Merit Oil of New York, Inc. v. New York State Tax Commission
| Decision Date | 26 October 1981 |
| Citation | 111 Misc.2d 118,443 N.Y.S.2d 604 |
| Parties | MERIT OIL OF NEW YORK, INC., Plaintiff, v. NEW YORK STATE TAX COMMISSION, James H. Tully, Jr., Thomas H. Lynch and Francis Koenig, Members of the New York State Tax Commission; and Robert Abrams, Attorney General of the State of New York, Defendants. |
| Court | New York Supreme Court |
Harter, Secrest & Emery, Rochester, Wolf, Block, Schorr & Solis-Cohen, Philadelphia, Pa., for plaintiff; Peter L. Faber, Thomas G. Smith, Rochester, Donald Bean, Raymond J. Bradley, Burt M. Rublin, Philadelphia, Pa., of counsel.
Robert Abrams, Atty. Gen., Dept. of Law, Albany, for defendants; Francis V. Dow, Asst. Atty. Gen., of counsel.
Plaintiff moves for an order directing the entry of summary judgment on its first, second, third and fifth causes of action and dismissing the defendants' counterclaim. Upon various theories, it challenges the constitutionality of the tax imposed pursuant to § 182 of the New York Tax Law, as such section was enacted by Chapters 271 and 272 of the Laws of 1980.
Initially, plaintiff's motion as to its third and fifth causes of action shall be denied. This court has previously decided similar cases involving Mobil Oil, Shell Oil and New England Petroleum Company, which have determined the issues raised thereby in favor of the defendant.
The plaintiff herein (Merit) is a New York corporation upon which the State Legislature has imposed a two percent gross profits tax. Its sole business is the sale at retail of gasoline and diesel motor fuel to motorists, together with the ancillary sale at retail, of products such as soft drinks, candy and cigarettes. It sold more than 60,000,000 gallons of gasoline and diesel motor fuel during its applicable fiscal year.
The challenged statute defines the term "oil company" to include all companies engaged in extracting, producing, refining, manufacturing or compounding petroleum. It exempts all companies principally engaged in the sale of residential fuel oil from payment of the tax. However, for retailers such as the plaintiff, the gross profits tax applies only to those which have sold more than 60,000,000 gallons of petroleum in New York State during their preceding taxable year. For those retailers selling less, a complete exemption from the tax is granted. Plaintiff argues that this taxing scheme is arbitrary, unreasonable and violates the equal protection clause of the Fourteenth Amendment of the United States Constitution and Article I, § 11 of the New York State Constitution. Indeed, upon exceeding the 60,000,000 gallon limit, plaintiff is not only required to pay the additional tax upon the sale of all petroleum products (from gallon one) but upon the sale of all candy, cigarettes, chewing gum, soda, and any other products which they may have sold during the fiscal year, as an adjunct to their operation as a service station.
The Legislature in enacting a taxing statute such as the one at bar may permissibly treat different classes of taxpayers differently for tax purposes. (Southern Ry. Co. v. Greene, 216 U.S. 400, 30 S.Ct. 287, 54 L.Ed. 536). Thus, the statute may properly tax the class of corporations engaged in the business of extracting, producing, refining, manufacturing or compounding petroleum as a separate entity. Its exemption for all corporations engaged in the selling of residential fuel oil was also permissible as treating members of a class similarly. However, it chose to treat members within the class of retailers differently by granting a complete exemption to those with sales under 60,000,000 gallons of gasoline while assessing the two percent gross profits tax on all sales of those corporations selling more than this amount.
While there is a presumption of constitutionality which attaches to the legislation in question, such a presumption is rebuttable (Society of Plastics Industry, Inc. v. City of New York, 68 Misc.2d 366, 326 N.Y.S.2d 788). The Court of Appeals has held that "long as ... all corporations of the same class are treated alike, the action of the Legislature may not be condemned by the courts for inequality." ( N.Y.C. & H.R.R.R. Co. v. Williams, ...
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