| Matter of 21 Club, Inc. v Tax Appeals Trib. of State of N.Y. |
| 2010 NY Slip Op 00032 [69 AD3d 996] |
| January 7, 2010 |
| Appellate Division, Third Department |
| In the Matter of 21 Club, Inc., Petitioner, v Tax Appeals Tribunalof State of New York et al., Respondents. |
—[*1] Andrew M. Cuomo, Attorney General, Albany (Julie S. Mereson of counsel), forCommissioner of Taxation and Finance, respondent.
Malone Jr., J. Proceeding pursuant to CPLR article 78 (initiated in this Court pursuant to TaxLaw § 2016) to review a determination of respondent Tax Appeals Tribunal, whichsustained a sales and use tax assessment imposed under Tax Law articles 28 and 29.
Petitioner is a restaurant and catering business that offered the use of audiovisual equipmentto its catering customers. The equipment that petitioner offered to its customers was rented bypetitioner from a company named Presentation Services pursuant to a written agreement.Petitioner did not pay sales tax on its rental of the equipment from Presentation Services; instead,it billed its catering customers for the total cost of the event—including audiovisualequipment rental—collected sales tax on the amount billed and remitted the sales tax tothe state.
After an audit, as is relevant here, the Division of Taxation issued petitioner a notice ofdetermination for a total amount of $172,520.04, which included taxes, penalties and interest forthe period of June 1999 through November 2002. After a conciliation conference, this amountwas reduced to $72,053.66, plus interest, representing taxes assessed on petitioner's rental ofaudiovisual equipment. Petitioner then sought a redetermination, arguing that its equipmentrentals were exempt from sales tax as they qualified as sales for resale as such within the [*2]meaning of the Tax Law (see Tax Law § 1101 [b][4]).[FN*]After a hearing, an administrative law judge affirmed the assessment. Petitioner filed a notice ofexception to respondent Tax Appeals Tribunal, which, after a hearing, also sustained theassessment. Petitioner then commenced this proceeding seeking review of the Tribunal'sdetermination.
"[E]xemptions from tax are strictly construed against the taxpayer, who bears the burden ofdemonstrating entitlement to such an exemption" (Matter of Upstate Farms Coop. v TaxAppeals Trib. of State of N.Y., 290 AD2d 896, 897-898 [2002]). The Tribunal'sdetermination will not be disturbed if it is rationally based and is supported by substantialevidence in the record, even if a different result could have been reached (see Matter of CBS Corp. v Tax AppealsTrib. of State of N.Y., 56 AD3d 908, 909 [2008], lv denied 12 NY3d 703[2009]; Matter of Rubin v Tax AppealsTrib. of State of N.Y., 29 AD3d 1089, 1090 [2006]). Further, because the issuepresented here—whether petitioner's equipment rentals were taxable as part of its cateringbusiness or were nontaxable as rentals for rerental—is not one of pure statutoryinterpretation, the Tribunal's expertise in the application of the Tax Law is entitled to deference(see Matter of Astoria Fin. Corp. v TaxAppeals Trib. of State of N.Y., 63 AD3d 1316, 1318 [2009]).
The record here reveals that petitioner rented the equipment from Presentation Services andmade such equipment available to its catering customers for use on petitioner's premises. Thecatering customers were not billed separately for the use of the equipment but, rather, the costwas included as part of the overall catering contract. Petitioner's customers were permitted toremove the equipment from the premises only if the customers negotiated for such removaldirectly with Presentation Services. Notably, petitioner did not rent audiovisual equipment toanyone other than its catering customers and offered the use of such equipment only inconjunction with catering services. As such, petitioner's rerental of the equipment "is purelyincidental to the primary purpose of the business" and, thus, is not a rental for rerental as such(Matter of Custom Mgt. Corp. v New York State Tax Commn., 148 AD2d 919, 920[1989]; see 20 NYCRR 527.8 [f] [2] [i]). Accordingly, the Tribunal's determination thatpetitioner's rentals of the equipment from Presentation Services were taxable transactions has arational basis in the record and will not be disturbed.
We are not persuaded by petitioner's contention that the equipment rentals at issue areanalogous to a caterer's purchase of flowers, which is typically considered to be a purchase forresale (see 20 NYCRR 527.8 [f] [2] [v]; Matter of Levine v State Tax Commn.,144 AD2d 209, 211 [1988]). Petitioner's remaining contentions are raised for the first time in thisproceeding and, thus, are not preserved for this Court's review (see Matter of XO N.Y., Inc. vCommissioner of Taxation & Fin., 51 AD3d 1154, 1155 [2008]).
Rose, J.P., Lahtinen and Garry, JJ., concur. Adjudged that the determination is confirmed,without costs, and petition dismissed.
Footnote *: Pursuant to the Tax Law, rentalsare treated in the same manner as sales. Thus, as with sales for resale, rentals for rerental are nottaxable transactions (see Tax Law § 1101 [b] [4], [5]).