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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 September 7, 2017 (covering DTA cases issued the week of August 28)

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There’s nothing like the news coverage of a couple of huge hurricanes, an earthquake of unprecedented power in Mexico, and a missile shot over Japan to lend perspective to what we report here. In the Grand Scheme of Things, taxes are of lesser significance. That said, we embrace our place. To paraphrase Mrs. Gump: “TiNY is as TiNY does”. And even though New York taxes matter little (or not at all) to the great majority of people in the World, they are important to us. If you are reading this, we assume they are important to you, too.

So…there was one ALJ determination and were three ALJ orders posted by the DTA today. And as of this writing, the Tribunal has posted nothing this week. This was a rare good day for petitioners who went 4 for 4.

ALJ Determination

Matter of Marin; Judge Law; Division’s Rep: Robert Maslyn; Taxpayer’s Rep: Norman Berkowitz; Articles 28 & 29.   There’s lots of meaty side-issues in this responsible officer case: the timeliness of the Notice; the timeliness of the petition; and the propriety of the indirect index used to estimate the tax liability of the underlying business. The Judge found that that: (1) Assuming the Notice was sent to Petitioner’s last known address, the petition was nonetheless timely since the Department had failed to demonstrate that its standard procedures had been followed. A USPS employee did not acknowledge in the certified mailing record the number of the pieces received, so there was no proof that the Division actually delivered the Notice to the post office. (2) The indirect audit method chosen by the Division was not proven by the Petitioner to be an improper one. The use of an indirect method was compelled by (a) the failure of the business to keep adequate records, and (b) certain inconsistent behaviors by the Petitioner during the observation test that called into question the accuracy of its results. So a resort to external indices was appropriate, and the RIOR rent-factor approach was not shown to be fundamentally flawed. (3) The Petitioner, who reported on the Division’s Responsible Officer Questionnaire that he was the manager of the business, had check-signing authority, had the right to pay bills with cash, could hire and fire, etc., was a responsible officer. BUT (4) Assuming the Notice at issue was mailed, the Division failed to mail the Notice to the Petitioner’s last known address because it addressed the February 2011 Notice to an address from the Petitioner’s 2003 Form IT-203 instead of to the address the Petitioner reported on the Responsible Officer Questionnaire the Division had him fill out in December 2010. So the Notice was canceled.

ALJ Orders

Matter of Bivona; Judge Gardiner; Division’s Rep: Brian Evans; Taxpayer’s Rep: Irwin Popkin; Articles 28 & 29.  The affidavits the Division proffered to prove a standard mailing practice and that they followed with respect to the Petitioner were found by the Judge to be inconsistent. One of the Division’s affiants attested that 44 pieces of correspondence were taken to the post office. The other affiant attested that only 42 pieces were delivered to the post office.  Because of this inconsistency, the Judge found the existence of a material issue of fact, withdrew the Notice of Intent to Dismiss, and ordered the Division to answer the Petition.

Matter of Gu; Judge Law; Division’s Rep: Karry Culihan; Taxpayer’s Rep: Stephen Seung; Article 8 Driver License suspension.  We haven’t seen one of these in a while, and this one is a little different. The Division’s motion for Summary Determination was denied when the Judge found that the Petitioner had properly pled one of the six enumerated defenses: i.e. that the tax liabilities at issue had been satisfied. In this instance, the liabilities were incurred by the Petitioner in the late 1990s. The Petitioner had, however, filed a bankruptcy petition in 2010 and was granted a discharge in 2011. The tax assessments at issue were properly listed as priority unsecured debts in the bankruptcy, and at least two of the three prohibitions to the discharge of tax liabilities were found to not apply. As to the third prohibition to discharge, the Judge found there was an issue of fact as to when (relative to the filing of the bankruptcy petition) the assessments were issued. So, the Judge denied the Division’s Motion for Summary Determination and will schedule a hearing to determine whether the assessments had been discharged as part of the Petitioner’s bankruptcy.

Matter of Pons; Judge Maloney; Division’s Rep: Linda Jordan; Taxpayer’s Rep: pro se; Article 22.   Today was the day for unusual timeliness cases, I guess. In this one, the Division moved for summary determination alleging that the Petitioner’s BCMS request was filed after the 90-day time limit. The Judge found that the Notice at issue was mailed on April 27, 2016 to the White Plains address that had been listed on the petition. It was also found that the BCMS request was mailed (at the earliest) on October 11, 2016. So, it would seem that the 90-day limit was exceeded. But the Judge dug deep and found some mitigating circumstances. The record includes an affidavit of one of the Department employees who handles compliance calls.  According to the affidavit, the Petitioner called the Department on March 16, 2016 at 10:48 am and reported a change in his address from “75 S. Broadway” to “75 South Broadway,” which was the address shown on the Notice. We assume that both addresses refer to the same location.  However, on April 18, 2016, the Petitioner mailed in his 2015 income tax return showing a 405 Tarrytown Rd. address. The Tarrytown Rd. address, according to an affidavit of another Tax Department employee, was posted to the Department’s computer system on April 28, 2017 (i.e. a day after the Notice was mailed). Finding that a change of address by a taxpayer becomes effective the day that the return is “filed” with the Department, the Judge determined that the Notice should have been mailed to the Tarrytown Rd. address. The Judge was unmoved by the Division’s argument that “the Division cannot be expected to be aware of an address change made on a return that had not yet been processed.” Given that the Notice was not shown to have been mailed to the Petitioner’s last known address, the Judge found that the 90 day time limit would run from the date of the Petitioner’s receipt of the Notice. Since there was nothing in the record regarding when the Notice was received, the Division’s Motion for Summary Determination was denied, and the Judge ruled that a hearing would be scheduled. 

And in other news:

Matter of 1018 Morris Park Avenue Realty Inc. (NYC TAT, 08/07/2017) hit our inbox last week. In it, the City Tax Appeals Tribunal held that all of the deferred gain resulting from an installment asset sale needed to be reported on the corporation’s New York City general corporation tax return for the year of the sale (which was the year that the corporation initially claimed it had ceased doing business in New York City).

And the New York State Department of Taxation and Finance released a bunch of advisory opinions and a new memorandum over the last few days. The Department’s releases regarding the new guidance follow:

TSB-M-17(3)C, (6)S, This memorandum outlines the Tax Department’s revised policy regarding:

• the application of the sales tax to intrastate and interstate/international telephone services that are sold together for a single charge; and

• the application of the sales tax and the section 186-e excise tax to these services when they are sold as part of a package including television, Internet and telephone services for a single charge.

TSB-A-17(1)R, Petitioner asks whether the transfer of an interest in real property, held in a trust with assets to be distributed equally among four beneficiaries, will be subject to real estate transfer taxes, if the interest in real property is distributed exclusively to one beneficiary and (1) the fair market value of the interest in the real property is less than or equal to one quarter of the total balance in the trust, or (2) the value of the interest in the real property is more than one quarter of the total balance in the trust.

TSB-A-17(14)S, Petitioner asks whether receipts from the inspection of cross-control or backflow prevention devices used in the installation of plumbing fixtures are subject to New York state and local sales taxes.

TSB-A-17(15)S, Petitioner asks whether New York State and local sales tax apply to charges to customer-retailers located both in and outside New York for: (i) training software that is customized to each Retailer and distributed electronically; (ii) license fees related to the creation of videos that are embedded in the software; (iii) software and video license fees when they are charged in a lump sum; and (iv) monthly or annual subscription fees.

TSB-A-17(16)S, Petitioner asks about the applicability of sales tax on amounts charged to independent trainers by a gym in New York City.

TSB-A-17(17)S, Petitioner asks whether it must collect sales tax from sales of its fire safety training program.

TSB-A-17(1)C, (18)S, Petitioner asks whether the sales and use tax and the telecommunication excise tax apply to sales of prepaid calling minutes and, if so, how to source those sales for purposes of those taxes.

TSB-A-17(19)S, Petitioner asks whether its receipts from two of the services it offers customers are subject to New York State and local sales tax.

TSB-A-17(20)S, Petitioner asks whether the amounts collected from customers when Petitioner arranges for the provision of on-site heating, ventilation and air condition maintenance and repair services (HVAC Services), including its “management and consulting fees,” are subject to New York State and local sales tax.

The documents themselves may be found at, which is the Department’s website.

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