Pyramid Co. of Auburn v. Chu

• Decision Date: 15 November 1991
• Citation: 177 A.D.2d 970,577 N.Y.S.2d 1015
• Parties: PYRAMID COMPANY OF AUBURN, Appellant, v. Roderick G.W. CHU, as Commissioner of Taxation and Finance of State of New York, President of the State Tax Commission and Head of the New York Department of Taxation and Finance and Gabriel B. Dicerbo and Frank J. Puccia, as Members of the State Tax Commission, Respondents.
• Court: New York Supreme Court — Appellate Division

Page 1015

577 N.Y.S.2d 1015

177 A.D.2d 970

PYRAMID COMPANY OF AUBURN, Appellant, v. Roderick G.W. CHU, as Commissioner of Taxation and Finance of State of New York, President of the State Tax Commission and Head of the New York Department of Taxation and Finance and Gabriel B. Dicerbo and Frank J. Puccia, as Members of the State Tax Commission, Respondents.

Supreme Court, Appellate Division,

Fourth Department.

Nov. 15, 1991.

Charles J. Engel, Jr., Syracuse, for appellant.

Robert Abrams, (Joanne Hunt Piersma, of counsel), Syracuse, for respondents.

Before CALLAHAN, Acting P.J., and DENMAN, GREEN, PINE and DAVIS, JJ.

MEMORANDUM:

In this declaratory judgment action, plaintiff alleges that the distinction implicit in Tax Law § 1115(a)(17) unconstitutionally violates the equal protection of the law. Supreme Court granted defendant summary judgment dismissing the action on the ground of failure to exhaust administrative remedies. We agree with plaintiff's contention that it was error to dismiss the complaint because his challenge raises only the issue of the statute's constitutionality (see, Horner v. State of New York, 107 A.D.2d 64, 65, 485 N.Y.S.2d 595; National Merchandising Corp. v. New York State Dept. of Taxation & Fin., 63 A.D.2d 785, 786, 404 N.Y.S.2d 1009; see also, Watergate II Apts. v. Buffalo Sewer Auth., 46 N.Y.2d 52, 57, 412 N.Y.S.2d 821, 385 N.E.2d 560). Because plaintiff's constitutional challenge may be resolved on the record before us, we address that issue (see, CPLR 5522) and declare that Tax Law § 1115(a)(17) is constitutional.

Taxation statutes carry a heavy presumption of constitutionality, and they should be upheld so long as they bear a rational relationship to any legitimate state purpose (see, Trump v. Chu, 65 N.Y.2d 20, 25, 489 N.Y.S.2d 455, 478 N.E.2d 971, appeal dismissed 474 U.S. 915, 106 S.Ct. 285, 88 L.Ed.2d 250; Matter of Long Is. Light. Co. v. Assessor of Town of Brookhaven, 154 A.D.2d 188, 193-194, 552 N.Y.S.2d 336; Savings Bank of Utica v. New York State Tax Comm., 107 A.D.2d 205, 207, 485 N.Y.S.2d 903, affd. 66 N.Y.2d 769, 497 N.Y.S.2d 368, 488 N.E.2d 114). The challenger on equal protection grounds bears the heavy burden of showing, "by the most explicit demonstration", that the purported distinction is not related to any conceivable legitimate state purpose (see, Trump v. Chu, supra, 65 N.Y.2d at 25, 489 N.Y.S.2d 455, 478 N.E.2d 971, quoting Madden v. Kentucky, 309 U.S. 83, 88, 60 S.Ct. 406, 408, 84 L.Ed. 590; Matter of Long Is. Light. Co. v. Assessor of Town of Brookhaven, supra, 154 A.D.2d at 194, 552 N.Y.S.2d 336; Matter of Greco Bros. Amusement Co. v. Chu, 113 A.D.2d 622, 625, 497 N.Y.S.2d 206; Savings Bank of Utica v. New York State Tax Comm., supra, 107 A.D.2d at 207, 485 N.Y.S.2d 903). Plaintiff has not met that burden.

Tax Law § 1115(a)(17) is rationally related to the legitimate State purpose of ensuring that the sales tax is efficiently collected without imposing double taxation. Personal property purchased by contractors for use in the improvement of real property is subject to the sales tax (see, Tax Law §§ 1101[b][4], 1105). Thus, whether the contractor installs the personal property on the real property or sells it to the real property owner for installation, the sales tax has already been paid. If the contractor installs the personal property, Tax Law § 1115(a)(17) exempts him from collecting the sales tax from the real property owner as would otherwise be required (Tax Law §§ 1101[b...