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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 July 23, 2020 (reporting on DTA cases issued July 16)  

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A decision and four determinations this week. The decision is a little interesting. The determinations each involve jurisdictional, procedural necessities that are routine.

DECISION

Matter of Watchtower Bible and Tract Society of New York, Inc.; Division’s Rep.: Brian Evans; Taxpayer’s Reps.: Beth Konken and John Miller; Article 13-A (by Chris Doyle)

The Tribunal sustained the ALJ’s determination.  This is what I wrote about the ALJ’s determination:

This is a rare case regarding application of the petroleum business tax.

Petitioner is a not-for-profit charitable entity that was, during the periods at issue, building a new world headquarters in Warwick, NY. In connection with that construction project, Petitioner bought a bunch of diesel fuel ‘dyed’ for off-road use. The primary tank into which the fuel was delivered was a 4,500 gallon tank on the back of a truck. Petitioner would then transfer the fuel to a 600-gallon fuel and lube truck that would, in turn, dispense the fuel into Petitioner’s off-road construction equipment. All of the tanks into which Petitioner’s fuel purchases were delivered had a hose and a nozzle capable of fueling other pieces of equipment, although the nozzles were too big to be used to fuel most on-road vehicles. Petitioner’s on-road vehicles were fueled separately, and it seems likely that none of the dyed diesel fuel was used for anything other than off-road use due to the safety and control procedures Petitioner had in place.

Petitioner paid petroleum business tax when it purchased the fuel. Petitioner filed three refund claims for the tax paid, all of which the Division denied.

The law imposing the petroleum business tax has an exemption for diesel sold to a tax exempt charity for the charity’s exclusive off-road use. This exemption, however, has an exception: ‘[T]his exemption shall in no event apply to a sale of non-highway diesel motor fuel which involves a delivery at a filling station or into a repository which is equipped with a hose or other apparatus by which such non-highway Diesel motor fuel can be dispensed into the fuel tank of a motor vehicle and all deliveries hereunder shall be made to the premises occupied by the qualifying organization and used by such organization in furtherance of the exempt purposes of such organization.’  In addition to the terrible grammar the Legislature used here, this exception suffers from being so broad as to almost always apply. The only time it would not apply is to purchases where the vendor actually delivered the diesel on the charitable organizations premises and into the tank of the equipment it was intended to fuel. The Judge recognizes this, but does not seem to care. I guess I am OK with that.

The Legislature should have the words it uses respected, even if the result is ridiculous. But just so the DTA and Department are on notice, any charity I am involved with is going to take delivery of its off-road diesel in a big-ass tank that has nothing other than a hatch. And when deliveries are not being made, the charity will attach a pump to the hatch that will allow the charity to dispense the fuel into its off-road equipment. The exemption will apply because the language used by the Legislature considers how the repository is equipped during ‘a delivery.’ So as long as the repository doesn’t have dispensing equipment when deliveries are taking place, the exemption should apply. This is a ridiculous distinction, but as long as we are going to live and die by the words used by the Legislature, judges and auditors should be OK with my approach.

Other than its citing the improper “only reasonable construction” standard (a Division-preferential standard that should not be applied by the Tribunal), I cannot quibble with the Tribunal’s affirmance of the Judge’s determination.  The statute says what the statute says, and if the Division wants to apply it literally, it is entitled to do so.

DETERMINATIONS

Matter of Lopez; Judge: Friedman; Division’s Rep.: Christopher O’Brien; Taxpayer’s Rep.:  pro se; Article 22 (by Chris Doyle)

Petitioner filed a petition challenging personal income tax for the 2016 tax year, but did not attach a Notice or Conciliation Order.  The DTA made several requests of Petitioner to cure this defect in her petition.  The DTA issued a Notice of Intent to Dismiss the Petition, to which, Petitioner did not respond.  And in this Determination, the petition was dismissed for failure to include the required documentation.

Matter of Mohamed and Hemeda; Judge: DiFiore; Division’s Rep.: Mary Hurteau; Taxpayers’ Rep.:  pro se; Article 22 (by Chris Doyle)

The Division proved both its standard mailing practices and that they were used when the Division mailed a Notice of Deficiency to Petitioners at their last known address on November 9, 2018.  Therefore, Petitioners’ BCMS request filed on August 15, 2019, was many months late.  Accordingly, the Judge granted the Division’s motion for summary determination.

Matter of NYC Green Transportation Group, LLC.; Judge: Friedman; Division’s Rep.: Mary Hurteau; Taxpayer’s Rep.: Jacqueline Moses; Article 22 (by Chris Doyle)

Petitioner filed a petition challenging a tax compliance levy issued July 1, 2019.  The petition did not attach a Notice of Deficiency or a Conciliation Order.  The DTA made several requests of Petitioner to cure this defect in its petition.  The DTA issued a Notice of Intent to Dismiss the Petition, to which, Petitioner did not respond.  And in this Determination, the petition was dismissed for failure to include the required documentation.

Matter of Panco Equipment Corp.; Judge: Law; Division’s Rep.: Brian Evans; Taxpayer’s Rep.:  Joseph Tedesco; Article 13-A (by Chris Doyle)

The Division proved both its standard mailing practices and that they were used when the Division mailed a Notice of Deficiency to Petitioner at its last known address on April 19, 2018.  Therefore, Petitioner’s BCMS request filed on October 17, 2018, was eight weeks too late.  Accordingly, the Judge granted the Division’s motion for summary determination.

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