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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.  

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TiNY Report for June 13, 2019 (reporting on DTA cases published May 30 and June 6)

By on

A Decision, a Determination, and an Order this week (which was missed last week). We never said we were perfect, but we will try to not make this a habit.  


Matter of Greenfield; Division’s Rep.: Jessica DiFiore; Petitioner’s Rep.: Richard Rubin; Articles 28 and 29. 

A third party assumed Petitioner’s lease on a car, and Petitioner claimed a refund for the portion of the sales tax that he paid upon the lease’s inception relating to the post-assumption period. The refund claim was denied, and that denial was sustained by an ALJ and then by the Tribunal. The Tribunal found that when a long-term automobile lease is at issue, “all receipts due under the full lease term are deemed to have been paid and are subject to sales tax at the lease’s inception (Tax Law § 1111 [i]). Petitioner thus properly paid the total amount of sales tax due under the lease at its inception.”  Accordingly, the Tribunal found that Petitioner was not due a refund. I agree with the logic and decision.

However, in dicta, the Tribunal also stated that: “Both petitioner’s initial lease of the vehicle and the subsequent assumption of the lease by the third party were separate and distinct retail sales under Tax Law § 1105 (a).” With respect (and as I have written in prior posts), I disagree that an assumption of a lease is a separate transaction under the sales tax. An assumer of a lease steps into the shoes of the original lessee under the terms of the original lease agreement.  And since, as the Tribunal clearly holds, “all receipts due under the full lease term are deemed to have been paid . . . at the lease’s inception . . .,” an assumer should not be required to pay any additional tax with respect to the assumption of a long-term vehicle lease. All the tax that was due under such a lease is, under the explicit terms of the statute cited by the Tribunal, deemed to have been paid by the original lessee. I hope that my position is vindicated before I retire.


Matter of The Warranty Group; Judge Gardiner; Division’s Rep.: James Passineau; Petitioner’s Rep.: Mark Nachbar; Article 9-A. 

Petitioner provided extended warranty solutions to manufacturers, distributors, and retailers for their resale to retail customers.  Petitioner’s HQ was in Chicago, Illinois. On its amended Forms CT-3, Petitioner treated its revenue from the sales of extended warranty solutions as service receipts sourced to the location of performance (i.e. Illinois). On audit, the Division determined that Petitioner’s receipts were from the sale of extended warranties—the sale of an intangible asset—and not from the sale of services. The Division’s position was based in part on its conclusion that a “service” required performance by a person. Ultimately, the Division concluded that Petitioner’s receipts were “other business receipts” subject to customer-based sourcing. Petitioner challenged the Division’s position by filing a petition and then moving for summary determination.

ALJ Gardiner denied Petitioner’s motion for summary determination. The affidavit accompanying the motion came from Petitioner’s director of state tax. However, the director of state tax did not appear to have personal knowledge of all of the facts stated in the affidavit, and there were no supporting documents attached to the affidavit to corroborate those assertions.

The Judge found that, when considered in concert with Petitioner’s failure to produce an affidavit based on first-hand knowledge, the Division’s work papers were sufficient to demonstrate that there were material questions of fact necessitating a hearing.


Matter of Scuderi; Judge Connolly;  Division’s Rep.: Jennifer L. Hink-Brennan; Petitioners’ Rep.: Pro Se; Article 22. 

In this submitted case, Judge Connolly found that Petitioners were ineligible for the QEZE real property tax credit. To get the credit, Petitioners needed to prove that they had a full-time employee for at least half of the tax year. Relying on non-statutory, non-regulatory authority (i.e. a “TSB-M” and tax return instructions), the Division indicated that “full-time” meant working at least 35 hours per week. Petitioners’ employee provided an affidavit stating that he was employed by Petitioners’ business every other week during the years at issue for 35 hours per week. The Division interpreted the statute’s “for at least half of the tax year” requirement as meaning at least 26 continuous weeks of full time work, and not every other week for a year.

Judge Connolly agreed with the Department’s interpretation and denied Petitioners the credits claimed.

A few observations: The Judge applied the “only reasonable construction standard” in this case. As I have written often, I do not believe it is appropriate for ALJs and the Tribunal to apply that standard. They are supposed to be “the adults in the room” and ought to apply the “most reasonable construction” when interpreting statutes. That said, I don’t think applying the most reasonable construction standard in this case would have made any difference in the outcome.

Although it didn’t influence the result, the Judge ruled against the Division on its alternative argument that the employee could not have been working 35 or more hours per week because that would have meant he was getting less than minimum wage. Here’s a quote I like:  “[The Division’s] analysis assumes that, for Mr. Bellamy to be considered an employee for purposes of the RPTC, the LLC must have paid him at least at the minimum wage rate, an assumption for which the Division presents no support. Because the assumption appears unfounded, the Division’s alternate argument is rejected.”

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