Merchants Refrigerating Co. v. Taylor

• Decision Date: 13 July 1937
• Citation: 275 N.Y. 113,9 N.E.2d 799
• Parties: MERCHANTS REFRIGERATING CO. v. TAYLOR, City Comptroller.
• Court: New York Court of Appeals Court of Appeals

275 N.Y. 113

9 N.E.2d 799

MERCHANTS REFRIGERATING CO.

v.TAYLOR, City Comptroller.

Court of Appeals of New York.

July 13, 1937.

Proceeding in the matter of the application of the Merchants Refrigerating Company for a certiorari order against Frank J. Taylor, Comptroller of the city of New York. From an order of the Appellate Division (249 App.Div. 732, 292 N.Y.S. 1000) which dismissed orders of certiorari and confirmed the determination of the comptroller, the petitioner appeals.

Reversed and remitted, with directions to proceed in accordance with opinion. Appeal from Supreme Court, Appellate Division, First Department.

Clarence J. Shearn and Daniel E. Hanlon, both of New York City, for appellant.

Paul Windels, Corp. Counsel, of New York City (Oscar S. Cox, Meyer Bernstein, and Frank J. Derrick, all of New York City, of counsel), for respondent.

CRANE, Chief Judge.

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. Refrigerationmachinery 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 if 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 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 an ‘off-premises' service. First, it furnishes refrigeration to the tenants occupying stores on the ground floor of its Seventeenth street warehouse. From its refrigerating plant in the warehouse, appellant pumps refrigerating fluid through pipes to these stores. It charges the tenants for this service, billing them separately in addition to their rent. Secondly, appellant also furnishes refrigeration to some outside premises in the neighborhood of one of its warehouses. These customers enter into yearly contracts with appellant for this service. The refrigeration is furnished by means of pipes under the streets, laid pursuant to a franchise from the city of New York. Appellant contends that the off-premises business does not amount to more than twenty per cent of its gross receipts.

Two separate taxes are imposed upon appellant under two separate local laws. We shall consider each tax separately.

Sales Tax. Local Law No. 20 (published as No. 21) of 1934, p. 143 did not tax sales of refrigeration or refrigerating service. That law was amended by Local Law No. 24 (published as No. 25) of 1934, p. 164. The amending law provides:

Ԥ 2. Imposition of tax. During the period commencing on December tenth, nineteen hundred and thirty-four, and ending on December thirty-first, nineteen hundred and thirty-five, there shall be paid a tax of two per centum upon the amount of the receipts from every sale in the city of New York of: * * *

‘(b) Gas, electricity, refrigeration and steam, and gas, electric, refrigeration, * * * service, for domestic or commercial use.’

‘Receipts' is defined in section 1 as meaning ‘the amount of the sale price of any property or the charge for any service’ specified ‘without any deduction therefrom on account of the cost of the property sold, the cost of materials used, labor or service cost, interest or discount paid, or any other expense whatsoever.’ In section 2 it is also stated that upon each taxable sale or service, the tax to be collected shall be stated and charged separately from the price or charge and shown separately upon any record, and shall be paid by the purchaser to the vendor for and on account of the city of New York. Where the purchaser has failed to pay or the vendor has failed to collect, the tax is payable by the vendor directly to the comptroller. In section 6 it is provided that each vendor shall pay to the comptroller the taxes imposed by this local law upon the receipts required to be included in his return. All taxes for the period shall be due from the vendor and payable to the comptroller ‘without regard to whether a return is filed or whether the return which is filed correctly shows the amount of receipts and the taxes due thereon.’

In Matter of Atlas Television Co., 273 N.Y. 51, at page 57, 6 N.E.(2d) 94, 96, this court said: ‘We might agree with that conclusion if the local law did not contain other provisions which indicate that the obligation imposed upon the vendor is in the nature of a tax. He must file a return of his receipts from sales. (§ 5.) The duty of payment to the city is laid upon the vendor, not the purchaser. His liability is not measured by the amount actually collected from the purchaser but by the receipts required to be included in such return. (§ 6.) He must pay the tax even if failure to collect is due to no fault of his own.’

Appellant has paid to the city of New York the sales tax on sales of refrigeration service made by appellant through pipe lines under its franchise with the city, and also under its annual written contracts with its lessees. The city has imposed the sales tax upon its refrigeration service to customers within its warehouses for the period from December, 10, 1934, to August 31, 1935. Appellant insists that as to its warehouse business, it does not sell refrigeration; that it stores goods and in connection therewith it uses refrigeration. In giving substance to this distinction, appellant compares itself to the operators of skating rinks, makers of ice cream, and owners of places air-cooled in summer, and contends that like them it performs a service in connection with which it uses refrigeration. It contends that it no more furnishes a refrigerating service than a turkish bath or a steam laundry furnishes a steam service, or a theater furnishes a refrigerating service in the hot weather. We agree with the appellant that the cooling of its storage rooms for the preservation of merchandise is not a sale of refrigeration or a sale of refrigeration service within the wording or meaning of this Local Law No. 20 (published as No. 21), as amended by Local Law No. 24, 1934 (published as No. 25). The temperature may attract customers and increase the charge, but safe storage is the service sought and paid for.

Utility Tax. Local Law No. 21 (published as No. 22) of 1934, p. 151 was amended by Local Law No. 2 of 1935, p. 94 so as to include within its purview a utility furnishing refrigerating service. The amended law provides: ‘1. (e) The word ‘utility’ shall be deemed to refer to and mean any person subject to the supervision of either division of the department of public service, and every person whether or not such person is subject to such supervision who shall engage in the business of furnishing or selling to other person gas, electricity, steam, water, refrigeration, telephony and/or telegraphy or who shall engage in the business of furnishing or selling to other persons gas, electric, steam, water, refrigeration, telephone or telegraph service.'

Section 2 of the Local Law provides: ‘Notwithstanding any other provision of law to the contrary, for the privilege of exercising its franchise or franchises, or of holding property, or of doing business in the city of New York, during the calendar year nineteen hundred thirty-five, or any part thereof, every utility doing business in the city of New York and subject to the supervision of either division of the department of public service, * * * and every other utility doing business in the city of New York shall pay to the comptroller of the city of New York an excise tax which shall be equal to three per...