Opinion
517504
03-05-2015
In the Matter of EXXON MOBIL CORPORATION, Petitioner, v. STATE OF NEW YORK TAX APPEALS TRIBUNAL et al., Respondents.
McCarter & English, LLP, New York City (David J. Shipley of counsel), for petitioner. Eric T. Schneiderman, Attorney General, Albany (Robert M. Goldfarb of counsel), for Commissioner of Taxation and Finance, respondent.
McCarter & English, LLP, New York City (David J. Shipley of counsel), for petitioner.Eric T. Schneiderman, Attorney General, Albany (Robert M. Goldfarb of counsel), for Commissioner of Taxation and Finance, respondent.
Before: McCARTHY, J.P., LYNCH, DEVINE and CLARK, JJ.
Opinion
CLARK, J.Proceeding pursuant to CPLR article 78 (initiated in this Court pursuant to Tax Law § 2016 ) to review a determination of respondent Tax Appeals Tribunal which, among other things, sustained a sales and use tax assessment imposed under Tax Law articles 28 and 29.
At all relevant times, petitioner owned, operated or was responsible for environmental concerns at numerous facilities in New York where petroleum was used. The Department of Taxation and Finance conducted an audit of petitioner, after which it issued a notice of determination finding that petitioner owed approximately $500,000 in sales tax on payments made to contractors from 2000 through 2004. Specifically, those payments were made for required testing and monitoring on properties affected by petroleum spills. Petitioner challenged the notice of determination and, following a hearing, an AdministrativeLaw Judge upheld it. Respondent Tax Appeals Tribunal thereafter affirmed. Petitioner commenced this CPLR article 78 proceeding seeking review of the Tribunal's determination, and we now confirm.
Tax Law § 1105(c)(5) imposes a sales tax on purchases of services related to “[m]aintaining, servicing or repairing real property, property or land ... as distinguished from adding to or improving such real property, property or land, by a capital improvement.” 20 NYCRR 527.7(a)(1) further defines “[m]aintaining, servicing and repairing” as “all activities that relate to keeping real property in a condition of fitness, efficiency, readiness or safety or restoring it to such condition.” Petitioner asserts that the monitoring and testing services paid for here were not taxable, as they were only intended to ascertain the condition of the affected property and not to remediate the petroleum spills. We disagree.
Under well-established principles of law, “an agency's interpretation of the statutes it administers must be upheld absent demonstrated irrationality or unreasonableness” (Lorillard Tobacco Co. v. Roth, 99 N.Y.2d 316, 322, 756 N.Y.S.2d 108, 786 N.E.2d 7 [2003] [internal quotation marks and citation omitted]; accord Matter of Xerox Corp. v. New York State Tax Appeals Trib., 110 A.D.3d 1262, 1264, 973 N.Y.S.2d 458 [2013] ; Matter of Island Waste Servs., Ltd. v. Tax Appeals Trib. of the State of N.Y., 77 A.D.3d 1080, 1082, 909 N.Y.S.2d 790 [2010], lv. denied 16 N.Y.3d 712, 2011 WL 1675376 [2011] ). Petitioner points out that no deference will generally be afforded to administrative agencies in matters of pure statutory interpretation (see Matter of O'Brien v. Spitzer, 7 N.Y.3d 239, 242, 818 N.Y.S.2d 844, 851 N.E.2d 1195 [2006] ; Matter of Xerox Corp. v. New York State Tax Appeals Trib., 110 A.D.3d at 1264, 973 N.Y.S.2d 458 ). Inasmuch as the present case involves the specific application of broad statutory language, however, deference to the agency that is charged with administering the statute is appropriate (see Matter of Xerox Corp. v. New York State Tax Appeals Trib., 110 A.D.3d at 1264, 973 N.Y.S.2d 458 ; Matter of Island Waste Servs., Ltd. v. Tax Appeals Trib. of the State of N.Y., 77 A.D.3d at 1082, 909 N.Y.S.2d 790 ; compare Matter of Michael A. Goldstein No. 1 Trust v. Tax Appeals Trib. of the State of N.Y., 101 A.D.3d 1496, 1497, 957 N.Y.S.2d 433 [2012], lv. denied 21 N.Y.3d 860, 2013 WL 3198167 [2013] ). Contrary to petitioner's further assertion, the burden rested upon it to establish that the specific sales at issue here were not taxable (see Tax Law § 1132[c][1] ; Matter of Cecos Intl. v. State Tax Commn., 71 N.Y.2d 934, 937, 528 N.Y.S.2d 811, 524 N.E.2d 132 [1988] ; compare Matter of Building Contrs. Assn. v. Tully, 87 A.D.2d 909, 910, 449 N.Y.S.2d 547 [1982] [challenge to regulatory provision imposing sales tax on specified sales of services] ).
As this Court and the Court of Appeals have “noted, both the statute and regulation contain broad language” (Matter of Island Waste Servs., Ltd. v. Tax Appeals Trib. of State of N.Y., 77 A.D.3d at 1082, 909 N.Y.S.2d 790 ; see Matter of Rochester Gas & Elec. Corp. v. New York State Tax Commn., 71 N.Y.2d 931, 933–934, 528 N.Y.S.2d 810, 524 N.E.2d 131 [1988] ). The removal of hazardous waste from a property constitutes a taxable maintenance service and, indeed, petitioner does not dispute that a purchase of services related to the remediation of spilled petroleum is taxable (see Matter of Island Waste Servs., Ltd. v. Tax Appeals Trib. of State of N.Y., 77 A.D.3d at 1082, 909 N.Y.S.2d 790 ; Matter of Tonawanda Tank Transp. Serv. v. Tax Appeals Trib. of State of N.Y., 168 A.D.2d 748, 750, 563 N.Y.S.2d 900 [1990] ). Petitioner claims that the services at issue here are not related to the improvement of property affected by a petroleum spill, but that claim is not borne out by the record. Petroleum discharges are prohibited in New York and, when a spill occurs, petitioner is obliged to notify the Department of Environmental Conservation and may coordinate with that Department to remediate the spill (see Navigation Law §§ 173, 175, 176[7] ). Petitioner is required to conduct an environmental investigation of the spill area, including the monitoring and testing services at issue here, as part of its remediation effort. While an active cleanup of a spill site is not required in every case, the same monitoring and testing procedures are always employed, and it may take years for those procedures to reveal what type of remediation is required. Moreover, if active remediation is conducted, further monitoring and testing is required to ensure that the remedial system may be safely removed. Under these circumstances, there was nothing irrational in the finding that the monitoring and testing services at issue constituted an “ integral part of the” taxable remediation efforts, even if they were billed separately (Matter of Tonawanda Tank Transp. Serv. v. Tax Appeals Trib. of State of N.Y., 168 A.D.2d at 750, 563 N.Y.S.2d 900 ; see Matter of Cecos Intl. v. State Tax Commn., 71 N.Y.2d at 936, 528 N.Y.S.2d 811, 524 N.E.2d 132 ; Matter of Penfold v. State Tax Commn. of State of N.Y., 114 A.D.2d 696, 697, 494 N.Y.S.2d 552 [1985] ). As a result, the Tribunal properly found them to be taxable services under Tax Law § 1105(c)(5), to wit, “activities that relate to keeping real property in a condition of fitness, efficiency, readiness or safety or restoring it to such condition” (20 NYCRR 527.7 [a][1]; see Matter of Island Waste Servs. v. Tax Appeals Trib. of State of N.Y., 77 A.D.3d at 1083, 909 N.Y.S.2d 790 ; Matter of Tonawanda Tank Transp. Serv. v. Tax Appeals Trib. of State of N.Y., 168 A.D.2d at 750, 563 N.Y.S.2d 900 ).
The Tribunal noted its belief that all services related to “cleanup” of a petroleum spill, as that term is used in the Navigation Law, were taxable under Tax Law § 1105(c)(5) (see Navigation Law §§ 172 [4 ], [5]; 176; State of New York v. Neill, 17 A.D.3d 802, 803, 795 N.Y.S.2d 355 [2005], appeal dismissed 5 N.Y.3d 823, 804 N.Y.S.2d 36, 837 N.E.2d 735 [2005] ). We need not, and do not, resolve that broader question because the Tribunal found that the specific activities here were taxable under Tax Law § 1105(c)(5), even without reference to the Navigation Law.
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Petitioner's remaining arguments have been considered and found to be lacking in merit.
ADJUDGED that the determination is confirmed, without costs, and petition dismissed.
McCARTHY, J.P., LYNCH and DEVINE, JJ., concur.