689 F.3d 312
3rd Cir.2012Background
- Calabrese operated Don's What a Bagel, Inc. and collected NJ sales tax from customers.
- Bankruptcy proceedings: Chapter 11 converted to Chapter 7; Calabrese also filed Chapter 13.
- New Jersey filed secured proofs of claim for sales taxes collected 2003–2009; claims reclassified as secured then disputed.
- Bankruptcy Court held third-party sales tax is a trust fund tax under § 507(a)(8)(C) and nondischargeable; District Court affirmed.
- Issue: whether third-party sales taxes (retailer collects and holds for the state) fall under § 507(a)(8)(C) or § 507(a)(8)(E).
- Court adopts an ambiguous-text approach requiring legislative history and public policy analysis; ultimately holds for trust-fund tax interpretation over excise tax interpretation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether third-party sales tax is a trust fund tax under § 507(a)(8)(C) or an excise tax under § 507(a)(8)(E). | Calabrese argues sales tax is excise tax under (E). | New Jersey argues sales tax is trust fund tax under (C). | Sales tax treated as trust fund tax; nondischargeable under § 507(a)(8)(C). |
Key Cases Cited
- Rosenow v. State of Ill., Dep’t of Revenue (In re Rosenow), 715 F.2d 277 (7th Cir. 1983) (three circuits favor trust fund treatment for third-party sales taxes)
- DeChiaro v. N.Y. State Tax Comm’n, 760 F.2d 432 (2d Cir. 1985) (affirms Rosenow; trust fund taxes include third-party sales taxes)
- Shank v. Wash. State Dep’t of Revenue, Excise Tax Div. (In re Shank), 792 F.2d 829 (9th Cir. 1986) (textual ambiguity requires legislative-history analysis; split on outcome)
- Begier v. IRS, 496 U.S. 53 (1990) (court treated floor statements as persuasive evidence of congressional intent)
- Phila. Newspapers, LLC, 599 F.3d 298 (3d Cir. 2010) (method of statutory interpretation in bankruptcy priorities; contextual reading)