114 A.D.2d 575 | N.Y. App. Div. | 1985
Proceeding pursuant to CPLR article 78 (transferred to this court by order of the Supreme Court at Special Term, entered in Albany County) to review a determination of respondent which sustained a corporate franchise tax assessment imposed under Tax Law article 9-A.
Petitioner, incorporated in New York, owns the formula for a detergent used in laboratories and markets the detergent from its office in New. York City. The product is manufactured in New Jersey by Fabric Chemical Corporation (Fabric), packaged in containers supplied by petitioner at the manufacturing site in Jersey City, New Jersey, and stored there until shipped to petitioner’s customers.
Petitioner applied for a redetermination of the deficiencies. Following an administrative hearing, respondent upheld the Department’s determination, finding that petitioner did not maintain a regular place of business outside of New York for the purposes of Tax Law § 210 (3) (a) (4) and 20 NYCRR 4-2.2 (b) and that petitioner improperly included the fees it paid for storage of its property with Fabric in the property factor of the allocation computation. Petitioner then commenced the instant CPLR article 78 proceeding which was transferred to this court.
For tax years beginning before January 1, 1978, which in
This court, citing its earlier opinion in Matter of UGP Props. v State Tax Commn. (64 AD2d 316, 319), has recently said that the factors relevant in determining whether the taxpayer maintains a regular place of business outside of the State include whether the taxpayer: "(1) holds itself out as doing business in another State; (2) has a source of income from another State; (3) files an income tax return with another State; and (4) has business capital and income with a situs in another State” (Matter of Adirondack Steel Casting Co. v State Tax Commn., 107 AD2d 924, 925). It is essential that the out-of-State place of business be shown to be income generating (supra).
While petitioner has filed corporate tax returns with New Jersey and does hold itself out as doing business in that State, i.e., petitioner’s name appears on the exterior of Fabric’s factory and some of the containers in which the detergent is packaged give a New Jersey address for petitioner, the facts do not demonstrate that petitioner engages in income-generating activities outside of New York. Petitioner’s business is the marketing of detergents. Sales of the product and the work to promote such sales are carried on in petitioner’s New York office. Paul Jacobson, Fabric’s president, testified that, although Fabric answered inquiries of a technical nature concerning the product, inquiries concerning sales were referred to petitioner in New York. Moreover, Fabric’s responses to technical inquiries and its representation of petitioner at trade shows were nothing more than contractual obligations. The contract between Fabric and petitioner recognized Fabric’s status as an independent contractor who had clients other than petitioner. Fabric’s compensation for its services was fixed by that contract. Further, none of Fabric’s employees were employees of petitioner (cf. Matter of Psychological Corp. v Tax Commn., 99 AD2d 905, 906; Matter of Micro Computer Corp. v State Tax Commn., 65 AD2d 867, 868). In our opinion, these facts provide a rational basis for respondent’s determination that petitioner did not maintain a regular place of business outside of the State for its 1977 and 1978 fiscal years.
Determination confirmed, and petition dismissed, without costs. Mahoney, P. J., Kane, Casey, Weiss and Levine, JJ., concur.
The requirement that petitioner maintain a regular place of business outside of New York as a condition to permitting an allocation of business income did not apply to taxable years beginning after January 1, 1978 (Tax Law § 210 [3] [a] [4]; L 1978, ch 69, § 2) and, therefore, did not apply to the return for the 1979 fiscal year which began on July 1, 1978.