New York Ass'n of Convenience Stores v. Urbach

• Decision Date: 08 May 1997
• Citation: 230 A.D.2d 338,658 N.Y.S.2d 468
• Parties: In the Matter of NEW YORK ASSOCIATION OF CONVENIENCE STORES et al., Respondents, v. Michael H. URBACH, as Commissioner of the Department of Taxation and Finance of the State of New York, et al., Appellants.
• Court: New York Supreme Court — Appellate Division

Page 468

658 N.Y.S.2d 468

230 A.D.2d 338

In the Matter of NEW YORK ASSOCIATION OF CONVENIENCE STORES et al., Respondents, v. Michael H. URBACH, as Commissioner of the Department of Taxation and Finance of the State of New York, et al., Appellants.

Supreme Court, Appellate Division Third Department.

May 8, 1997.

Dennis C. Vacco, Attorney-General (Andrew D. Bing, of counsel), Albany, for appellants.

Crane, Kelley, Greene & Parente (David M. Cherubin, of counsel), Albany, for respondents.

Before CARDONA, P.J., and CREW, WHITE, CASEY and CARPINELLO, JJ.

CARDONA, Presiding Justice.

Appeals from three judgments of the Supreme Court (Harris, J.), entered August 14, 1996, August 14, 1996 and August 28, 1996 in Albany County, which, inter alia, conditionally granted petitioners' application, in a proceeding pursuant to CPLR article 78, to compel respondents to enforce cigarette and motor fuel taxes pertaining to on-reservation sales of cigarettes and motor fuel to non-Indian consumers.

New York imposes sales and excise taxes upon cigarettes and motor fuel (see, Tax Law arts. 12-a, 20, 28), but cannot impose such taxes on sales of those products to enrolled tribal members on Indian reservations (see, Moe v. Confederated Salish & Kootenai Tribes of Flathead Reservation, 425 U.S. 463, 96 S.Ct. 1634, 48 L.Ed.2d 96). On-reservation sales to non-Indian consumers, however, are subject to such taxation (see, Washington v. Confederated Tribes of Colville Indian Reservation, 447 U.S. 134, 100 S.Ct. 2069, 65 L.Ed.2d 10). In 1988, respondent Department of Taxation and Finance adopted regulations (see, 20 NYCRR 336.6, 336.7, 414.6, 414.7) designed to require on-reservation retailers to pay sales and excise taxes upon sales of cigarettes and motor fuel to non-Indian consumers. Cigarette wholesalers doing business on Indian reservations commenced actions to enjoin the State's regulatory scheme (see, 20 NYCRR 336.6, 336.7) to enforce the collection of sales taxes on cigarettes; however, the actions culminated in a decision by the U.S. Supreme Court in June 1994 (see, Department of Taxation & Fin. of N.Y. v. Milhelm Attea & Bros., 512 U.S. 61, 114 S.Ct. 2028, 129 L.Ed.2d 52) upholding the State's regulations.

Nevertheless, according to the petition herein, respondent Commissioner of Taxation and Finance has failed to enforce said statutes and regulations. As a consequence, petitioners, trade organizations representing convenience stores and corporations owning and operating retail stores in New York engaged in, inter alia, the sale of cigarettes and motor fuel, commenced this CPLR article 78 proceeding seeking to compel respondents to determine, assess and collect cigarette and motor fuel excise and sales taxes relating to sales of those products by on-reservation retailers to non-Indian consumers and otherwise enforce the laws on a uniform basis. Respondents moved to dismiss the petition on the ground that petitioners lack standing to maintain the proceeding, which motion was denied. Thereafter, respondents answered, interposing objections in point of law. Supreme Court treated such objections as a motion for summary judgment and, inter alia, granted the petition in all respects. Respondents appeal.

The essential principle of standing is the notion of "injury in fact--an actual legal stake in the matter being adjudicated [which] ensures that the party seeking review has some concrete interest in prosecuting the action which casts the dispute 'in a form traditionally capable of judicial resolution' " (Society of Plastics Indus. v. County of Suffolk, 77 N.Y.2d 761, 772, 570 N.Y.S.2d 778, 573 N.E.2d 1034, quoting Schlesinger v. Reservists to Stop the War, 418 US 208, 220-221, 94 S.Ct. 2925, 2932, 41 L.Ed.2d 706), which is "fairly traceable to the defendant's acts or omissions" (Village of Arlington Hgts. v. Metropolitan Hous. Dev. Corp., 429 U.S. 252, 261, 97 S.Ct. 555, 561, 50 L.Ed.2d 450). The crux of petitioners' argument is that by failing to enforce the subject taxing statutes against on-reservation retailers, State officials are permitting those retailers, with whom petitioners must compete, to purchase cigarette and motor fuel products at lower wholesale prices, which in turn enables them to charge "discount" prices to non-Indian consumers, a fact which respondents have not seriously disputed. We note that the U.S. Supreme Court has found such competitive economic injury cognizable (see, Clarke v. Securities Indus. Assn., 479 U.S. 388, 403, 107 S.Ct. 750, 759, 93 L.Ed.2d 757; Arnold Tours v. Camp, 400 U.S. 45, 46, 91 S.Ct. 158, 159, 27 L.Ed.2d 179; Association of Data Processing Serv. Orgs. v. Camp, 397 U.S. 150, 151, 90 S.Ct. 827, 829, 25 L.Ed.2d 184; cf., Matter of United States Catholic Conference, 2d Cir., 885 F.2d 1020, 1029, cert. denied 495 U.S. 918, 110 S.Ct. 1946, 109 L.Ed.2d 309). Accordingly, we find that petitioners have asserted sufficient injury in fact for standing purposes. The determination of standing, however, requires more than a showing of a cognizable injury in fact.

To the principle of injury in fact, courts at both the State and Federal levels have added a rule of self-restraint or "prudential limitation[ ]" (Society of Plastics Indus. v. County of Suffolk, 77 N.Y.2d 761, 773, 570 N.Y.S.2d 778, 573 N.E.2d 1034, supra ), that the interest or injury asserted must fall within "the zone of interests to be protected or regulated by the statute or constitutional guarantee in question" (Association of Data Processing Serv. Orgs. v. Camp, supra, at 153, 90 S.Ct. at 830 [emphasis supplied] ). Thus, as the Court of Appeals has noted, "competitive injury, of itself, will not confer standing" (Matter of Dairylea Coop. v. Walkley, 38 N.Y.2d 6, 11, 377 N.Y.S.2d 451, 339 N.E.2d 865). The competitive injury must be tied either to a statutory purpose, as it was in Matter of Dairylea Coop. v. Walkley (supra), ¹ or to a violation of a constitutional guarantee, as is the case here.

In arguing that petitioners lack standing to maintain this proceeding because they are not within the "zone of interests" intended to be protected by the tax laws (see, Tax Law arts. 12-A, 20, 28) and regulations (see, 20 NYCRR 336.6, 336.7, 414.6, 414.7), respondents misconstrue the nature of petitioners' challenge. Petitioners are not contesting the validity of the subject taxing statutes or an administrative determination rendered in violation of those statutes. Rather, petitioners challenge respondents' unequal enforcement of the statutes and regulations. Petitioners argue, inter alia, that by their failure to uniformly enforce the mandated collection of taxes, respondents have engaged in discrimination violative of their right to equal protection as guaranteed by the 14th Amendment of the U.S. Constitution. ² Thus, for standing purposes, we must decide whether petitioners' injury falls within the zone of interests sought to be protected by that constitutional guarantee.

The Equal Protection Clause prohibits a public authority from applying or enforcing an admittedly valid law in a discriminatory fashion between persons in similar circumstances (see, Yick Wo v. Hopkins, 118 U.S. 356, 373-374, 6 S.Ct. 1064, 1072-1073, 30 L.Ed. 220; Matter of 303 W. 42nd St. Corp. v. Klein, 46 N.Y.2d 686, 693, 416 N.Y.S.2d 219, 389 N.E.2d 815). In the case before us, it is clear that the failure to enforce the collection of sales and excise taxes on cigarettes and motor fuel sold by on-reservation retailers to non-Indian consumers has resulted in the unequal application of the taxing statutes and regulations to petitioners, who by statute (see, Tax Law arts. 12-A, 20, 28), regulation (see, 20 NYCRR 336.6, 336.7, 414.6, 414.7) and case law (see, Department of Taxation & Fin. of N.Y. v. Milhelm Attea & Bros., 512 U.S. 61, 114 S.Ct. 2028, 129 L.Ed.2d 52, supra ) are entitled to be treated alike (see, Matter of Di Maggio v. Brown, 19 N.Y.2d 283, 290, 279 N.Y.S.2d 161, 225 N.E.2d 871). ³

Although " '[t]he conscious exercise of some selectivity in enforcement is not in itself a federal constitutional violation' " (id., at 290, 279 N.Y.S.2d 161, 225 N.E.2d 871, quoting Oyler v. Boles, 368 U.S. 448, 456, 82 S.Ct. 501, 506, 7 L.Ed.2d 446; see, Matter of 303 W. 42nd St. Corp. v. Klein, 46 N.Y.2d 686, 695, 416 N.Y.S.2d 219, 389 N.E.2d 815, supra ), when it is demonstrated, as it has been here, that the selection is based upon a suspect classification such as race, " ' * * * a State must show that its purpose or interest is both constitutionally permissible and substantial, and that its use of the classification is "necessary * * * to the accomplishment" of its purpose or the safeguarding of its interest' " (Regents of Univ. of Cal. v. Bakke, 438 U.S. 265, 305, 98 S.Ct. 2733, 2756, 57 L.Ed.2d 750, quoting Matter of Griffths, 413 U.S. 717, 721-722, 93 S.Ct. 2851, 2855, 37 L.Ed.2d 910). Respondents argue that nonenforcement of the taxing statutes against on-reservation retailers has been necessary "to ensure an opportunity for reservation businesses to survive, and to avoid disruptive and potentially violent demonstrations" while they negotiate a diplomatic solution to the problem of collecting taxes from Indian nations and tribes protective of their sovereign status.

Referring to the first proffered reason, we note that it is not constitutionally permissible to "[p]refer[ ] [the] members of any one group for no reason other than race or ethnic origin [for, to do so,] is discrimination for its own sake" (Regents of Univ. of Cal. v. Bakke, 438 U.S. 265, 307, 98 S.Ct. 2733, 2757, 57 L.Ed.2d 750, supra ). As for the second reason, we acknowledge that protecting citizens from civil disorder is within the legitimate police power of the State (see, Stotland v. Pennsylvania, 398 U.S. 916, 920, 90 S.Ct. 1552, 1554, 26 L.Ed.2d 83 [Douglas, J., dissenting] ), but note that the exercise of that power is never paramount to the right of equal protection, save in...