Fairbank Farms, Inc. v. Kasza
| Decision Date | 26 January 1977 |
| Citation | 89 Misc.2d 1022,393 N.Y.S.2d 502 |
| Parties | Application of FAIRBANK FARMS, INC. and John L. Rhodes, Petitioners, v. Thaddeus KASZA, Coordinator, et al., Respondents, For a Judgment under Article 78 of the Civil Practice Law and Rules. |
| Court | New York Supreme Court |
Petitioners seek an order pursuant to Article 78 of the Civil Practice Law and Rules to prohibit respondent tax examiners from assessing petitioners for additional sales taxes. Respondents have requested an order dismissing this petition pursuant to CPLR 7804(f).
Petitioner Fairbank Farms, Inc. and another corporation share garage space for the maintenance and repair of their trucks. These corporations wished to discontinue a complicated dual system of labor costs, parts procurement and other garage costs. The system they devised involved the payment of all costs and the procurement of necessary labor and parts through one of the corporations. The second corporation would then reimburse the first corporation for its share of expenses. No 'profit' was to be made by the first corporation. By using this new system the corporations paid the same amount of sales tax that they would have paid under the old dual system. The new arrangement was one of convenience rather than commerce.
The accountant who represented both corporations was concerned that the new arrangement might result in additional sales tax liability for Fairbank Farms, Inc. To clarify the question he wrote to the Instructions and Interpretations Unit of the State Tax Commission explaining the situation in full. The Unit replied unequivocally that no tax would be due on any reimbursements made under the plan. Fairbank Farms, Inc., acting in reliance on the determination of the Instructions and Interpretations Unit, proceeded to conduct its garage operations under the plan outlined above.
In October of 1976, the respondent local tax examiners audited the books of the respective corporations, and after a hearing on the matter, notified petitioners that almost $4,500 of additional sales tax would be due from Fairbank Farms, Inc. Said examiners told petitioners that they disagreed with the ruling made by the Interpretations Unit and that they did not feel bound by its ruling.
This case raises a number of procedural and substantive issues:
1. Are respondents the proper parties to this suit?
2. Should petitioners have exhausted other administrative remedies?
3. Should the local tax examiners be enjoined from determining an additional sales tax assessment once the Interpretations Unit had made a 'no-tax' ruling?
In order to answer these questions and come to appropriate conclusions, one must understand the nature of the relief sought in this matter. While this action is in general one under Article 78 of the CPLR, within that category are included actions in the nature of 'certiorari' (review of a 'quasi-judicial') proceeding, 'mandamus' (review of an administrative act or to compel an administrative act required by law), 'prohibition' (enjoin threatened acts in excess of jurisdiction). (See 8 Weinstein-Korn-Miller, N.Y.Civ.Prac., par. 7801.)
Since there has been no 'final' assessment of additional sales tax, only an initial determination by the examiners, it would appear that the relief sought here is in the nature of 'prohibition'. Petitioners seek to enjoin a 'threatened' tax determination.
' Prohibition' is considered an extraordinary remedy and is applied where another remedy is unavailable and a judicial or 'quasi-judicial' tribunal is threatening to act in excess of its jurisdiction. (See Rushmore v. Lipson, 45 Misc.2d 487, 257 N.Y.S.2d 316.)
Keeping in mind the nature of this action, let us speak to each of the questions that has been raised.
Are respondents proper parties?
CPLR 7801 permits Article 78 actions against 'bodies or officers'. Section 7802(a) defines 'body or officer' as 'every court, tribunal, board, corporation, officer, Or other person, or aggregation of persons, whose action may be affected by a proceeding under this article.' (Emphasis added.) Section 7802(c) of the CPLR requires the joinder of The particular individuals affected when the proceeding is in the nature of prohibition. (See also Leventhal v. Michaelis, 29 Misc.2d 831, 219 N.Y.S.2d 508.)
It is the finding of this Court that the respondents are proper and necessary parties to this proceeding.
Should this proceeding be dismissed for failure to exhaust administrative remedies?
Since this action is in the nature of prohibition rather than certiorari, there is no requirement that petitioners exhaust administrative remedies. (See 8 Weinstein-Korn-Miller, N.Y.Civ.Prac. par. 7801.07.) Even...
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Genesee Hospital v. Kramarsky
...State Tax Comm., 63 Misc.2d 705, 707, 311 N.Y.S.2d 568, 570, aff'd, 41 A.D.2d 576, 339 N.Y.S.2d 603 and Fairbanks Farms, Inc. v. Kasza, 89 Misc.2d 1022, 1024, 393 N.Y.S.2d 502, 503. In considering whether a court, board or officer has, or is about to exceed its jurisdiction, the Court of Ap......