Elmer W. Davis, Inc. v. Comm'r of Taxation & Fin.

• Decision Date: 27 December 2012
• Parties: In the Matter of ELMER W. DAVIS, INC., Petitioner, v. COMMISSIONER OF TAXATION AND FINANCE et al., Respondents.
• Court: New York Supreme Court — Appellate Division

104 A.D.3d 50

957 N.Y.S.2d 427

2012 N.Y. Slip Op. 09107

In the Matter of ELMER W. DAVIS, INC., Petitioner,

v.COMMISSIONER OF TAXATION AND FINANCE et al., Respondents.

Supreme Court, Appellate Division, Third Department, New York.

Dec. 27, 2012.

Harris Beach, PLLC, Pittsford (A. Vincent Buzard of counsel), for petitioner.

Eric T. Schneiderman, Attorney General, Albany (Kathleen M. Arnold of counsel), for Commissioner of Taxation and Finance, respondent.

Before: MERCURE, J.P., LAHTINEN, MALONE JR., STEIN and GARRY, JJ.

MERCURE, J.P.

Proceeding pursuant to CPLR article 78 (initiated in this Court pursuant to Tax Law § 2016) to review a determination of respondent Tax Appeals Tribunal which sustained a sales and use tax assessment imposed under Tax Law articles 28 and 29.

This proceeding requires that we determine whether an industrial development agency may grant financial assistance, in the form of a sales tax exemption on movable equipment, to a business that uses its equipment on jobs or to make deliveries outside the municipality for whose benefit the agency was created. Respondent Tax Appeals Tribunal determined that equipment used outside the agency's jurisdiction may not be exempted from sales tax because agencies are permitted to extend financial assistance only with respect to “projects,” and such equipment does not come within the definition of “project” that is set forth in General Municipal Law § 854(4). Inasmuch as we conclude that the Tribunal's construction of the term “project” is contrary to the purpose and language of the statute, we now annul.

Petitioner is a roofing company with a facility located in the City of Rochester, Monroe County. In June 2005, the County of Monroe Industrial Development Agency (hereinafter COMIDA) appointed petitioner as its agent in a project to renovate and equip petitioner's facility. In connection with equipping the facility, petitioner purchased several trucks, along with a forklift, predator spray equipment, a compressor, computer equipment, telephone upgrades, and a security system. It is undisputed that the trucks were driven to and used for various roofing jobs both within and outside of Monroe County.

Following an audit, the Division of Taxation concluded that vehicles capable of leaving COMIDA's jurisdiction—i.e., Monroe County—were taxable, and assessed petitioner with a deficiency of approximately $20,000 based upon the failure to pay sales tax on the trucks. An Administrative Law Judge sustained the notice of determination and demand for payment of sales and use taxes, and the Tribunal affirmed. As in Matter of American Rock Salt Co., LLC v. Commissioner of Taxation & Fin., 104 A.D.3d 12, 957 N.Y.S.2d 436 [decided herewith], the Tribunal concluded that petitioner failed to show that the trucks—or “rolling stock”—were an integral part of the project, or that the use of the trucks outside of Monroe County was upon prior consent of the other municipalities ¹ in which petitioner performed roofing jobs. Petitioner then commenced this proceeding challenging the Tribunal's determination.

The Industrial Development Agency Act ( see General Municipal Law art. 18–A) provides for the creation of a local industrial development agency, such as COMIDA, for the purpose of promoting economic welfare, attracting economically sound industry, and “preventing unemployment and economic deterioration” (General Municipal Law § 852; see Governor's Mem., 1969 McKinney's Session Laws of N.Y. at 2572). The statute directs that an agency is to achieve this goal by developing and improving specified types of facilities: “[t]he purposes of the agency shall be to promote, develop, encourage and assist in the acquiring, constructing, reconstructing, improving, maintaining, equipping, and furnishing [of] industrial, manufacturing, warehousing, commercial, research and recreation facilities” (General Municipal Law § 858). An agency is considered to be performing a governmental function and, thus, is not required to pay taxes on “any of the property acquired by it or under its jurisdiction or control or supervision or upon its activities” (General Municipal Law § 874[1] ). Further, it is empowered “[t]o acquire, construct, reconstruct, lease, improve, maintain, equip or furnish one or more projects ” (General Municipal Law § 858[10] [emphasis added] ), and to provide “financial assistance,” including tax exemptions, to “private developers,” such as petitioner, “who act as the agency's agent for project purposes ” ( Matter of Fagliarone, Grimaldi & Assoc. v. Tax Appeals Trib., 167 A.D.2d 767, 768, 563 N.Y.S.2d 324 [1990] [emphasis added]; accord Matter of Regeneron Pharms., Inc. v. McCarthy, 77 A.D.3d 1246, 1247, 910 N.Y.S.2d 196 [2010],lv. denied16 N.Y.3d 704, 2011 WL 501206 [2011];seeGeneral Municipal Law § 854[14] ).

Petitioner's entitlement to a sales tax exemption on the vehicles at issue turns on whether those vehicles were part of a COMIDA-sponsored “project” within the meaning of the statute, because—as respondent Commissioner of Taxation and Finance correctly points out—COMIDA is authorized to provide financial assistance only in connection with “projects.” That term is defined in detail as:

“any land, any building or other improvement, and all real and personal properties located within the state of New York and within or outside or partially within and partially outside the municipality for whose benefit the agency was created, including, but not limited to, machinery, equipment and other facilities deemed necessary or desirable in connection therewith, or incidental thereto ... which shall be suitable for manufacturing, warehousing, research, commercial or industrial purposes or other economically sound purposes ... provided, however, no agency shall use its funds in respect of any project wholly or partially outside the municipality for whose benefit the agency was created without the prior consent thereto by the governing body or bodies of all the other municipalities in which a part or parts of the project is, or is to be, located” (General Municipal Law § 854[4] ).

We reject the Commissioner's assertion that the Tribunal's interpretation of General Municipal Law § 854(4) is entitled to deference; the question before us does not involve the application of a broad statutory term, as the Commissioner argues; it involves the interpretation of a detailed definition in a statute outside the Tax Law ( cf. Matter of Island Waste Servs., Ltd. v. Tax Appeals Trib. of the State of N.Y., 77 A.D.3d 1080, 1082, 909 N.Y.S.2d 790 [2010],lv. denied16 N.Y.3d 712, 2011 WL 1675376 [2011] ). As such, the question before us is “ ‘one of pure statutory reading and analysis, dependent only on accurate apprehension of legislative intent’ ” ( Wegmans Food Mkts. v. Department of Taxation & Fin. of State of N.Y., 126 Misc.2d 144, 152, 481 N.Y.S.2d 298 [1984],affd. on mem. below115 A.D.2d 962, 497 N.Y.S.2d 790 [1985],lv. denied67 N.Y.2d 606, 501 N.Y.S.2d 1025, 492 N.E.2d 1233 [1986], quoting Kurcsics v. Merchants Mut. Ins. Co., 49 N.Y.2d 451, 459, 426 N.Y.S.2d 454, 403 N.E.2d 159 [1980] ).

The parties are in agreement that the critical question is whether the Tribunal properly determined that the vehicles could not, by definition, be part of the project because petitioner used them on roofing jobs outside of Monroe County, COMIDA's jurisdiction, without the prior consent of the other municipalities.² We conclude that, as petitioner asserts, the Tribunal's determination is flawed because the Commissioner has read the word “used” into the statute, which speaks in terms of the “location” of a project facility, rather than where its equipment is “used.”

Apart from the requirement that a project be “located within the state of New York,” the critical language in the statute is the proviso at the end of General Municipal Law § 854(4), prohibiting the use of agency funds for “any project wholly or partially outside the municipality for whose benefit the agency was created without the prior consent thereto by the governing ... bodies of all the other municipalities in which a part or parts of the project is, or is to be, located ” (General Municipal Law § 854[4] [emphasis added] ). That proviso was added as a safeguard in a 1973 amendment clarifying that projects could be located partially within and partially outside an agency's jurisdiction. The purpose of the amendment was evidently to expressly authorize multi-municipality projects in order to permit agencies to obtain consolidated financing, with a lower interest rate and lower financing costs, for project facilities that are located in several parts of the state, subject to the approval of the other local governments involved ( see Senate Introducer Mem. in Support, Bill Jacket, L. 1973, ch. 353, at 3).

We agree with the Tribunal's decision insofar as it concluded that General Municipal Law article 18–A, taken in its entirety, clearly contemplates and speaks in terms of improvements to project facilities, i.e., real property ( seeGeneral Municipal Law § 858). Consistent with that reading, the Tribunal has determined in other cases that a vehicle is not a “facility” and the purchase of a vehicle, without a designated facility—fixed real property—cannot constitute a “project,” but the purchase of a vehicle will qualify as a project if the vehicle is installed or used at a designated facility ( see e.g. Matter of Maven Tech., LLC, 2011 WL 2180362, *5–6 [Tax Appeals Trib., May 26, 2011, DTA No. 822709];Matter of Midtown Tire, Inc., 2011 WL 2180361, *6 [Tax Appeals Trib., May 26, 2011, DTA No. 822708] ). The Tribunal has emphasized that “an [industrial development agency] must designate real property as a facility because, under the statutory scheme and case law, the location of the facility becomes the project location for both jurisdictional and tax purposes ” ( Matter of Conking & Calabrese Co., 2011 WL 198443, *4 [Tax Appeals Trib. ...