City of New York v. Feiring

• Decision Date: 26 May 1941
• Docket Number: No. 863,863
• Citation: 313 U.S. 283,61 S.Ct. 1028,85 L.Ed. 1333
• Parties: CITY OF NEW YORK v. FEIRING
• Court: U.S. Supreme Court

313 U.S. 283

61 S.Ct. 1028

85 L.Ed. 1333

CITY OF NEW YORK

v FEIRING.

No. 863.

Argued May 7, 1941.

Decided May 26, 1941.

Messrs. Paxton Blair, William C. Chanler, Sol Charles Levine, and Morris L. Heath, all of New York City, for petitioner.

Mr. Benjamin Siegel, of New York City, for respondent.

Mr. Justice STONE delivered the opinion of the Court.

The question is whether the obligation imposed upon sellers by a New York City sales tax (No. 20, published as No. 21, Local Laws of New York City, 1934, p. 143, as amended, No. 24, published as No. 25, Local Laws of New York City, 1934, p. 164), to pay a tax laid upon receipts from sales of personal property and collectible alternatively from the buyer or the seller is a 'tax' entitled to priority of payment in bankruptcy under § 64 of the Bankruptcy Act, 11 U.S.C.A. § 104.

Petitioner, New York City, filed its claim against the estate of the bankrupt for taxes on sales of tangible property by the bankrupt during the five years following January 10, 1934. In the proceeding before the referee it appeared that the bankrupt had failed to collect most of the taxes from its buyers as required by the applicable law, and that the sole issue was with respect to the right of the City to priority of payment of the City's claim over those of general creditors. The District Court set aside the referee's order allowing the priority and the Court of Appeals for the Second Circuit affirmed, In re National Stu ios, Inc., 118 F.2d 329, 330, holding that the sum claimed was not a tax, but that the 'bankrupt was liable to the city as a taxpayer who owes a tax or as a tax collector who owes as a debt the amount of taxes collected or to be collected'. We granted certiorari, 313 U.S. 552, 61 S.Ct. 843, 85 L.Ed. —-, April 14, 1941, because of the suggested failure of the court below to follow our decision in New York City v. Goldstein, 299 U.S. 522, 57 S.Ct. 321, 81 L.Ed. 384, reversing Matter of Lazaroff, 2 Cir., 84 F.2d 982, and of the asserted conflict in principle of the decision below with that of the Court of Appeals for the Tenth Circuit in Barbee, Trustee v. Oklahoma Tax Commission, 10 Cir., 103 F.2d 114.

Section 64 of the Bankruptcy Act, as amended June 22, 1938, 52 Stat. 840, 874, 11 U.S.C.A. § 104, awards priority of payment, in bankruptcy, to 'taxes legally due and owing by the bankrupt to the United States or any State or any subdivision thereof * * *.' Whether the present obligation is a 'tax' entitled to priority within the meaning of the statute is a federal question. New Jersey v. Anderson, 203 U.S. 483, 491, 27 S.Ct. 137, 139, 51 L.Ed. 284; cf. Burnet v. Harmel, 287 U.S. 103, 110, 53 S.Ct. 74, 77, 77 L.Ed. 199; Palmer v. Bender, 287 U.S. 551, 555, 53 S.Ct. 225, 226, 77 L.Ed. 489; cf. United States v. Pelzer, 312 U.S. 399, 61 S.Ct. 659, 85 L.Ed. —-, decided March 3, 1941. Intended to be nationwide in its application, nothing in the language of § 64 or its legislative history suggests that its incidence is to be controlled or varied by the particular characterization by local law of the state's demand. Hence we look to the terms and purposes of the Bankruptcy Act as establishing the criteria upon the basis of which the priority is to be allowed.

As was pointed out in New Jersey v. Anderson, supra, 203 U.S. 491, 27 S.Ct. 139, 51 L.Ed. 284, the priority commanded by § 64 extends to those pecuniary burdens laid upon individuals or their property, regardless of their consent, for the purpose of defraying the expenses of government or of undertakings authorized by it. The particular demand for which the City now claims priority of payment as a tax is created and defined by state enactment. We turn to its provisions and to the decisions of the state courts in interpreting them, not to learn whether they have denominated the obligation a 'tax' but to ascertain whether its incidents are such as to constitute a tax within the meaning of § 64. Cf. Morgan v. Commissioner, 309 U.S. 78, 80, 81, 60 S.Ct. 424, 425, 426, 84 L.Ed. 585, and cases cited; United States v. Pelzer, supra; Ryerson v. United States, 312 U.S. 405, 61 S.Ct. 656, 85 L.Ed. —-, decided March 3, 1941.

The present exaction is that which was considered, and its constitutionality sustained in McGoldrick v. Berwind-White Co., 309 U.S. 33, 60 S.Ct. 388, 84 L.Ed. 565, 128 A.L.R. 876. The discussion of it there will be supplemented here only so far as is needful for the disposition of the issue now before us. It was enacted by the municipal assembly of New York City as an emergency revenue measure to defray the expense of unemployment relief, pursuant to authority conferred by the state legislature. Ch. 815, New York Laws 1933; Ch. 873, New York Laws 1934, Ex.Sess. Originally No. 24 published as No. 25, of New York Local Laws, 1934, p. 164, it has since been annually renewed with minor amendments not now material. Section 2 lays a tax upon receipts from retail sales in New York City of tangible personal property, and requires the seller, with exceptions not now material to charge the buyer with the amount of the tax, separately from the sales price and to collect the tax from him. Penalties are imposed by § 15 for the seller's willful failure to comply with these requirements. Section 2 also commands that the tax 'shall be paid by the purchaser to the vendor, for and on account of the city of New York'. Section 5 requires the seller to file with the City Comptroller a 'return of his re eipts and of the taxes payable thereon' for prescribed periods. Section 6 requires the seller, at the time of filing a return to pay to the Comptroller the taxes upon all receipts required to be included in his return and also provides that 'all taxes for the period for which a return is required to be filed shall be due from the vendor and payable to the comptroller on the date limited for the filing of the return for such period, without regard to whether the return is filed or whether the return which is filed correctly shows the amount of receipts and the taxes due thereon'. But if the seller fails to collect the tax § 2 also makes it the duty of the purchaser to file a return with the Comptroller and commands that 'such tax shall be payable by the purchaser directly to the Comptroller'.

By § 8 whenever either the seller or purchaser 'shall fail to collect and pay over any tax and/or to pay any tax' imposed by the law, the City is authorized to bring an action for its recovery or, as an alternative remedy, the Comptroller is authorized to issue a warrant directed to the sheriff of the county, commanding him to levy upon and sell the real and personal property of the seller...