Tully v. Griffin, Inc

Decision Date09 November 1976
Docket NumberNo. 75-831,75-831
Citation50 L.Ed.2d 227,429 U.S. 68,97 S.Ct. 219
PartiesJames H. TULLY, Jr., et al., Appellants, v. GRIFFIN, INC
CourtU.S. Supreme Court

The Tax Injunction Act, 28 U.S.C. § 1341, which prohibits federal district courts from enjoining the assessment, levy, or collection of state taxes where "a plain, speedy and efficient remedy may be had in the courts of such State," held to bar appellee Vermont furniture store's suit in Federal District Court for injunctive relief against allegedly unconstitutional assessment of New York sales taxes on appellee's sales to New York customers, since New York provides a "plain, speedy and efficient" means for redress of appellee's constitutional claims while preserving the right to challenge the amount of taxes due. Despite New York statutes providing that judicial review of an administrative determination shall be a taxpayer's only remedy, other procedures, including a declaratory judgment action, may be used in New York courts when the claim is that the tax is unconstitutional, Ammex Warehouse Co. v. Gallman, 414 U.S. 802, 94 S.Ct. 163, 38 L.Ed.2d 39. Moreover, appellee need not accept as binding the amount of the assessment as a price of challenging the constitutionality of the tax but can obtain a preliminary injunction in state court that will toll the running of the 90-day period within which appellee may challenge such amount at an administrative hearing. Pp. 73-77.

D.C., 404 F.Supp. 738, vacated and remanded.

Thomas P. Zolezzi, Albany, N. Y., for appellants.

R. Paul Wickes, Bennington, Vt., for appellee.

Mr. Justice STEWART delivered the opinion of the Court.

The question in this case is whether New York provides a "plain, speedy and efficient" remedy to an out-of-state corporation that seeks to challenge New York's assessment of sales taxes against it. The United States District Court for the District of Vermont held that New York does not provide such a remedy, and issued a preliminary injunction restraining the collection of the New York taxes. 404 F.Supp. 738. We noted probable jurisdiction of the appeal, 424 U.S. 907, 96 S.Ct. 1099, 47 L.Ed.2d 310.


The appellee, Griffin, Inc., is a Vermont corporation that operates a furniture store in Arlington, Vt., six miles from the New York-Vermont border. It advertises on radio and television and in newspapers that serve the Albany-Schenectady-Troy area of New York, and makes substantial sales at its place of business to customers from that State. It regularly delivers furniture to the New York buyers in its own trucks, and its employees also enter New York on occasion to repair furniture it has sold.

In February 1973, the New York Department of Taxation and Finance determined that Griffin was "doing business" in New York and thus was required to collect state and local sales taxes from its New York customers. The Department sent a tax examiner to Vermont to audit Griffin's records, but Griffin refused its consent. Little more happened until March 1975, when the Department reaffirmed its position and advised Griffin that another tax examiner would soon be dispatched for an audit. Griffin responded by filing suit in the United States District Court for the District of Vermont, alleging generally that any assessment, levy, or collection of sales taxes against it would violate the Commerce, Due Process, and Equal Protection Clauses of the United States Constitution, and asking for injunctive relief. A three-judge court was convened.

After Griffin again denied the tax examiner access to its records, the Department issued a "Notice of Determination and Demand for Payment of Sales and Use Taxes Due." This assessment, by necessity only an estimate, demanded that Griffin pay $218,085.37 in back taxes, interest, and penalties.1 Griffin moved in the federal court for a preliminary injunction to prevent steps from being taken to collect the taxes and to stay the running of the 90-day period in which it could contest the amount shown in the Notice of Determination.2 The defendant New York tax officials filed a cross-motion to dismiss the action for lack of jurisdiction, claiming that suit was barred by the Tax Injunction Act, 28 U.S.C. § 1341, which provides:

"The district courts shall not enjoin, suspend or restrain the assessment, levy or collection of any tax under State law where a plain, speedy and efficient remedy may be had in the courts of such State."

The District Court rejected this defense, ruling that New York law does not provide Griffin "a plain, speedy and efficient remedy."

In reaching this conclusion, the federal court considered first the availability under New York law of direct review of the Notice of Determination. Under New York Tax Law § 1138(a), a taxpayer has 90 days from the receipt of a notice of determination to apply for a hearing before the Tax Commission.3 The Tax Commission's decision after the hearing is judicially reviewable "for error, illegality or unconstitutionality or any other reason whatsoever" in a proceeding under Art. 78 of New York's Civil Practice Law and Rules.4 Before a taxpayer may seek Art. 78 review, however, he must either prepay or post a bond for the amount of the assessment. The court found that Griffin lacked the means to do this. Although the assessment was only a gross estimate, the court assumed that the amount would not be changed unless Griffin submitted to an audit. It ruled that Griffin should not be required to "tur(n) over its books and records to a state whose authority it claims is invalid," and further questioned whether a New York court would entertain an Art. 78 proceeding if Griffin refused to be audited. 404 F.Supp., at 743-745.

The District Court then considered the availability of declaratory relief under § 3001 of New York's Civil Practice Law and Rules.5 It viewed this possible avenue of relief as insufficiently "plain, speedy and efficient" because N.Y. Tax Law § 1140 on its face seems to limit review of sales tax liability to the Art. 78 procedure discussed above.6 Although the court took note of substantial federal and New York case law holding that New York's administrative review proceedings are not in fact exclusive where a plaintiff claims that a tax is unconstitutional, the court concluded that the issue was "cloak(ed) . . . in some uncertainty." Even if Griffin could get declaratory relief, the court held, its contacts with New York were so "minimal" that "it seems unfair to make Griffin litigate in an unfamiliar forum." Finally, the court expressed "reservations" about Griffin's ability to get a preliminary injunction pending a New York court's decision in a declaratory judgment suit. 404 F.Supp., at 745-747. On the basis of this reasoning the District Court granted Griffin preliminary injunctive relief.


A federal district court is under an equitable duty to refrain from interfering with a State's collection of its revenue except in cases where an asserted federal right might otherwise be lost. See Hillsborough v. Cromwell, 326 U.S. 620, 622-623, 66 S.Ct. 445, 447-448, 90 L.Ed. 358; Great Lakes Dredge & Dock Co. v. Huffman, 319 U.S. 293, 297-299, 63 S.Ct. 1070, 1072-1073, 87 L.Ed. 1407; Matthews v. Rodgers, 284 U.S. 521, 525-526, 52 S.Ct. 217, 219-229, 76 L.Ed. 477. This policy of restraint has long been reflected and confirmed in the congressional command of 28 U.S.C. § 1341 that no injunction may issue against the collection of a state tax where state law provides a "plain, speedy and efficient remedy." As the Court has frequently had occasion to note, the statute has its roots in equity practice, in principles of federalism, and in recognition of the imperative need of a State to administer its own fiscal operations. "Interference with state internal economy and administration is inseparable from assaults in the federal courts on the validity of state taxation, and necessarily attends injunctions, interlocutory or final, restraining collection of state taxes. These are the considerations of moment which have persuaded federal courts of equity to deny relief to the taxpayer especially when the state, acting within its constitutional authority, has set up its own adequate procedure for securing to the taxpayer the recovery of an illegally exacted tax." Great Lakes Dredge & Dock Co. v. Huffman, supra, 319 U.S., at 298, 63 S.Ct., at 1073. See also Moe v. Salish & Kootenai Tribes, 425 U.S. 463, 96 S.Ct. 1634, 48 L.Ed.2d 96; Hillsborough v. Cromwell, supra, 326 U.S., at 622-623, 66 S.Ct., at 447-448; Matthews v. Rodgers, supra, 284 U.S., at 525-526, 52 S.Ct., at 219.

These principles do not lose their force, and a State's remedy does not become "inefficient," merely because a taxpayer must travel across a state line in order to resist or challenge the taxes sought to be imposed. If New York provides an otherwise adequate remedy, the mere fact that Griffin must go to New York to invoke it does not jeopardize its ability to assert its rights. To accept the District Court's holding that it would be "unfair" to make Griffin litigate in New York would undermine much of the force of 28 U.S.C. § 1341.

We turn then to the basic inquiry whether under New York law there is a "plain, speedy and efficient" way for Griffin to press its constitutional claims while preserving the right to challenge the amount of tax due. This Court answered the first part of that question by its summary judgment of affirmance three years ago in Ammex Warehouse Co. v. Gallman, 414 U.S. 802, 94 S.Ct. 163, 38 L.Ed.2d 39. In that case, the New York Tax Commission had assessed state alcoholic beverage, tobacco, and sales taxes against two New York companies that sold cigarettes and liquor to persons about to leave the State to enter Canada. The companies brought suit in Federal District Court, claiming that the assessment of the taxes against them violated the Commerce and Import-Export Clauses of the Constitution. The three-judge District...

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