Steinbeck v. Gerosa

Decision Date01 May 1958
Citation175 N.Y.S.2d 1,4 N.Y.2d 302,151 N.E.2d 170
Parties, 151 N.E.2d 170 In the Matter of John E. STEINBECK, Appellant, v. Lawrence E. GEROSA, as Comptroller of the City of New York et al., Respondents.
CourtNew York Court of Appeals Court of Appeals

Irwin Karp and Harry Buchman, New York City, for appellant.

Peter Campbell Brown, Corp. Counsel, New York City (Isidore Friedman, Stanley Buchsbaum, New York City, and Jacob Friedes, Brooklyn, of counsel), for respondents.

CONWAY, Chief Judge.

Petitioner is an author of novels, plays, motion picture scripts, magazine articles and other literary works. In April of 1952 he filed returns under the New York City General Business and Financial Tax Law (commonly known and hereinafter referred to as the 'Gross Receipts Tax') covering the following periods: January 12, 1943 to December 31, 1944; October 1, 1945 to August 30, 1948; January 1, 1950 to June 30, 1950, and paid the tax and interest thereon. The comptroller denied a refund following which the present proceeding was instituted to review that determination. Thereafter, the parties stipulated that the total amount paid represented, in part, taxes and interest attributable to literary works of petitioner prior to the time he became a resident of New York City. They further stipulated that the city would pay petitioner the sum of $251.24 and that in the event the petitioner were fully successful in this proceeding the refund will be limited to the sum of $531.09 principal of tax and $133.73 interest or a total of $664.82.

It is conceded that petitioner was a resident of New York City and wrote numerous novels, motion picture scripts, plays, newspaper and magazine articles and radio scripts during the three periods here involved. Through his literary agents located in New York City, petitioner negotiated for the licensing of certain rights in his literary works. The agents' principal function was to negotiate such contracts for Mr. Steinbeck and they had complete authority and discretion in so doing. Indeed, they even executed contracts on his behalf. Certain of the author's rights were licensed by the agents orally as 'a cash deal'. He did not sell the copyright to his works. He merely licensed certain rights in them to others.

Respondents' Exhibits D, H and I are examples of the type of contract executed by petitioner in New York City. They purport to grant certain of his rights in his literary works. As to books, the consideration to be paid to him consists of a percentage of the amount charged by the publisher for all copies sold, less copies returned, but with 'no deduction for cash discounts or bad debts'. This percentage is characterized as 'royalties'. As to motion picture scripts, magazine and newspaper articles, and plays, the consideration consists of a lump sum or a percentage or a combination of the two. The agents would receive the royalty moneys, take their commission and deposit the balance in Mr. Steinbeck's bank account.

The Gross Receipts Tax (Administrative Code of City of New York, ch. 46, tit. B) is imposed pursuant to section 24-a of the General City Law, Consol.Laws, c. 21 which authorizes New York City to impose 'a tax * * * upon persons carrying on or exercising for gain or profit within such city, any trade, business, profession, vocation or commercial activity * * * or making sales within such city'. The tax is to be 'measured by the gross receipts from such activities carried on or sales made within the city * * *.'

In this petition Steinbeck alleged that the tax levied on him, and paid under protest, was collected erroneously, illegally and unconstitutionally because

(a) his activities in New York City did not constitute a trade, business or other activity within the meaning of the tax statute;

(b) the Gross Receipts Tax is a tax on privileges secured by the First and Fourteenth Amendments to the Constitution of the United States and section 8 of article I of the Constitution of the State of New York;

(c) his activities in New York City other than writing were de minimis and not subject to tax; and

(d) the tax was levied, in part, on royalties derived from interstate and foreign commerce, in violation of section 8 of article I of the United States Constitution.

The Gross Receipts Tax applies to persons 'carrying on or exercising for gain or profit within * * * (the city of New York) any trade, business, profession, vocation or commercial activity * * *' so long as the gross receipts therefrom exceed $10,000 per annum (Administrative Code, § B46-2.0). Insofar as the interpretation of a statute is concerned there are four kinds of terms or words, to wit, common, technical, legal, and trade or commercial (2 Sutherland on Statutory Construction (3d ed.), § 4919). Manifestly, the words found in the Gross Receipts Tax are common words. Moreover, it is well settled that a 'tax law should be interpreted as the ordinary person reading it would interpret it.' Howitt v. Street & Smith Pub., 276 N.Y. 345, 351, 12 N.E.2d 435, 437; Business Statistics Organization v. Joseph, 299 N.Y. 443, 449, 87 N.E.2d 505, 507. Common words are to be given their commonly understood meaning unless another meaning is obviously intended (see McKinney's Consol.Laws of N.Y., Book 1, Statutes, § 232). Since there is nothing in the Gross Receipts Tax to suggest even remotely that the lawmakers intended to confer a special or restricted meaning on the terms therein used, we may look to the legal dictionaries for the generally accepted common definition of such terms. The word 'trade' has a broad definition of 'Any sort of dealings by way of sale or exchange; commerce, traffic.' Vol. III, Bouvier's Law Dictionary, Rawle's Third Revision, pp. 3290-3291. 'Business' has been described as a word of 'large * * * import', a 'very comprehensive term'. It encompasses 'That which occupies the time, attention and labor of men for the purpose of livelihood or profit, but it is not necessary that it should be the sole occupation or employment. It embraces everything about which a person can be employed'. Vol. I, Bouvier's Law Dictionary Rawle's Third Revision, p. 406; Flint v. Stone Tracy Co., 220 U.S. 107, 171, 31 S.Ct. 342, 55 L.Ed.2d 389. 'Profession' has been defined as a 'vocation, calling, occupation or employment involving labor, skill, education, special knowledge and compensation or profit, but the labor and skill involved is predominantly mental or intellectual, rather than physical or manual.' (Black's Law Dictionary (4th ed.), p. 1375.) A 'vocation' is 'One's regular calling or business.' 'The activity on which one spends major portion of his time and out of which he makes his living.' (Id., p. 1745.) 'Commercial activity', of course, is activity relating to or connected with trade and traffic or commerce in general. (See Black's Law Dictionary (4th ed.), p. 337.) Thus, it will be seen that the broadest of terms have been employed in the Gross Receipts Tax. Indeed, it is difficult to conceive of a more all-embracing tax. The sweep of the statute is so great that it was deemed necessary to provide expressly that the phrase, exercising any profession, vocation, trade, business or commercial activity, '(d)oes not include labor or services rendered by an individual for a wage or salary.' Administrative Code, § B46-1.0, subd. 5.

Petitioner Steinbeck earns his livelihood as an author, reaping profits from the sale of his literary endeavors. It cannot be doubted that in so doing petitioner is carrying on or exercising for gain or profit a trade, business, profession, vocation or commercial activity as those terms are commonly understood.

In an effort to demonstrate that he is not engaged in 'business' the petitioner cites People ex rel. Nauss v. Graves, 283 N.Y. 383, 28 N.E.2d 881. The question there presented was whether the owners in common of certain realty were engaged in business within the meaning of article 16-A of the Tax Law, Consol.Laws, c. 60, which imposed a 'Temporary emergency tax on net incomes of unincorporated businesses.' The relators had inherited the subject real estate and had engaged another to manage it. After pointing out that the term 'business' is of very broad significance and has a great variety of meanings, this court wrote (283 N.Y. at pages 386-388, 28 N.E.2d at page 882): 'When used in tax statutes similar to that involved in the case at bar, 'business' or 'doing business' connote something more than the ownership of property and the receipt of income derived from property. (Cases cited.) Although the very nature of the case does not permit an exact formula by which to determine when the activities of a property owner amount to the doing of business, there has been evolved the principle which distinguishes between a passive and an active owner or investor. One who allocates the active administration of the properties to others and himself performs only such acts as are appropriate to safeguard his ownership, is to be distinguished from one who himself actively participates in administering the management of the properties. The question is one which depends upon the facts of the particular case. (Case cited.) * * * If the activities of these appellants were deemed to be the doing of business, then the doing of business would comprise every instance where property is owned in common and the owners act but to safeguard their property. If there is to be maintained a distinction between ownership on the one hand and the doing of business on the other, a distinction established by the cases and respondents do not suggest that the distinction be obliterated, then these appellants may not be regarded as having been engaged in the doing of business.'

The Nauss case, supra, is not controlling for at least two reasons. First, Mr. Steinbeck is not a mere passive owner or investor. He actively creates the literary properties which bear his name. Second, and more important, or so it seems to us, the...

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