petitioner then filed a timely petition with the Division of Tax Appeals protesting the order of dismissal, and included a sworn affidavit, photocopy of a social security card with Petitioner’s name, and an alleged consolidated statement of tax liabilities dated July 21, 2021.

The notice had asserted additional tax due from Petitioner in his capacity as owner and responsible person of a Brooklyn business called “Miracle Grill.” The business had filed a form DTF-17-R application to renew Miracle Grill’s sales tax certificate of authority in 2009 which listed Petitioner as owner. On the application, Petitioner had listed the fourth digit of his social security number as a “3,” but the social security card he provided to the Division and his affidavit both stated the fourth digit was a “5.”

Petitioner’s argument centered around the fact that when he began receiving notices from the Division, he called and gave the representative on the phone his social security number and was informed that “there were no tax assessments associated with [his] name and social security number.” So naturally, Petitioner thought the assessments he received were in error. Eventually, Petitioner started receiving notices again. So, Petitioner checked his on-line account with the Department, and it also showed no tax assessments were associated with his name and social security number, and a July 2021 statement from the Department indicated Petitioner had no unpaid bills at the time. 

One expects that the Department’s failure to report that Petitioner had liabilities was due to the erroneous “3” he reported in his social security number on the form DTF-17-R.   

Petitioner argued summary determination should be granted in his favor, as he was prejudiced against his ability to defend the notice, and that his memories of the assessment period are now vague. The Division cross-moved for summary determination and provided affidavits, affirmations, and records showing the name and address the notice was sent to were Petitioner’s.

On the timeliness issue the Division introduced adequate proof of its standard mailing procedures and that those procedures were followed, regardless of the fact that Petitioner mistakenly assumed the notices were sent in error.

Petitioner’s motion for summary determination was denied, and the Division’s motion for summary determination was granted.   

TiNY wonders whether Petitioner could have made a meritorious argument for estoppel under the Harry’s Exxon (DTA No. 801193) line of cases. Certainly, it seems like the three prerequisites to application of the doctrine were present: 1. A writing by the Division, 2. reasonably relied on by a taxpayer, 3. to their detriment. But estoppel is an equitable doctrine, and maybe a judge would find that Petitioner did not have “clean hands” since it was his listing of the wrong social security number on the form DTF-17-R that was the cause of the Department’s misidentification of Petitioner’s liabilities.

Matter of Taubman (ALJ Baldwin, April 4, 2024); Div’s Rep. Aliza Chase, Esq.; Pet’s Rep. pro se; Articles 28 and 29/Auto lease (Chris Doyle).

Petitioner leased a truck for 42 months while he was living in Pennsylvania. He paid $44.55 of Pennsylvania sales tax with each of his lease payments. 

One year into the lease, Petitioner moved to New York. When he went to register the truck in New York, the DMV required Petitioner to pay New York sales tax of $972, which was the sales tax due on the lease payments remaining unpaid at that time. About a half year after moving to New York, Petitioner moved back to Pennsylvania.

Shortly after the move, Petitioner filed a claim for refund for $651.69, the amount of New York sales tax incurred for lease payments that were unpaid at the time of his move back to Pennsylvania. The refund claim was denied by the Division on the basis that there is no provision to repay the sales tax on “pre-paid” lease payments should the car be taken out of New York prior to the termination of the lease. This petition followed, and after issue was joined, the Division moved for summary determination and Judge Baldwin granted the motion.

It appears the Judge properly applied the law. But the law is a bad law. New York should absolutely be able to tax vehicles registered in New York (with credits for taxes paid to other states for vehicles used outside of the state prior to registration here). But New York’s vehicle lease rules are designed so that New York gets at least the sales or use tax to which it is entitled, and more than it’s entitled to if: 1. the owner of the vehicle moves out of state during the lease, or 2. the vehicle is destroyed during the lease, or 3. the lease is assigned to another person during the lease term. The rules may be legal (but maybe not constitutional since the rules discriminate on their face based on residency and the law may not qualify as a valid compensatory tax), but the operation of the rules indicates that New York’s reputation as a “tax-happy” state is well-deserved. Taking the Judge’s ruling to its illogical conclusion, if Petitioner moved back to New York again (because it worked out so well for him the first time!), he’d be required to pay the tax on the then-remaining lease payments again.

Orders

Matter of Brogan-Dillon (ALJ Chu-Fong, April 4, 2024); Div’s Rep. Elizabeth Lyons, Esq.; Petitioner’s Rep. Jennifer Koo, Esq.; Articles 28 and 29/Atypical timy (Zoe Peppas).

Are you seeing double? Didn’t we just report a Brogan-Dillon determination, above?

No, and yes. The above determination was for periods after the periods addressed in this order.    

The Division mailed a notice of determination on June 28, 2010, to Petitioner. Petitioner did not request a conciliation conference with BCMS until August 11, 2021, eleven years later. That request was dismissed by BCMS as untimely as it was not filed within 90 days of the notice.

Petitioner filed a timely petition with the Division of Tax Appeals protesting the order of dismissal, including a sworn affidavit, photocopy of a social security card with his name, and an alleged consolidated statement of tax liabilities dated July 21, 2021.

Petitioner, as a responsible person, had filed a form DTF-17-R application to the sales tax certificate of authority for Petitioner’s business in 2009. That form listed Petitioner as an owner. On the application, Petitioner listed the fourth digit of his social security number as a “3,” but the social security card he provided to the Division and his affidavit both stated the fourth digit was a “5.”

As Petitioner began receiving notices from the Division, he called and gave the Department’s representative on the phone his social security number and was informed that “there were no tax assessments associated with [his] name and social security number,” leading Petitioner to believe the assessments he received were in error. Eventually, Petitioner started receiving notices again. According to his online account with the Division, no tax assessments were associated with his account, and the July 2021 statement indicated no unpaid bills were associated with Petitioner’s actual social security number.

Petitioner argued summary determination should be granted in his favor, as he was prejudiced against his ability to defend the notice because his mind was “not as sharp as it was back then.” 

Petitioner’s motion for summary determination was denied as the record could not establish key facts such as the validity of the social security card, accuracy of the social security number, and whether Petitioner contacted the Division and relied upon the advice to his detriment.

Why didn’t the Division move to dismiss this case too? I don’t know, but it wouldn’t surprise me to see a Division motion for summary determination based on timeliness on this case any day now.

Matter of Mascara (ALJ Maloney April 4, 2024); Div’s Rep. Stefan Armstrong, Esq.; Pet’s Rep. pro se; Article 22/Atypical timy (Chris Doyle)

Oh boy. I try to avoid puns. But sometimes the set-ups are too perfect, and I just can’t resist.

The Division proved its standard mailing practices for issuing six Notices of Deficiency to Petitioner. However, the Division did not prove that the practices were followed by the Division in this case because the dates on the post marks on a few of the pages of the certified mailing records (CMRs) submitted into evidence were smudged and thus illegible.

So, Judge Maloney denied the Division’s motion to dismiss or for summary determination. And if TiNY had headlines for the cases it summarizes, for this one it would be “SMUDGED DATE RUINS MASCARA.”   

Remember, the TiNY editorial staff can’t hear you groan over the internet.

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