| Matter of Island Waste Servs., Ltd. v Tax Appeals Trib. of the State ofN.Y. |
| 2010 NY Slip Op 07431 [77 AD3d 1080] |
| October 21, 2010 |
| Appellate Division, Third Department |
| In the Matter of Island Waste Services, Ltd., Petitioner, v TaxAppeals Tribunal of the 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.
Mercure, J.P. 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 tax assessment imposed under Tax Law article 28.
At all relevant times, petitioner operated a waste transfer station in Suffolk County, at whichit sorted and condensed municipal solid waste and construction debris that had been collectedfrom its customers or delivered by other trash removal companies. Petitioner was assessed salestax totaling approximately $2.5 million plus interest on payments made to third-party truckersfrom March 1997 to November 2005 for shipping waste material from its transfer station. Thewaste was taken to landfills and burn centers, generally located out of state, for ultimate disposal.Petitioner challenged the assessments and, following a hearing, an administrative law judgegranted the petitions and canceled the assessments. Thereafter, respondent Tax Appeals Tribunalreversed. Petitioner then commenced this CPLR article 78 [*2]proceeding seeking review of the Tribunal's determination, and wenow confirm.[FN1]
Tax Law § 1105 (c) (5) imposes a sales tax on certain services, including"[m]aintaining, servicing or repairing real property, property or land . . . asdistinguished from adding to or improving such real property, property or land, by a capitalimprovement." Although the statute was amended effective December 1, 2005 to exempt"services of removal of waste material from a facility regulated as a transfer station. . . by the department of environmental conservation, provided that the wastematerial to be removed was not generated by the facility" (L 2005, ch 321, § 1), petitionerconcedes that the exclusion was not applicable during the time period at issue. The relevantregulation defines "[m]aintaining, servicing and repairing" as "all activities that relate to keepingreal property in a condition of fitness, efficiency, readiness or safety or restoring it to suchcondition. Among the services included are . . . trash and garbage removal" (20NYCRR 527.7 [a] [1]).
Petitioner argues that the removal of the waste processed at its facility should not be taxedbecause the waste was not merely incidental to its use of the property. That is, petitioner contendsthat it is akin to a manufacturer or processor whose principal function is to process rawmaterials—waste—into a form for shipment. Thus, petitioner maintains, the serviceperformed by the third-party truckers in shipping its product to landfills or burn centers is notrationally comparable to the incidental disposal of trash or garbage generated by its facility.Rather, petitioner asserts, the applicable regulation here is 20 NYCRR 526.5 (g) (3), whichprovides, in relevant part, that "transportation and delivery are not themselves services subject totax." We disagree.
It is well settled that "an agency's interpretation of the statutes it administers must be upheldabsent demonstrated irrationality or unreasonableness" (Lorillard Tobacco Co. v Roth, 99NY2d 316, 322 [2003] [internal quotation marks omitted]; see Matter of Chesterfield Assoc. v New York State Dept. of Labor, 4NY3d 597, 604 [2005]). "While as a general rule courts will not defer to administrativeagencies in matters of pure statutory interpretation, deference is appropriate where the question isone of specific application of a broad statutory term" by the agency charged with administeringthe statute (Matter of O'Brien vSpitzer, 7 NY3d 239, 242 [2006] [internal quotation marks and citations omitted];see Lorillard Tobacco Co. v Roth, 99 NY2d at 322-323; Matter of American Tel. &Tel. Co. v State Tax Commn., 61 NY2d 393, 400 [1984]). According deference to theinterpretation of Tax Law § 1105 (c) (3) by respondent Commissioner of Taxation andFinance, we conclude that he rationally determined that the services provided by third-partytruckers constituted maintenance services within the meaning of the statute as it existed prior tothe 2005 amendment.
As the Court of Appeals has noted, both the statute and regulation contain broad language(see Matter of Rochester Gas & Elec. Corp. v New York State Tax Commn., 71 NY2d931, 934 [1988]; Matter of Cecos Intl. v State Tax Commn., 71 NY2d 934, 936 [1988]).Moreover, both the Court of Appeals and this Court have held that the removal andtransportation of waste—including hazardous waste and industrial waste—to adisposal facility constitutes a taxable maintenance service (see Matter of Rochester Gas &Elec. Corp. v New York State Tax Commn., 71 NY2d at 933-934; Matter of Cecos Intl. vState Tax Commn., 71 [*3]NY2d at 936; Matter ofTonawanda Tank Transp. Serv. v Tax Appeals Trib. of State of N.Y., 168 AD2d 748,749-750 [1990]; see also IslandRecycling Corp. v New York State Dept. of Taxation & Fin., 34 AD3d 739 [2006],appeal dismissed and lv denied 8 NY3d 956 [2007]). The Court of Appeals explainedthat the removal of such waste "to landfills is neither the transportation of a useful product fromone location to another, nor an integral step in the erection of a capital improvement" under TaxLaw § 1105 (c) (3) (Matter of Rochester Gas & Elec. Corp. v New York State TaxCommn., 71 NY2d at 934). In rejecting the argument that "property must be abandoned byits owner before it can be considered trash" (Matter of Tonawanda Tank Transp. Serv. v TaxAppeals Trib. of State of N.Y., 168 AD2d at 749), this Court further explained that"removing hazardous waste is necessary to maintain real property and transportation of the wasteis an integral part of the removal process" (id. at 750).
Similarly here, as the Tribunal explained in its determination, petitioner was required toremove trash from its property in order to make room for new deliveries of waste. Indeed, theamount of waste that could be stored at the property and the length of time that it could remainthere were limited by the Department of Environmental Conservation permits pursuant to whichpetitioner operated. Kevin Walton, who was employed as a district manager for petitioner'sparent company, testified that waste was constantly moving through the facility and, if thetransfer station became filled to capacity because waste could not be moved, petitioner wasrequired to shut down the facility. Under these circumstances, we cannot conclude that theCommissioner acted irrationally in determining that the removal of waste by third-party truckerswas taxable as a maintenance service, i.e., an "activit[y] that relate[d] to keeping [petitioner's]real property in a condition of fitness, efficiency, readiness or safety" (20 NYCRR 527.7 [a][1]).[FN2]
Malone Jr., McCarthy, Garry and Egan Jr., JJ., concur. Adjudged that the determination isconfirmed, without costs, and petition dismissed.
Footnote 1: Seventeen other taxpayers withsimilar assessments agreed by stipulation to be bound by the outcome in this proceeding.
Footnote 2: This interpretation is consistentwith a 1997 advisory opinion of the Commissioner opining that the removal of trash from atransfer station is a taxable maintenance service (see NY St Dept of Taxation & FinAdvisory Op No. TSB-A-97[32]S). Although the sponsors of the 2005 amendment characterizedthe 1997 opinion as a "strained interpretation" of Tax Law § 1105 (c) (3) (seeSenate Introducer Mem in Support, Bill Jacket, L 2005, ch 321, at 3-4; Assembly Mem inSupport, Bill Jacket, L 2005, ch 321, at 5-6), neither the Legislature itself nor its individualmembers have the "power to declare, retroactively, that an existing statute shall receive a givenconstruction" (Matter of Roosevelt Raceway v Monaghan, 9 NY2d 293, 304 [1961]).