275 N.Y. 113, Merchants Refrigerating Co. v. Taylor

Citation:275 N.Y. 113
Party Name:Merchants Refrigerating Co. v. Taylor
Case Date:July 13, 1937
Court:New York Court of Appeals

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275 N.Y. 113



FRANK J. TAYLOR, as Comptroller of the City of New York, Respondent.

New York Court of Appeal

July 13, 1937

Argued May 24, 1937.

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Clarence J. Shearn and Daniel E. Hanlon for appellant. The assessment of the city sales tax and the city utility tax against the receipts from petitioner's storage business was not authorized by the terms of the laws. (People ex rel. Studebaker Corp. v. Gilchrist, 244 N.Y. 114; Gould v. Gould, 245 U.S. 151; People ex rel. Mutual Trust Co. v. Miller, 177 N.Y. 51.) While classifications made by the Legislatures for the purpose of taxation have been sustained, such classification must have some basis in reason and cannot be entirely arbitrary. (Gulf, C. & S. F. Ry. Co. v. Ellis, 165 U.S. 150; Quaker City Cab Co. v. Pennsylvania, 277 U.S. 389; Connolly v. Union Sewer Pipe Co., 184 U.S. 540; Iowa-Des Moines Nat. Bank v. Bennett, 284 U.S. 239; People ex rel. Phillips v. Raynes, 136 A.D. 417; 198 N.Y. 539; New York Steam Corp. v. City of New York, 268 N.Y. 137.) To the extent that the utility tax is held to tax petitioner's business, it constitutes a second tax on gross receipts and exceeds the authority granted to the city by the Legislature. (Matter of Atlas Television Co., 273 N.Y. 51.)

Paul Windels, Corporation Counsel (Meyer Bernstein, Oscar S. Cox and Frank J. Derrick of counsel), for respondent. Petitioner's receipts from its cold storage warehouse business constitute taxable receipts within the meaning of Local Laws No. 24 of 1934 and No. 2 of 1935. (Helvering v. Stockholms Enskilda Bank, 293 U.S. 84.) No discrimination results from the classification of the appellant's receipts with those of other taxpayers subject to the local laws. (Carr v. West Side Warehouse Co., 169 N.Y.S. 564; Sutherland v. Albany Cold Storage & Warehouse Co., 171 N.Y. 269; Roberts & Schaefer Co. v. Emmerson, 271 U.S. 50; Old Dearborn Distributing Co. v. Seagram Distillers Corp., 299 U.S. 183; Colgate v. Harvey, 296 U.S. 404; Radice v. New York, 264 U.S. 292; Fox v. Standard Oil Co. of N. J., 294 U.S. 87; Kentucky Railroad Tax Cases, 115 U.S. 321;

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Southern Boulevard R. R. Co. v. City of New York, 86 F. [2d] 633; Tyler v. United States, 281 U.S. 497; Karnuth v. United States, 279 U.S. 231; New York Steam Corp. v. City of New York, 268 N.Y. 137; Standard Oil Co. v. Marysville, 279 U.S. 582; Rast v. Van Deman & Lewis Co., 240 U.S. 342.)Amounts received from so-called handling charges are receipts from a necessary part of the service appellant renders and were, therefore, properly included in the base of the tax. (Gee Coal Co. v. Department of Finance, 361 Ill. 293; State v. Menefee Motor Co., 18 La. App. 694; People ex rel. Westchester Lighting Co. v. Gaus, 199 N.Y. 147; Lash's Products Co. v. United States, 278 U.S. 175.)


Appellant seeks to review the determination of the Comptroller of the city of New York taxing it under the Local Laws of the city which impose a sales tax and a tax upon utilities. The Appellate Division has unanimously confirmed the determination of the respondent and dismissed the orders of certiorari. Appeal is taken here by permission of this court.

Appellant operates two storage warehouses in the city of New York which are equipped to permit the refrigeration of its storage chambers. Its property consists of steel and concrete buildings, the walls of which are insulated with cork. Refrigeration machinery and equipment, for the production and circulation of the refrigerating fluids or brine, are installed in the basements. By means of a closed system of pipes the brine leaves the machine, goes through the pipes, reduces the temperature on the premises to be refrigerated and returns by means of pipes to the refrigerating system.

At its warehouses appellant assumes full control over the merchandise delivered to it for storage. Its customers are, for the most part, dealers in perishable commodities. It supplies the labor for hauling merchandise in and out of its building; it selects and furnishes the cooling room in which the goods are placed; it maintains the proper circulation of air around the

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packages; and controls the correct degree of humidity. Different commodities require different types of refrigeration service. For all this service rendered, appellant's charges are higher than those of the ordinary warehousemen who do not supply refrigeration. Included in the charges to the customers are the amounts paid for handling of the customers' merchandise on appellant's premises. The handling charges for placing the goods in and bringing them out of storage are made separately and are in addition to the storage charges.

In addition to its warehouse business, appellant furnishes what is called anoff-premises" service. First, it furnishes...

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