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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.  

TiNY Report for December 20, 2018 (covering DTA cases issued December 13)

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This week we had 4 ALJ Determinations and 4 ALJ Orders.  One of the Orders is worthy reading.  Not even coal in the stocking from the Tribunal.  Happy Holidays to all of our readers.  


Matter of Liaros; Judge: Friedman; Division’s Rep: Hannelore Smith; Taxpayer’s Rep: pro se; Articles 28 and 29.  Petitioners filed a DTA petition protesting a consolidated statement of tax liabilities issued to Theodore’s Original Charcoal Broiled Hot.  That entity to which the statement was addressed was not the Petitioner in this matter, so the Judge dismissed the petition.  This is not the last we will hear today from the Liaroses (see below).

Matter of Wayne Fueling Systems LLC; Judge: Friedman; Division’s Rep: Stephanie Scalzo; Taxpayer’s Rep: Tiffiny Stuart; Articles 28 and 29.  The Division proved proper mailing of the Notice of Determination to Petitioner’s last known address.  Petitioner filed its DTA petition after the 90-day deadline expired, so the Judge dismissed it as untimely filed.

Matter of Harvest Trans Inc.; Judge: Friedman; Division’s Rep: Frank Nuara; Taxpayer’s Rep: Vincent Frammigen; Revisions of a Determination or for Refund of Highway Use Tax under Article 21.  The Division proved proper mailing, yadda, yadda, yadda.  Case dismissed on timeliness grounds.

Matter of Cruz; Judge: Russo; Division’s Rep: Christopher O’Brien; Taxpayer’s Rep: Waverly Lane; Article 22.  Petitioner claimed NYS and NYC earned income credits, an empire state child credit, and a NYC school tax credit on her 2014 and 2016 NYS returns.  The Judge determined that the record made clear Petitioner failed to substantiate her business income as reported for the tax years at issue, so she was not entitled to the earned income credit for 2014 and 2016.  Petitioner also failed to prove she was entitled to the empire state child tax credit because she did not provide proof that the children she claimed as qualifying children had the same principal place of abode as her for more than half of the year.   

There have been an increasing volume of these earned income/child care credit cases recently.  It seems to us that the petitioners lose more of these types of cases than other types of cases, and it is difficult for us to ascertain why that is.   Are the credits being claimed erroneously  by self-preparers?  Are the Petitioners poorly represented at the hearing?  Or is there some other factor at play (e.g. nefarious tax preparers)?  


Matter of Degmor, Inc.; Judge: Gardiner; Division’s Rep: Michael Hall; Taxpayer’s Rep: Robert Singer; Articles 28 and 29.  The Division established its standard mailing procedures to mail the Notice of Determination to Petitioner at its last known address.  However, a copy of the Notice was sent to Petitioner’s representative at an address listed on an outdated Power of Attorney, which was the wrong address.  So, the Division failed to prove its standard mailing procedure was followed to mail the Notice to the representative.  To show actual receipt by the representative, the Division showed the postal service did in fact deliver a copy of the Notice with a certified control number, but the confirmation from the USPS provided an illegible signature of the recipient and the address of the recipient was incomplete.  As a result, the Judge determined the Division failed to prove actual receipt, so the 90-day limitation period to file a petition or BCMS request was tolled, and the Division’s motion for summary determination was denied. 

Matters of Liaros; Judge: Friedman; Division’s Rep: Hannelore Smith; Taxpayer’s Rep: pro se; Articles 28 and 29.  We told you there would be more…. 

There were two (allegedly late-filed) petitions, two matters and two Orders, one for Theodore Liaros and one for Beth Ann Liaros, addressing the same underlying issues.  Notices of proposed driver’s license suspension were issued to Petitioners.  The Notices were based on a collection case, which was based on several underlying assessments.  Petitioners lost at BCMS and a conciliation order was issued sustaining the Notice.  Afterwards, the Division issued to Petitioners updated consolidated statements of tax liability, which included additional assessments.  Petitioners filed DTA petitions protesting the conciliation order and the updated consolidated statement of tax liabilities. 

On the timeliness issue, the Judge determined the Division established proper mailing of the conciliation order and that Petitioners did not timely file their petition.  However, there were additional tax liabilities included in the updated consolidated statement of liabilities issued after the conciliation order.  The Judge determined it was unclear as to whether those liabilities were fixed and final, so it was possible that those Notices were still susceptible to administrative challenge.  Thus, the Judge sustained the Notice of Intent to Dismiss on timeliness grounds, except with regards to the additional assessments.  The Division was directed to file its answers to the petitions with respect to those additional assessments. 

Matter of Carlson; Judge: Law; Division’s Rep: Stephanie Scalzo; Taxpayer’s Rep; Gary Kanaley; Articles 28 and 29.  This order involved competing motions for summary determination.

In November 2012, Best Wings LLC (“Best Wings”) filed two bulk sale notifications, reporting it purchased the business assets of The Village Casino from Carlson Food Enterprises, Inc. (“Carlson Food”) and the business assets of the Wing City Grille from Car-Kid Development, Inc. (“Car-Kid”).  Both notifications were signed by Petitioner as managing member of Best Wings.  In 2013, The Division issued two Notices of Determination to Best Wings asserting sales tax due, the amounts of which represented the outstanding sales tax owed by Carlson Food and by Car-Kid.  The Notices indicated that Best Wings was liable as a bulk sale purchaser.  In December 2012, Professional Hospitality LLC (“Professional Hospitality”) filed a bulk sale notice reporting that it purchased the business assets associated with The Village Casino from Best Wings.  Petitioner signed that bulk sale notice as managing member of Professional Hospitality.  On the same day, Great Food Great Fun LLC (“Great Food”) filed a bulk sale notice reporting that it purchased the business assets associated with Wing City Grille from Best Wings.  Petitioner signed that bulk sale notice as managing member of Great Food.  It’s tough to tell the players without a program, but it looks as if Petitioner owned all of the teams in this league.  In addition to Petitioner signing just about every tax form, Professional Hospitality’s and Great Food’s mailing address, telephone number, trade name, and business locations were identical to that of Best Wings. 

In 2013, the Division issued a Notice of Claim to Purchaser to both Professional Hospitality and Great Food.  The Division later issued Notices of Determination to Professional Hospitality and to Great Food as bulk sale purchasers for the sales tax owed by Best Wings.  Best Wings filed a BCMS request protesting the Notices issued to it.  Petitioner, on behalf of Best Wings, signed consents settling those Notices.  In 2015, the Division issued Notices of Determination to Petitioner as a responsible person of Great Food and of Professional Hospitality for sales taxes due.  Those Notices were made available to Petitioner electronically (and not via certified mail).  In 2017, Professional Hospitality and Great Food filed for bankruptcy, the filings signed by Petitioner as sole member of both entities. 

Petitioner moved for summary determination arguing (a) that it was inappropriate for the Division to issue the Notices electronically, (b) that Petitioner could not be held liable as a responsible person for the bulk sale liabilities of certain underlying purchasing entities that he allegedly controlled, and (c) that the value of the assets transferred to the entities at issue was nil and therefore the bulk sales liability should also be nil.  The Division cross moved for summary determination.  

First, the Judge determined the Division properly furnished the Notices of Determination to Petitioner by electronic means.  The Division established it obtained Petitioner’s authorization for communication electronically when Petitioner checked the box for such authorization at the time he signed up for an online account.  Petitioner also received emails alerting him of the Notices. 

Editorially, we again note our discomfort with electronic furnishing of statutory notices.  1.  Computer systems are not infallible, nor are they immutable; 2.  Accepting that web pages and programs change and that there may be computer glitches, there seems to be significant holes in the proof of Petitioner’s election to accept electronic notification and whether the emails intended for Petitioner were actually received; and 3. Sending me an email telling me where I can get my Notice doesn’t really seem like “furnishing” me the notice.  A fight for another day, I’m sure.

Next, Petitioner argued the Division was not authorized to issue Notices of Determination for a seller’s outstanding sales tax liabilities to the responsible person of a purchaser.  The Judge rejected Petitioner’s argument as a matter of law.  Judge Law determined that the Tax Law specifically authorizes that a bulk sale transferee can be held liable for the bulk sale transferor’s sales tax, and provides the procedure through which a purchaser may avoid such liability.  Best Wings failed to comply with the bulk sale notification requirements prior to the purchase of The Village Casino and Wing City Grille.  Professional Hospitality and Great Food also failed to comply with those requirements prior to the purchase of The Village Casino and Wing City Grille.  The Judge also found that the statute and Tribunal case law (e.g. Matter of Santo) impose per se responsible person liability on LLC members like Petitioner.  So, on the first two issues, the Judge granted summary determination in the Division’s favor. 

A bulk sale purchaser’s liability is limited to the greater of the purchase price or the fair market value of the business assets sold or transferred.  Petitioner argued that no consideration changed hands on the respective transfers and that the fair market value of the assets transferred was zero.  The Division relied on the sales prices indicated by Professional Hospitality’s and Great Food’s bulk sale notifications.  The Judge determined that other than the bulk sale notifications filed by Best Wings, Professional Hospitality, and Great Food, the record was devoid of any details of the transactions, including any contracts.  Though there were sales prices listed in the notifications, the Judge noted there were clearly facts in dispute as to whether any consideration changed hands and of the fair market value of the assets transferred.  Thus, because of the lack of evidence regarding relevant factual issues, the Judge denied both Petitioner’s and the Division’s motions for summary determination on the issue. 

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