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State and Local Tax Blog

About This Blog

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 July 18, 2018 (covering DTA cases from July 12)

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Welcome to this week’s edition of TBR’s* “Good Beach Reads” with your hosts Chris Doyle and Nara Tjitradjaja.  Today we review two Tribunal Decisions and two ALJ Determinations. 

Let’s start with the Determinations.

ALJ DETERMINATIONS

Matter of All Ways Concrete Pumping, LLC; Judge: Maloney; Division’s Rep: Anita Luckina; Taxpayer’s Rep: Michael Stanczyk; Articles 28 and 29.  In this Determination in the suspense genre, the reader follows a husband/wife business as they buy four concrete pumping trucks and one concrete pumping trailer without paying New York sales tax.  The Judge shows her creative streak by coming up with J.K. Rowling-esque character names.  For instance, the company who sold the Petitioner the concrete pumping equipment?  “Putzmeister America, Inc.”  from Sturtevant Wisconsin.  Hilarious!   

In this courtroom drama, Petitioner tries to convince the Judge that the purchases of the concrete pumpers were exempt from sales tax since, arguably, the pumpers were used predominantly to process concrete for sale (and thus exempt production equipment), or the pumping trucks and trailer were exempt under Tax Law § 1115(a)(26) as tractors, trailers or semi-trailers with a gross vehicle weight in excess of 26,000 pounds.   The Judge found that the pumping trucks were neither “tractors” nor “trailers.” But all was not lost!  Petitioners were able to convince the Judge that the pumping trucks and trailer were used predominantly to produce “pumped concrete” for sale because the pumping action changes the physical characteristics of the concrete mix. 

Having previously read Brooklyn Union Gas, 967 NYS2d 174 (3d Dep’t 2013) (gas compressing/odorizing equipment not exempt production equipment), I was at the edge of my seat.  Indeed, halfway through the Determination I thought the Petitioner didn’t have much of a chance.  But labeling the final product to be sold as “hardened concrete” instead of “concrete” allowed the Judge to determine that the pumpers were production equipment and not merely delivery devices. 

Our Good Beach Reads score?  4 Coronas with lime (out of a possible 5).

Matter of Stein; Judge: Gardiner; Division’s Rep: Hannelore Smith; Taxpayer’s Rep: Michael Tedesco; Review of Notice of Proposed Driver License Suspension Referral under § 171-v.  This is one of many cases we have read this summer that just doesn’t resonate.  Petitioner challenged a Notice of proposed license suspension at BCMS, and then through a timely-filed DTA petition.  Petitioner argued he was in the process of submitting an Offer in Compromise (“OIC”) in order to pay the underlying tax liability but the OIC had not been accepted yet.  The Judge held that an application for an OIC without acceptance by the Division does not satisfy the “making payment arrangements satisfactory to the commissioner” criteria permitting relief from driver’s license suspension.  Petitioner argued that it was unreasonable for the Division to suspend his driver’s license before his OIC was evaluated and that it was a violation of his due process rights for the Division to suspend his license before allowing him to make a payment arrangement.  The Judge determined that Petitioner’s argument was meritless and that since Petitioner failed to raise any of the statutory defenses to avoid suspension, the Judge granted summary determination for the Division.

Petitioner’s story was entirely derivative, and we have read several like it previously.  Accordingly, its Good beach Read score is 1 Corona with lime (out of five) and a warning “do not read while sunbathing as case may induce drowsiness and over-exposure to the sun.”

TRIBUNAL DECISIONS

Matter of Pugliese; Division’s Rep: Robert Maslyn; Taxpayer’s Rep: Gary Kanaley; Articles 28 and 29.  In this highly-anticipated sequel, we are drawn once again into the plight of Petitioner who failed to timely protest a Notice of Determination covering 18 sales tax quarters, paid one of the quarters and tried to challenge the resulting denial of refund for that quarter.  Here’s what we wrote regarding the ALJ’s dismissal of the petition in Pugliese I: “Petitioner admits he did not file a timely challenge to the original notice.  But then Petitioner paid the tax liability for one of the quarter’s included in the notice, filed a refund claim within two years of that payment, and then filed a timely BCMS request (that was denied) following the Division’s denial of the refund claim.  In considering the Division’s motion for summary determination on the timeliness issue, the ALJ found that: ‘Tax Law § 1139(c) clearly requires that an application for refund must be made within two years of payment of the full tax assessed. Since petitioner has not made payment of the tax assessed, the conciliation order dismissing request was properly issued.’  Accordingly, the Judge granted the Division’s motion.” 

This reviewer finds the Tribunal’s analysis compelling reading:  “Tax Law § 1139 (c) requires a finding that the notice of determination was erroneous, illegal or unconstitutional before a refund of tax, penalty or interest can be made. Such language indicates that the entire determination must be reviewed for error and thus recognizes that a refund claim made following the issuance of a notice of determination is, necessarily, a protest of that assessment. Under such circumstances, the entire amount of the assessment must be paid before a refund of any part of the assessment may be granted.”  The Tribunal quotes from legislative history to support its argument, which is necessary in this reviewer’s opinion, inasmuch as the language of the statute is not as clear as the Division would have one think. 

In any event, the underlying theme is “file a timely pre-payment petition in the first instance and you won’t need to worry.”  Good advice! 

Our Great Beach Reads score?  3 Coronas with lime (out of a possible 5).

Matter of Urrego; Division’s Rep: Adam Roberts; Taxpayer’s Rep: Michael Buxbaum; Articles 28 and 29.  This is a story that has been re-told a bazillion times over since Shakespeare famously wrote (in The Merry Wives of Windsor) “Better three hours too soon than a minute too late.”  This version is updated to reflect a digital-era twist, but the conclusion is the same: too late is too late. 

The Tribunal agreed with the ALJ that the Division proved its standard issuance procedures and that they were followed to issue the Notices to Petitioner electronically.  The Tribunal agreed with the ALJ that the Division had presented sufficient evidence to establish it furnished the Notices electronically and that the records constituted sufficient proof of delivery to Petitioner.  Such proper issuance was presumptive evidence that Petitioner received the Notices.  The Tribunal found that Petitioner’s mere denial of receipt was not sufficient to overcome that presumption.  The Tribunal held Petitioner’s DTA petition was not timely filed since it was filed more than 90 days after the Notice was furnished electronically to Petitioner.

And this is what we said about the ALJ Determination:  “[We] wonder whether posting a Notice on one’s on-line account and then sending an email alert stating the Notice may be accessed really constitutes the use of electronic means to “furnish” the Notices.  Said another way, I wonder if putting a Notice in a place and alerting the intended recipient that it is in such place and the recipient should go get it is the same as furnishing.  Furnishing seems to connote that the Notice be delivered and not simply made available for access.”  Apparently, Petitioner’s representative is not one of TiNY’s dozen or so regular readers since there is nothing in the Decision suggesting this argument was made.  Too bad.

Our Great Beach Reads score?  2 Coronas with lime (out of a possible 5). 

Until next week . . . .

*TiNY Blog Reviews

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