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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 March 12, 2020 (covering DTA cases issued March 7)

By on

From Chris:  Do you have whiplash from watching the balance on your 401(k)? Are you choking on the platitudes our state and national leaders are spewing (Really?! Bahrain, Finland, Malaysia and The Netherlands have tested more people for Covid-19 per capita than the USA?!)? Does your stomach roil from March Madness bracket/NBA/NHL withdrawal? TiNY wishes it could give you something for what ails you (more cowbell, perhaps?). But alas, we can’t get approval from the FDA to provide you with anything other than these reports, and this week it’s like using a baby aspirin to cure tuberculosis.

We have only one determination on which to report, and because it involves sales tax, Joe wrote it. If I had written the summary it would have been something like “Petitioners failed to offer enough evidence to prove entitlement to their sales tax refund.” But Joe being Joe, we have the following more (exhaustive? overly-meticulous? mind-numbingly comprehensive?) thorough analysis.

From Joe:  You should all know by now how much I love sales tax, and how that enthusiasm often manifests itself in overly-long reviews of the sales tax cases issued by DTA, which Chris invariably shortens. But even I’m finding it difficult to come up with much to say about this week’s lone determination. So we have the rarest of my TiNY posts: a “short, short” review of a sales tax case. What does that even look like?  Read on:

Matter of Ocean State Job Lot of NY2006, LLC, et al; Judge: Dennis Galliher; Division’s Rep: Stephanie Scalzo; Taxpayers’ Reps: Tracy Baran and Gerald Benson

This is my TiNY Report analog of the “short, short” marriage ceremony from “Spaceballs” and the comedic genius of Mel Brooks. For those who don’t remember the scene:

MINISTER: “Okay. Here we go, the short-short version.  (to Lone Starr) Do you?”

LONE STARR: “Yes.”

MINISTER: (to Vespa) “Do you?”

VESPA: “Yes.”

MINISTER: “Good. You're married. Kiss her.”

Three LLCs (Petitioners) submitted refund claims for one sales tax quarter during which they allegedly over-reported and paid sales tax on partially non-taxable clothing and footwear sales. The total amount of the refund at issue was just $13,893.83. This seems like a lot of trouble to go through for less than $14,000. The refunds were ultimately denied by the Division due to lack of supporting documentation/evidence despite multiple requests for records. At hearing, the Petitioners only provided a spreadsheet that purportedly contained aggregated monthly sales figures (and corresponding sales tax calculations) for each Petitioner and the testimony of an employee who was hired after the sales tax quarter at issue. And the Petitioners failed to provide any source documentation regarding the individual transactions that formed the basis of the summary spreadsheets.

Though this is based exclusively on practical experience dealing with the Tax Department and the Division of Tax Appeals, we generally consider refund claims to be, in practice, harder to prosecute. In other words, it’s easier to prove that a liability asserted against you is erroneous than it is to prove that your refund claim is, in all respects, correct. So if you’re going to submit a refund claim, it’s best to have impeccable proof.

To summarize:

Petitioner:  “No proof.”

Judge:  “Good.  No refund.  Kiss your money goodbye.”

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