Wegmans Food Mkts., Inc. v. Tax Appeals Tribunal of N.Y.

• Decision Date: 22 November 2017
• Parties: In the Matter of WEGMANS FOOD MARKETS, INC., Petitioner, v. TAX APPEALS TRIBUNAL OF the STATE of New York et al., Respondents.
• Court: New York Supreme Court — Appellate Division

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In the Matter of WEGMANS FOOD MARKETS, INC., Petitioner,
v.
TAX APPEALS TRIBUNAL OF the STATE of New York et al., Respondents.

Supreme Court, Appellate Division, Third Department, New York.

Nov. 22, 2017.

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Ward Greenberg Heller & Reidy LLP, Rochester (Jeffrey J. Harradine of counsel), for petitioner.

Eric T. Schneiderman, Attorney General, Albany (Frederick A. Brodie of counsel),

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for Commissioner of Taxation and Finance, respondent.

Before: EGAN JR., J.P., DEVINE, CLARK, MULVEY and RUMSEY, JJ.

EGAN JR., J.P.

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Proceeding pursuant to CPLR article 78 (initiated in this Court pursuant to Tax Law § 2016 ) to review a determination of respondent Tax Appeals Tribunal denying petitioner's request for certain refunds of sales and use tax imposed under Tax Law articles 28 and 29.

Petitioner is a regional supermarket chain headquartered in the City of Rochester, Monroe County, which operates retail locations in several states, including approximately 50 locations throughout New York. As part of its business operations, petitioner monitors the retail prices charged by its competitors in order to competitively price its products in accordance with its pricing strategy. Since 1995, petitioner has contracted with RetailData, LLC for the provision of competitive price audits (hereinafter CPAs) or price checks in order to determine how much its competitors charge for certain specifically requested retail products. RetailData collects this raw data and compiles it into a report, according to certain specifications provided by petitioner, that petitioner thereafter uses to inform its pricing strategies. In 2011, the Department of Taxation and Finance conducted an audit of petitioner's sales and use tax liability for

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the period between June 2007 and February 2010. Following the audit, the Department determined that petitioner's purchase of CPAs from RetailData, and the corresponding reports derived therefrom, constituted the purchase of taxable information services (see Tax Law § 1105[c][1] ) and issued a notice of determination imposing upon petitioner an additional tax amount due of $227,270.01 for the relevant time period. Petitioner thereafter filed a petition in the Division of Tax Appeals challenging the determination and seeking a redetermination and refund of its sales tax liability. Following a hearing, an Administrative Law Judge (hereinafter ALJ) sustained the determination, concluding that the CPAs and written reports produced by RetailData and purchased by petitioner did not fall within the applicable exclusion from the imposition of sales tax because the information purchased was not, among other things, personal and individual in nature to petitioner (see Tax Law § 1105[c][1] ). Petitioner filed an exception to the ALJ's determination and, following a hearing, respondent Tax Appeals Tribunal affirmed the ALJ's determination. Petitioner then commenced this proceeding, seeking to, among other things, annul the Tribunal's determination.

This Court's review of the Tribunal's determination is limited. So long as the Tribunal's determination is rationally based and is supported by substantial evidence, it must be confirmed, even where a different conclusion is reasonable (see Matter of American Food & Vending Corp. v. New York State Tax Appeals Trib., 144 A.D.3d 1227, 1228, 41 N.Y.S.3d 572 [2016] ; Matter of Hwang v. Tax Appeals Trib. of the State of N.Y., 105 A.D.3d 1151, 1152, 963 N.Y.S.2d 423 [2013] ). "Where the interpretation of a statute or its application involves knowledge and understanding of underlying operational practices or entails an evaluation of factual data and inferences to be drawn therefrom," the courts are generally deferential "to the governmental agency charged with responsibility for administration of the statute" ( Matter of Colt Indus. v. New York City Dept. of Fin., 66 N.Y.2d 466, 470–471, 497 N.Y.S.2d 887, 488 N.E.2d 817 [1985] [internal quotation marks, brackets and citation omitted] ); however, if "the

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question is one of pure statutory reading and analysis, dependent only on accurate apprehension of legislative intent, there is little basis to rely upon any special competence or expertise of the administrative agency and its interpretive regulations are, therefore, to be accorded much less weight" (Matter of New York Life Ins. Co. v. State Tax Commn., 80 A.D.2d 675, 676, 436 N.Y.S.2d 380 [1981], affd. 55 N.Y.2d 758, 447 N.Y.S.2d 245, 431 N.E.2d 970 [1981] ). The burden is on the taxpayer to establish that the determination being challenged clearly falls within the applicable exclusion (see

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Matter of 677 New Loudon Corp. v. State of N.Y. Tax Appeals Trib., 19 N.Y.3d 1058, 1060, 955 N.Y.S.2d 795, 979 N.E.2d 1121 [2012], cert. denied 571 U.S. ––––, 134 S.Ct. 422, 187 L.Ed.2d 280 [2013] ; Matter of American Food & Vending Corp. v. New York State Tax Appeals Trib., 144 A.D.3d at 1228, 41 N.Y.S.3d 572). "Where the language of a statute is clear and unambiguous, courts must give effect to its plain meaning" ( Matter of Charter Dev. Co., L.L.C. v. City of Buffalo, 6 N.Y.3d 578, 581, 815 N.Y.S.2d 13, 848 N.E.2d 460 [2006] [internal quotation marks, brackets and citation omitted] ); however, in the event of ambiguity, " where, as here, an exclusion rather than an exemption is involved, the statute must be strictly construed in favor of the taxpayer" (Matter of New York Life Ins. Co. v. State Tax Commn., 80 A.D.2d at 676, 436 N.Y.S.2d 380 ; see Matter of Grace v. New York State Tax Commn., 37 N.Y.2d 193, 196, 371 N.Y.S.2d 715, 332 N.E.2d 886 [1975] ; Matter of Towne–Oller & Assoc. v. State Tax Commn., 120 A.D.2d 873, 874 n., 502 N.Y.S.2d 544 [ 1986] ; Matter of Greco Bros. Amusement Co. v. Chu, 113 A.D.2d 622, 624, 497 N.Y.S.2d 206 [1986] ; but see Matter of Mobil Oil Corp. v. Finance Adm'r of City of N.Y., 58 N.Y.2d 95, 99, 459 N.Y.S.2d 566, ...