Matter of White v. State of N.Y. Tax Appeals Trib., 2021 NY Slip Op 04394

Petitioner Eric R. White (ERW Wholesale), a Seneca Nation-licensed tobacco wholesaler on the Cattaraugus Reservation, shipped 9,000 cartons of Native American brand cigarettes to another Native-owned business; an ERW employee (driver Snyder) was delivering the load.
Snyder was stopped after failing to stop at a commercial vehicle inspection checkpoint, produced registration/invoices/licenses, and underwent a 40-minute safety inspection at the checkpoint.
After the safety inspection concluded, State Police detained Snyder and, using bolt cutters to remove a padlock, opened the cargo area, opened a carton, inspected a single pack and found it unstamped; the cigarettes were confiscated.
The Department of Taxation and Finance assessed a $1,259,250 penalty under Tax Law article 20 for possession of unstamped cigarettes; the Division and Tribunal sustained the penalty against petitioner; petitioner sought review via CPLR article 78.
The Appellate Division (Third Dept.) held the warrantless search unconstitutional, suppressed the seized cigarette evidence as the product of an illegal search, found the remaining circumstantial evidence insufficient to support the assessment, and annulled the Tribunal's determination.

Issue	White's Argument	Commissioner/State's Argument	Held
Lawfulness of warrantless search of the truck	Search violated Fourth Amendment; evidence obtained by State Police after safety inspection was unlawful and must be excluded	Search was permissible under automobile exception, administrative-search authority, and Tax Law inspection powers	Search unlawful: automobile exception unmet (no arrest, no probable cause); safety inspection had ended before forcible search; State Police not shown to be acting as Commissioner's agent and, in any event, lacked reasonable basis; forced entry impermissible; evidence suppressed
Sufficiency of remaining (circumstantial) evidence to support penalty	Without seized cigarettes, record lacks proof cigarettes were unstamped; invoices merely show sales-tax exemption, not excise-stamp status	Tribunal: even if seized cigarettes excluded, truck’s failure to stop and invoices provide rational basis for penalty	Tribunal's alternative reliance on circumstantial evidence irrational and unsupported; invoices irrelevant to excise-stamp status; assessment cannot stand absent suppressed direct evidence

People v. Spinelli, 35 N.Y.2d 77 (N.Y. 1974) (commercial/business property entitled to Fourth Amendment protections)
Matter of Finn's Liquor Shop v. State Liquor Auth., 24 N.Y.2d 647 (N.Y. 1969) (state agencies must comply with Fourth Amendment in enforcement actions)
People v. Diaz, 81 N.Y.2d 106 (N.Y. 1993) (warrantless searches presumptively unreasonable absent an exception)
People v. Rizzo, 40 N.Y.2d 425 (N.Y. 1976) (administrative inspectors must have information amounting to a reasonable belief before entering/inspecting)
People v. Sciacca, 45 N.Y.2d 122 (N.Y. 1978) (administrative inspectors lack authority to break and enter locked areas)
People v. De Bour, 40 N.Y.2d 210 (N.Y. 1976) (standards for police investigatory stops and founded suspicion)
Hudson v. Michigan, 547 U.S. 586 (U.S. 2006) (fruit-of-the-poisonous-tree/exclusionary-rule analysis and purging taint inquiry)