2 N.Y.2d 196, W. T. Grant Co. v. Joseph

Citation2 N.Y.2d 196, 159 N.Y.S.2d 150
Party NameW. T. Grant Co. v. Joseph
Case DateJanuary 10, 1957
CourtNew York Court of Appeals

Page 196

2 N.Y.2d 196

159 N.Y.S.2d 150

In the Matter of W. T. GRANT COMPANY, Appellant,

v.

Lazarus JOSEPH, as Comptroller of the City of New York, Respondent.

New York Court of Appeals

January 10, 1957.

Page 197

[Copyrighted Material Omitted]

Page 198

[159 N.Y.S.2d 151] Sol Charles Levine, S. H. Levine and Joseph M. Godman, New York City, for appellant.

Harman Hawkins and Robert L. Martin, New York City, for S. H. Kress and Company, amicus curiae, in support of appellant's position.

Page 199

Kenneth W. Greenawalt and William T. Pullman, New York City, for F. W. Woolworth Co., amicus curiae, in support of appellant's position.

Peter Campbell Brown, Corp. Counsel, New York City (Leroy Mandle and Stanley Buchsbaum, New York City, of counsel), for respondent.

Page 200

FULD, Judge.

We granted leave to appeal in this case in order that we might consider important questions involving the construction and administration of the New York City Sales Tax Law.

Appellant W. T. Grant Company, a present-day counterpart of the old five and ten cent store, operates a dozen or so limited price variety retail stores in New York City. It brought this proceeding to review a determination of the comptroller of the City of New York, rendered following a hearing, which assessed a sales tax deficiency against it in the aggregate amount of some $66,000, inclusive of interest and penalties, for the period from October 1, 1945 through December 31, 1948, and the Appellate Division unanimously confirmed.

[159 N.Y.S.2d 152] The local sales tax law, enacted pursuant to authorization of the legislature, L.1934, ch. 873, imposes a tax at a specified flat percentage rate upon the receipts from every sale made in New York City subject to its provisions. During a portion of the period under review, between October 1, 1945 and June 30, 1946, that tax was fixed at the rate of 1%, and during the balance of the period, from July 1, 1946 through December 31, 1948, the tax rate was 2%. Administrative Code of City of New York, § N41-2.0, subd. a, pars. 6, 7. 1 However, in order to meet the situation where application of the flat tax rate to an individual sale would yield a tax comprising a fraction of one cent, another section of the law, Administrative Code, § N41-3.0, authorizes the comptroller to

'prescribe (by regulation) a method or methods and/or a schedule or schedules of the amounts to be collected from purchasers in respect to any receipt upon which a tax is imposed by this title so as to eliminate fractions of one cent and so that the aggregate collections of taxes by a vendor shall, as far as practicable, equal one percentum, two percentum or three percentum as the case may be of the total receipts from the sales * * * of such vendor upon which a tax is imposed by this title.'

Page 201

On the strength of such statutory authority, the comptroller promulgated a schedule of amounts to be collected upon sales in specified categories. Under this schedule the substance of which is set forth in the footnote 2 upon sales from 17 cents to 66 cents, a tax of 1 cent was to be collected; upon sales from 67 cents to $1.16, the tax was to be 2 cents; and there were similar gradations affecting sales in specified categories.

On all amounts above $3.16, the tax was to be 'in like proportions'.

The problem posed by the present appeal has arisen by reason of the fact that the comptroller's schedule of taxes on small sales makes possible the imposition of taxes on individual sales which do not always yield an amount, in the aggregate, equal to 2% of the vendor's total receipts. The aggregate of the taxes payable may amount to more or less than 2% of the vendor's total taxable sales, depending upon whether a preponderance [159 N.Y.S.2d 153] of the transactions happens to fall within the lower or the upper end of a particular price range category specified in the schedule. For example, under the 17 to 66-cent bracket, on which a tax of 1 cent is required to be collected, the tax will amount to over 5%, if the particular sale is one in the neighborhood of 17 cents and will be less than 2% if the sale involves a 66-cent article.

The system used by Grant for collection of the sales tax was, in general, as follows. A metal box, with a coin slit in it, was attached to the side of each cash register; a copy of the comptroller's bracket schedule was affixed to the register; and the sales clerk would consult the schedule to determine the amount of the tax to be collected and would then deposit that amount in the metal box. The proceeds of the sale, exclusive of the tax, were separately rung up on the cash register and deposited in the register drawer. No written record, however, was kept of the individual tax items collected, either in the form of sales slips, cash register tapes or otherwise, nor apparently was there any permanent record of the individual sales transactions. At the end of the work day, the manager or assistant manager of

Page 202

the store would unlock the metal tax box, the tax receipts would be counted and inserted in a special 'tax bag' and the total entered on a special form. The tax receipts would subsequently be recounted by the cashier, and the aggregate figure recorded on a daily cash statement. Upon the basis of such weekly cash statements, Grant filed quarter-annual sales tax returns with the city.

One of the items in the sales tax return called upon the taxpayer to show the 'Amount of tax charged or required to be charged to customers (whichever is greater)'. Grant's returns, however, did not report the amount 'required to be charged to customers'; instead, it set forth only its total taxable receipts and the total sales taxes actually collected during the particular three-month period and paid the city either the taxes actually collected or 2% of its aggregate receipts, whichever was greater.

Upon the auditing of its returns by the comptroller, Grant failed to produce or make available any records of the individual sales, of the amount collected as tax on each such transaction or of the number of sales falling into each particular sales Taking the position that Grant had failed to comply with the record-keeping requirements of the law, Administrative Code, § N41-2.0, subd. e; § N41-4.0, and that the returns were insufficient, § N41-7.0, the comptroller's auditors proceeded to have a test check made, and the deficiency here under attack was assessed on the basis of that check.

Grant does not challenge the use of the bracket schedule in the collection of the sales tax, and, indeed, its validity is beyond dispute. See, e. [159 N.Y.S.2d 154] g., RKO-Keith-Orpheum Theatres v. City of New York, 308 N.Y. 493, 127 N.E.2d 284. Nor does it deny that the purchasers were required to pay the sums specified in the schedule applicable to the particular sales. It is, however, the appellant's contention that it did not have to account to the city for the precise amounts collectible from its customers on individual sales, so long as it discharged its collection function with reasonable diligence, as it maintains it did here. Its basic claim is that its liability under the sales tax law is either (1) that of a tax collector for the city, in which event it is liable only for the sales taxes actually collected or (2) that of a taxpayer, in which event its liability is limited to an amount equal to 2% of its total taxable sales, if that amount is greater than the amount actually collected.

Page 203

The comptroller, on the other hand, urges that the measure of a vendor's liability is the amount of taxes which should have been paid by his purchasers that is, the amount the vendor was required to collect from his customers if that amount is greater than either the taxes actually collected or the tax of 2% of his total taxable sales.

There is no doubt that the sales tax law imposes upon the vendor the obligation of a taxpayer in addition to that of a collecting trustee. In plain and unequivocal language, it declares that the tax 'shall be paid by the purchaser to the vendor as trustee for and on account of the city, and the vendor shall be liable for the collection thereof and for the tax', Administrative Code, § N41-2.0, subd. e. While the incidence of the tax is, in the first instance, placed on the consumer, this court has flatly held that 'vendors * * * are to be deemed taxpayers under this legislation,' Fifth Ave. Building Co. v. Joseph, 297 N.Y. 278, 283, 79 N.E.2d 22, 24, that 'the obligation imposed upon the vendor is in the nature of a tax' which is 'not measured by the amount collected nor dependent upon failure to exercise the diligence in collection which would be required of an agent.' Matter of Atlas Television Co., 273 N.Y. 51, 57-58, 6 N.E.2d 94, 96; see, also, Merchants Refrigerating Co. v. Taylor, 275 N.Y. 113, 124, 9 N.E.2d 799, 803; City of New York v. Feiring, 313 U.S. 283, 287-288, 61 S.Ct. 1028, 85 L.Ed. 1333.

Since the tax is thus levied not alone on the purchaser but on the vendor as well, it is a necessary corollary that one measure of the vendor's obligation as a taxpayer is the tax which his customers were required to pay on individual sales, and that obligation may not be discharged by payment of any lesser amount, irrespective of...

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46 practice notes
  • 108 Misc.2d 86, People v. Valenza
    • United States
    • New York Supreme Court of New York
    • 18 Febrero 1981
    ...appellants have no quarrel" (p. 351, 418 N.Y.S.2d 324, 391 N.E.2d 1302) and cited with approval Matter of Grant Company v. Joseph, 2 N.Y.2d 196, 159 N.Y.S.2d 150, 140 N.E.2d 244 (1957), where the court stated that "there is no doubt that the sales tax law imposes upon the vendor t......
  • 58 A.D.2d 454, Ames Volkswagen Ltd. v. State Tax Commission
    • United States
    • New York New York Supreme Court Appelate Division Third Department
    • 28 Julio 1977
    ...legislation, and the duty to pay is 'in the alternative' " (supra, p. 283, 79 N.E.2d p. 24). (See also Matter of Grant Co. v. Joseph, 2 N.Y.2d 196, 159 N.Y.S.2d 150, 140 N.E.2d 244, cert. den. 355 U.S. 869, 78 S.Ct. 119, 2 L.Ed.2d 75.) At page 203, 159 N.Y.S.2d at page 154, 140 N.E.2d ......
  • 79 N.Y.2d 197, Mercy Hosp. of Watertown v. New York State Dept. of Social Services
    • United States
    • New York New York Court of Appeals
    • 20 Febrero 1992
    ...unfair or unreliable. 4 The use of such methods has been upheld by this Court in other contexts (see, Matter of Grant Co. v. Joseph, 2 N.Y.2d 196, 159 N.Y.S.2d 150, 140 N.E.2d 244, cert. denied 355 U.S. 869, 78 S.Ct. 119, 2 L.Ed.2d 75; Matter of Inwood Post No. 581, Am. Legion v. State Bing......
  • 82 A.D.2d 516, People v. Lyon
    • United States
    • New York New York Supreme Court Appelate Division Second Department
    • 31 Agosto 1981
    ...have no quarrel. On the question of their 'status' we can state it no more clearly than did this court in Matter of Grant Co. v. Joseph, 2 N.Y.2d 196, 203, 159 N.Y.S.2d 150, 140 N.E.2d 244, mot. to amend remittitur granted 2 N.Y.2d 992, 163 N.Y.S.2d 604, 143 N.E.2d 342, cert. den. 355 U.S. ......
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46 cases
  • 108 Misc.2d 86, People v. Valenza
    • United States
    • New York Supreme Court of New York
    • 18 Febrero 1981
    ...appellants have no quarrel" (p. 351, 418 N.Y.S.2d 324, 391 N.E.2d 1302) and cited with approval Matter of Grant Company v. Joseph, 2 N.Y.2d 196, 159 N.Y.S.2d 150, 140 N.E.2d 244 (1957), where the court stated that "there is no doubt that the sales tax law imposes upon the vendor t......
  • 58 A.D.2d 454, Ames Volkswagen Ltd. v. State Tax Commission
    • United States
    • New York New York Supreme Court Appelate Division Third Department
    • 28 Julio 1977
    ...legislation, and the duty to pay is 'in the alternative' " (supra, p. 283, 79 N.E.2d p. 24). (See also Matter of Grant Co. v. Joseph, 2 N.Y.2d 196, 159 N.Y.S.2d 150, 140 N.E.2d 244, cert. den. 355 U.S. 869, 78 S.Ct. 119, 2 L.Ed.2d 75.) At page 203, 159 N.Y.S.2d at page 154, 140 N.E.2d ......
  • 79 N.Y.2d 197, Mercy Hosp. of Watertown v. New York State Dept. of Social Services
    • United States
    • New York New York Court of Appeals
    • 20 Febrero 1992
    ...unfair or unreliable. 4 The use of such methods has been upheld by this Court in other contexts (see, Matter of Grant Co. v. Joseph, 2 N.Y.2d 196, 159 N.Y.S.2d 150, 140 N.E.2d 244, cert. denied 355 U.S. 869, 78 S.Ct. 119, 2 L.Ed.2d 75; Matter of Inwood Post No. 581, Am. Legion v. State Bing......
  • 82 A.D.2d 516, People v. Lyon
    • United States
    • New York New York Supreme Court Appelate Division Second Department
    • 31 Agosto 1981
    ...have no quarrel. On the question of their 'status' we can state it no more clearly than did this court in Matter of Grant Co. v. Joseph, 2 N.Y.2d 196, 203, 159 N.Y.S.2d 150, 140 N.E.2d 244, mot. to amend remittitur granted 2 N.Y.2d 992, 163 N.Y.S.2d 604, 143 N.E.2d 342, cert. den. 355 U.S. ......
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