OPINION OF THE COURT
The issue presented in this case is whether the State Department of Taxation and Finance exceeded its authority when it denied the sales tax refund claims of a financial services company that did not pay the sales taxes underlying the refund requests. We conclude that denial of the refund claims was authorized by the sales tax statutory and regulatory scheme and we therefore affirm the judgment of the Appellate Division confirming the determination of the Tax Appeals Tribunal.
Petitioner General Electric Capital Corporation provided financing services for private label credit cards issued by retail vendors. Typically, the retail vendors offered credit cards to their customers under their store names. When the customers used the credit cards to purchase merchandise from the vendors, the vendors remitted the sales taxes due on the retail transactions to the Division of Taxation of the New York State Department of Taxation and Finance.
In account purchase agreements entered into between 1990 and 1996, particular retail vendors assigned their rights under credit agreements with their customers to petitioner. Petitioner purchased these accounts for the face amount of the total indebtedness, which included any sales taxes financed by the vendors at the time of the purchases—taxes the vendors had already paid to the Division. After unsuccessfully attempting to collect the debts owed from the customers, petitioner ultimately determined that certain accounts were uncollectible. It charged off these “bad debts” on its own financial records and deducted the amounts of the uncollectible debts from its income for federal income tax purposes.
The Administrative Law Judge denied the protest petition and petitioner appealed to the Tax Appeals Tribunal, which also upheld the Division’s decision denying the refunds. The Tribunal explained that, unlike the retail vendors, a third-party finance company has no trustee relationship with the State with respect to the collection of sales taxes. The State, therefore, has no concomitant obligation to refund sales taxes paid on transactions that later became uncollectible debts. Referencing Tax Law § 1139 (a), which sets forth the procedure for pursuing a sales tax refund claim, the Tribunal noted that petitioner did not fall within any of the categories of applicants eligible to seek a sales tax refund, each of which had a more direct connection to the purchase transaction that gave rise to the sales tax obligation in the first instance. Absent such a connection, the Tribunal noted that the field of entities that could potentially seek a sales tax refund “would be virtually limitless and the orderly administration of the sales tax rendered unworkable, at best.”
Unsuccessful on administrative appeal, petitioner commenced this original proceeding in the Appellate Division challenging the determination of the Tax Appeals Tribunal. That Court confirmed the determination denying the sales tax refund claim, concluding that 20 NYCRR 534.7 (b) was consistent with Tax Law § 1132 (e), and its restriction on the class of applicants eligible to seek a sales tax refund was not precluded by the assignment provisions in the General Obligations Law. This Court granted petitioner’s application for leave to appeal and we now affirm.
“The tax commission may provide, by regulation, for the exclusion from taxable receipts, amusement charges or rents of amounts representing sales where the contract of sale has been cancelled, the property returned or the receipt, charge or rent has been ascertained to be uncollectible or, in case the tax has been paid upon such receipt, charge or rent, for refund of or credit for the tax so paid. . . .”
As the word “may” suggests, the statute does not require that the Division grant refunds on uncollectible debts to any class of applicants.
Consistent with the explicit grant of authority to issue regulations, the Commissioner of Taxation and Finance promulgated 20 NYCRR 534.7 (b) (1), which states that “[wjhere a receipt . . . has been ascertained to be uncollectible, either in whole or in part, the vendor of the tangible personal property . . . may apply for a refund or credit of the tax paid on such receipt.” Under the regulation, a leased department or concession of the vendor, or a finance company wholly owned by the vendor (referred to as a captive finance company), is recognized as standing in the shoes of the vendor for purposes of pursuing a refund request. A refund is not available, however, “for a transaction which is financed by a third party or for a debt which has been assigned to a third party” (20 NYCRR 534.7 [b] [3]).
Petitioner acknowledges that it is neither a leased concession or department of the retail vendors nor a captive finance company, but is a third party as that term is used in 20 NYCRR 534.7 (b) (3). Thus, petitioner does not dispute that its refund request falls squarely within the prohibition designated in the regulation. Rather, it asserts that the Division erred in denying the refund because the regulatory restriction is not authorized by Tax Law § 1132 (e), and because it violates the broad assignment provisions in the General Obligations Law. We disagree with both arguments.
We interpreted a predecessor regulation in
Matter of Abraham & Straus v Tully
(
“The cornerstone of administrative law is derived from the principle that the Legislature may declare its will, and after fixing a primary standard, endow administrative agencies with the power to fill in the interstices in the legislative product by prescribing rules and regulations consistent with the enabling legislation”
(Matter of Nicholas v Kahn,
This regulatory authority is, of course, not unbridled. “As an arm of the executive branch of government, an administrative agency may not, in the exercise of rule-making authority, engage in broad-based public policy determinations”
(Rent Stabilization Assn. of N.Y. City v Higgins,
Here, the Legislature enacted a statute—Tax Law § 1132 (e)—that permitted but did not require the Division to provide
The regulation narrowly addresses sales tax refunds arising from uncollectible debts, subject matter specifically referenced in the enabling legislation. Unquestionably, by its terms, Tax Law § 1132 (e) allows the Division to exclude uncollectible debts from “taxable receipts.” With respect to the underlying purchase transactions in this case, the retail vendors were the only entities who had taxable receipts—they alone were responsible for paying sales taxes to the Division at the time of the taxable transactions (see Tax Law § 1101 [b] [3]; § 1105 [a]).
Having determined that the statute granted the Commissioner authority to promulgate regulations regarding refunds for uncollectible debts, we turn to whether the Commissioner articulated a rational explanation for distinguishing between who is and who is not permitted to seek sales tax refunds. The Commissioner contends that the limitation on the assignment of sales tax refund claims to third parties is necessary to avoid excessive administrative burden and facilitate the orderly administration of the sales tax. The rationality of this explanation is manifest when it is considered in the context of the sales tax statutory scheme.
Third-party finance companies do not carry the burden of collecting sales taxes as a trustee of the State, nor does the Division have any trustee relationship with assignees such as petitioner to provide a basis for tracking the underlying transactions giving rise to the debts acquired by these companies. Thus, it was not arbitrary or capricious for the Commissioner to authorize retail vendors to pursue refund claims pertaining to debts that eventually became uncollectible while precluding third parties, who do not have taxable receipts and never paid the taxes in the first instance, from doing so.
Indeed, the regulatory restriction at issue corresponds with a provision in the general sales tax refund statute, Tax Law § 1139, which addresses the procedure for filing a refund claim. Section 1139 (a), applicable to refund claims arising from uncollectible debts
(see
Tax Law § 1139 [e]), identifies three types of sales tax refund applicants, each of whom paid sales taxes (either to the retail vendor, who then forwarded the taxes to the Division, or directly to the Division). Consistent with section 1139 (a), 20 NYCRR 534.7 allows a party who remitted sales taxes to seek a refund. The rule is therefore rational, entirely consistent with sections 1132 (e) and 1139 (a), and does no more than “fill in the interstices in the legislative product”
(Matter of Nicholas v Kahn,
Petitioner’s contention that Tax Law § 1132 (e) “merely gives the . . . Commissioner the right to universally allow refunds and credits on uncollectible receivables” (appellant’s brief, at 30-31) finds no support in the language or legislative history of that provision
(see
L 1965, ch 93). The Legislature’s grant of authority to the Commissioner in this instance was both
Petitioner also maintains that the regulation violates the broad assignment provisions in General Obligations Law § 13-101, which states that “[a]ny claim or demand can be transferred” except in certain enumerated circumstances not relevant here, or when such a transfer is “expressly forbidden” by statute or “would contravene public policy.” (§ 13-101 [3].) Asserting that no statute expressly precludes the assignment of a sales tax refund claim, petitioner submits that the retail vendors were free to assign the debts and, once the debts became uncollectible, it assumed their entitlement to apply for refunds, thereby standing in the shoes of the retail vendors. 2
This argument fails to account for General Obligations Law § 13-105, which clarifies under what circumstances a transferred claim can be enforced in an action or special proceeding. Section 13-105 states that where a claim is lawfully transferred, it is generally enforceable with one important caveat: “this section does not apply, where the rights or liabilities of a party to a claim or demand, which is transferred, are regulated by special provision of law.” In this case, the rights of parties to apply for sales tax refunds from the Division are closely regulated under Tax Law § 1132 (e), § 1139 (a) and 20 NYCRR 534.7. By the plain terms of General Obligations Law § 13-105, where there is a conflict between a “special provision of law” and the general assignment statute, the former governs
General Obligations Law § 13-101 itself contains exceptions that recognize that its provisions can be trumped by specific statutes or public policy concerns and we have relied on those exceptions in rejecting a similar challenge to a regulation. In
Matter of Medical Socy. of State of N.Y. v Serio
(
Like the no-fault benefits at issue in
Medical Society,
this case involves a purely statutory benefit (without Tax Law § 1132 [e] and 20 NYCRR 534.7, no taxpayer would be entitled to obtain a sales tax refund arising from an uncollectible debt) in a closely-regulated arena where the Legislature has relied on the Commissioner’s special expertise. Here, the Legislature’s delegation of authority was especially broad in that the Commissioner was vested with the discretion to decide whether refunds should ever be allowed for bad debts. We have already concluded that the regulation is valid and has the force and effect of law and, since we look to statutes and their implementing regulations to ascertain public policy
(see Matter of Economico v Village of Pelham,
Contrary to petitioner’s assertion, our holding does not result in a “windfall” for the State. By statute, sales taxes are due in full at the time of the taxable transaction, which is completed upon the transfer of title or possession of the tangible personal property to the customer (Tax Law § 1101 [b] [5]). The taxable event is the retail sale, regardless of whether the customer pays the taxes in cash or the taxes become a portion of the amount financed by the retail vendor
(see
Tax Law § 1101 [b] [3]; § 1105
The dissent asserts that by refusing to entertain refund claims by parties who never paid sales taxes, the Commissioner is somehow making those parties “bear the sales tax burden” or seeking to collect a tax on a sale that was “never consummated”
4
in circumstances where “there is no sales transaction” (dissenting op at 261, 262, 263). This argument misapprehends both the facts and the statutory scheme. In this case, petitioner purchased commercial paper (undifferentiated debt) from retail vendors in transactions that did not involve the transfer of tangible personal property and therefore were not subject to the application of sales taxes. Petitioner has not borne any sales tax burden, nor is the Commissioner attempting to collect anything
Accordingly, the judgment of the Appellate Division should be affirmed, with costs.
R.S. Smith, J. (dissenting). Regulations of the Department of Taxation and Finance, promulgated pursuant to Tax Law § 1132 (e), provide for the refund or credit of sales tax payments where the purchase price of the item sold proves uncollectible. At issue here is the validity of one section in those regulations, 20 NYCRR 534.7 (b) (3), which provides: “A refund or credit is not available for a transaction which is financed by a third party or for a debt which has been assigned to a third party, whether or not such third party has recourse to the vendor on that debt.” I believe that section 534.7 (b) (3) is inconsistent with both the Tax Law and the General Obligations Law, and so is invalid on two independent grounds. I therefore dissent.
I
The basis for my view that the regulation violates the Tax Law is that the sales tax imposed by Tax Law § 1105 was designed to be a tax whose burden falls upon purchasers. It was not intended as a direct burden on vendors or their successors in interest. Yet the regulation challenged here permits the state treasury to retain, and prohibits a vendor’s assignee from recovering, 474% (or more, where the sales tax is higher) of the amount a purchaser was supposed to pay, in situations where the purchaser has not paid a penny. Section 534.7 (b) (3) thus contradicts the thrust of the sales tax statute, while accomplishing no discernable purpose except the enrichment of the State.
Although vendors are required to collect and pay sales tax as a matter of administrative convenience, the statute makes quite clear that the pocketbook being targeted is the purchaser’s. The tax is imposed upon the vendor’s “receipts” (Tax Law § 1105 [a]), and while “receipts]” is defined to include “any amount for which credit is allowed by the vendor to the purchaser” (Tax Law § 1101 [b] [3]), nothing in the statute suggests an intention to tax as “receipts” sums that the vendor never in fact receives. On the contrary, Tax Law § 1132 (e) says that the State Tax Commission “may provide, by regulation, for the exclusion from taxable receipts ... of amounts representing sales where the contract of sale has been cancelled, the property returned or the receipt . . . has been ascertained to be uncollectible.” (As I explain below, I think the majority reads too much into the word “may” in this section of the statute.)
Thus, when a vendor parts with merchandise that a customer has paid for, the vendor does not directly bear the burden of the sales tax. (Of course the sales tax often burdens vendors indirectly, by reducing their sales or impelling them to charge lower prices, but this kind of indirect consequence is not the same as the direct burden of paying the tax.) And obviously, where the vendor retains his merchandise and receives no payment—i.e., where no sale takes place—the vendor does not bear the burden of any tax. It would be neither fair nor sensible to make the vendor bear the burden of the tax where it is in the worst possible situation—where it has parted with the merchandise and received nothing in exchange—and the State has never, so far as I am aware, sought to do so. But it is equally anomalous, where the vendor has passed the risk of collection on to a third-party assignee, to make that assignee bear the sales tax burden in cases where the customer pays nothing. By promulgating 20 NYCRR 534.7 (b) (3), respondent Commissioner of Taxation and Finance has created just this anomaly.
We rejected an effort by the State Tax Commission to achieve a similarly irrational result in
Matter of Abraham & Straus v Tully
(
“The interpretation placed on [subdivision (e)] of section 1132 of the Tax Law and on regulation 525.5 (a) by the Sales Tax Bureau and by the State Tax Commission in this proceeding would all but emasculate the statute and regulation. The statute and the regulation obviously intend that a vendor shall be relieved of sales tax liability to the extent that the receipt from a sale proves uncollectible, so that the taxes which the vendor is required to remit will most closely reflect the tax due on moneys actually received on sales of personal property. The method employed by the bureau and approved by the commission, by which it is assumed that the first cash received by a vendor on a credit sale is for the entire sales tax due on the sale, would have quite the contrary result and, by reason of the fact that the receipts under consideration are by their nature not fully collectible, would inevitably produce a liability for sales taxes which would deviate from the statutory sales tax rate” {id. at 212-213 [emphasis added]).
We found the State Tax Commission’s interpretation of the statute and regulation in Abraham & Straus to be “irrational and unreasonable” {id. at 214). In this case, the Commissioner has embodied his interpretation of the statute in a regulation, but his interpretation is no less unreasonable. The Commissioner refuses to reduce tax liability “to the extent that the receipt from a sale proves uncollectible” and is collecting not just a tax in excess of the statutory rate “on moneys actually received,” but a tax where no money is received at all.
Our decision in
Abraham & Straus
followed the logic of an earlier Appellate Division case raising the same issue,
Matter of Yonkers Plumbing & Heating Supply Corp. v Tully
(
Respondents argue, however, and the Court today agrees, that the Legislature did authorize collection of tax on purchase
The majority reads this language as authorizing the Commissioner (the successor to the State Tax Commission) to make no provision at all for such exclusions, refunds or credits if he chooses—thus producing the result, “inconceivable” to the Yonkers Plumbing court, of a sales tax where there is no sales transaction. According to the majority, the Commissioner could, simply by not issuing the regulations which section 1132 (e) says he “may” issue, exact tax on money never received. It is implicit in the majority’s logic that the Commissioner could require payment of tax not only where a debt is uncollectible, but “where the contract of sale has been cancelled” or “the property returned.” The Commissioner has not imposed such a tax, but by not doing so, in the majority’s view, the Commissioner is doing vendors a favor—the majority describes it as a “benefit” which “offsets the significant responsibilities imposed on [vendors] and fosters the trustee relationship between the vendors and the State” (majority op at 256). The Commissioner is under no obligation, the majority reasons, to do a similar favor for assignees who are not trustees for the receipt of sales tax.
I think the majority misreads the statutory scheme. The whole policy of the statute, as reflected in the provisions I summarized above, is to tax the purchaser, not the vendor. It is a tax on “receipts.” The statute does indeed define “receipts” to include amounts for which credit is extended, but it is quite another thing to include amounts for which credit is extended that are never paid. It would be a very strange definition of “receipts” that included amounts never received at all, and I see no basis for believing that the Legislature intended such a definition. On the contrary, I conclude from reading the statutes that a sales tax on a nonsale was as “inconceivable” to the Legislature as it was to the Court in Yonkers Plumbing, and that the Legislature assumed that, one way or another, sales tax proceeds would come only out of the prices that purchasers actually paid.
In short, I do not believe that it would have been within the discretion of the Commissioner to decide to permit no exclusions, credits or refunds for uncollectible debts. If I am right in this, the basis for the majority’s conclusion in this case falls away. The Commissioner’s decision to allow, by regulation, credits or refunds for uncollectible debts cannot be interpreted as a gracious favor given by the Commissioner to vendors, which he can withhold from those who are not vendors and therefore not “trustees.”
It remains to consider whether any other justification warrants what the Commissioner purports to do in 20 NYCRR 534.7 (b) (3): to deny a refund or credit, and thus effectively tax an unconsummated sale, in those cases where the transaction has been financed by, or a debt assigned to, a third party.
Respondents argue that Tax Law § 1132 (e) not only permits, but requires, the distinction that section 534.7 (b) (3) makes between vendors and vendors’ assignees; that assignees are not, under the statute, eligible for a refund when debts are uncollectible. The majority does not accept this argument; indeed, it
Respondents’ theory is that section 1132 (e), in authorizing regulations that provide for exclusion, refund or credit of taxes paid on uncollectible debts, limits the benefit of such regulations to “vendors” and excludes vendors’ assignees. The first problem with this argument is that the word “vendors” does not appear in section 1132 (e). However, that statute refers to exclusion from taxable “receipts,” and respondents argue that only vendors can have “receipts” within the meaning of the statute. Tax Law § 1101 (b) (3) defines “receipt” as “[t]he amount of the sale price of any property and the charge for any service taxable under this article . . . valued in money, whether received in money or otherwise” and goes on to state certain specific inclusions in, and an exclusion from, this definition. Thus, the essential definition of “receipt” does not use the word “vendor.” The specified inclusions do; they qualify the definition of “receipts” as “including any amount for which credit is allowed by the vendor to the purchaser . . . and also including any charges by the vendor to the purchaser for shipping or delivery . . . regardless of whether such shipping or delivery is provided by such vendor or a third party.” If the definition is read literally and with care it does not say that only “vendors” can have “receipts.” It says only that “receipts” are inclusive of certain credits or charges allowed or imposed by “vendors.” Thus even on a literal level, respondents’ argument fails.
Ignoring this, respondents infer from the mere mention of the word “vendor” in Tax Law § 1101 (b) (3) an intention by the Legislature that the exclusion from taxable “receipts” authorized by Tax Law § 1132 (e), and the credits and refunds also authorized by that statute, can benefit only vendors themselves and not their assignees. I believe the idea the Legislature was trying to communicate such a limitation when it included the word “vendor” in subordinate clauses of the definition of “receipts” is absurd.
Indeed, even if Tax Law § 1132 (e) said that the Commissioner was authorized to allow “vendors” to exclude bad debts from their receipts, respondents’ argument would still be a weak one. When a statute gives a person a right of action it is ordinarily understood to imply the same right in that person’s successors in interest, including assignees. Even apart from
There is not the slightest indication in Tax Law § 1132 (e) that the Legislature intended to exclude assignees, or that it gave any thought to the question. Respondents surely would not even contend that all successors in interest to “vendors” are excluded: obviously, if a vendor is an individual and dies, the refund can be collected by his or her executors; if the vendor is a corporation that is merged out of existence, the refund can be collected by the successor entity. Nothing in the statute indicates that an assignee should be on any different footing.
I consider one final possible argument in support of the validity of 20 NYCRR 534.7 (b) (3) under the Tax Law. As I have explained above, while I believe that the Legislature intended to impose sales tax only on transactions in which a purchase price was actually paid, I recognize that practical considerations might trump the perfect attainment of that goal. Thus I think we should seriously consider an argument that the Commissioner’s disparate treatment of cases where there is an assignment and cases where there is not is justified by some administrative reason.
But respondents’ brief in this Court makes no such argument, and the issue of administrative convenience is barely touched on in the decisions of the Administrative Law Judge and respondent Tax Appeals Tribunal rejecting petitioner’s claim. The Tribunal, at the end of its lengthy opinion, does say that without a “connection between an applicant [for refund], the person responsible for collecting the tax and the underlying transaction, the field of potential refund or credit applicants . . . would be virtually limitless and the orderly administration of the sales tax rendered unworkable.” But the Tribunal neither states the facts underlying this conclusion nor explains how it was arrived at. Similarly, at the oral argument in this
In any event—even assuming we could consider a justification for the regulation that is supported by no more than conclusory assertions—the “administrative convenience” argument is not viable. Section 534.7 (b) (3), on its face, is not designed just to save the Department whatever added trouble there may be in dealing with assignees rather than vendors. The regulation does not say that only a vendor may apply for a refund or credit; if it said that, presumably vendors and their assignees could structure their transactions so that the vendor would get the refund and pay it to the assignee. The regulation flatly forbids any refund or credit to anyone in a “transaction which is financed by a third party or for a debt which has been assigned to a third party.” Thus, the regulation requires that in all such transactions, the applicable percentage of the customer’s unpaid obligation will remain in the state treasury.
I therefore conclude that administrative convenience and efficiency are not the reasons for, and do not justify, section 534.7 (b) (3). Indeed, I can think of only one reason for the regulation: it effectively transfers money from private firms to the State. 2 I am not shocked that the Commissioner of Taxation and Finance finds this an attractive result, but I do not believe the Legislature has authorized the Commissioner to accomplish that result in this case. I therefore conclude that section 534.7 (b) (3) is invalid because it is inconsistent with the Tax Law.
I also believe that section 534.7 (b) (3) is inconsistent with General Obligations Law § 13-101, which provides:
“Any claim or demand can be transferred, except in one of the following cases:
“1. Where it is to recover damages for a personal injury;
“2. Where it is founded upon a grant, which is made void by a statute of the state; or upon a claim to or interest in real property, a grant of which, by the transferrer, would be void by such a statute;
“3. Where a transfer thereof is expressly forbidden by: (a) a statute of the state, or (b) a statute of the United States, or (c) would contravene public policy.”
I find it hard to imagine a regulation more directly contrary to this statute than one that says, as 20 NYCRR 534.7 (b) (3) does, that a refund or credit otherwise available “is not available ... for a debt which has been assigned to a third party.” Indeed, the decisions in this case of both the Administrative Law Judge and the Tax Appeals Tribunal appear to acknowledge that section 534.7 (b) (3) is inconsistent with General Obligations Law § 13-101, and the Appellate Division assumed, without deciding, that that was correct. Nevertheless, all three found section 534.7 (b) (3) to be valid. The Tax Appeals Tribunal and the Appellate Division based this holding on the theory that Tax Law § 1132 (e), which in their view authorized the promulgation of section 534.7 (b) (3), was enacted subsequent to General Obligations Law § 13-101, and thus superseded it. In other words, the Tax Appeals Tribunal and the Appellate Division held that section 1132 (e) impliedly repealed section 13-101, insofar as section 13-101 applied to claims for sales tax refunds. Respondents’ brief also argues that section 1132 (e) is a “later-enacted, specific” provision which “governs” to the extent it conflicts with section 13-101.
It is well established that repeals by implication are not favored
(see Matter of Consolidated Edison Co. ofN.Y. v Department of Envtl. Conservation,
With respect, I find the idea that Tax Law § 1132 (e) so clearly contradicts General Obligations Law § 13-101 that the former impliedly repeals the latter to be extremely farfetched. Section 13-101 is a statute dealing with the transferability, or assign-ability, of claims. Section 1132 (e) says not a word on that subject. The logic by which respondents find an implied repeal in section 1132 (e) is the same chain of reasoning that I described above, in which respondents argue that assignees are not eligible for refunds under section 1132 (e). That is, respondents start from the word “receipts” in section 1132 (e), find the word “vendor” in two subordinate clauses in the definition of “receipt,” and infer from that that only a vendor, and not a vendor’s assignee, can have “receipts”; thus respondents conclude, assignees may not benefit from section 1132 (e). As I said above, I see not the slightest warrant for believing that is what the Legislature was thinking when it wrote section 1132 (e). A fortiori, section 1132 (e) is not the sort of clear prohibition on assignment that would justify finding an implied repeal of the General Obligations Law section.
In addition to making the implied repeal argument, respondents argue that the prohibition on assignment contained in 20 NYCRR 534.7 (b) (3) is valid under the “public policy” exception of General Obligations Law § 13-101 (3). Respondents’ “public policy” argument, however, is but another iteration of their theory that section 1132 (e) is a prohibition on assignment. I find it no less difficult to find an anti-assignment “public policy” in section 1132 (e) than I do to find an implied repeal.
The majority’s discussion of General Obligations Law § 13-101 does not track either respondents’ “implied repeal” or “public policy” argument. But the majority does find that section 534.7 (b) (3) is within the public policy exception in General Obligations Law § 13-101 (3). The majority’s reasoning, if I understand it correctly, is that, since (in the majority’s view) section 534.7 (b) (3) is consistent with the Tax Law, that regulation “has the force and effect of law” and is therefore an embodiment of “public policy” (majority op at 258). I believe this is a bootstrap argument which contradicts the plain intent of General Obligations Law § 13-101.
The majority relies on General Obligations Law § 13-105 and on
Matter of Medical Socy. of State of N.Y. v Serio
(
As for
Medical Society v Serio,
I find it relevant here only by contrast. The claims at issue in
Medical Society
were claims of beneficiaries of no-fault insurance to “benefits for non-health-related services (typically housekeeping and transportation expenses)” (
Accordingly, I would reverse the order of the Appellate Division and direct that petitioner’s refund claims be granted.
Chief Judge Kaye and Judges G.B. Smith, Ciparick and Rosenblatt concur with Judge Graffeo; Judge R.S. Smith dissents and votes to reverse in a separate opinion; Judge Read taking no part.
Judgment affirmed, with costs.
Notes
. The dissent suggests that we are placing too much emphasis on the use of the word “may” in section 1132 (e) (dissenting op at 260). But this is, in part, a statutory construction case, requiring us to carefully parse the language chosen by the Legislature. We have previously recognized that the term “may” is permissive
(see e.g. Matter of Scoglio v County of Suffolk,
. It should be noted that the underlying contracts later assigned to petitioner were between the customers and the retail vendors—the Division of Taxation was not a party. For purposes of this appeal, we assume, without deciding, that as between petitioner and the retail vendors, the agreement assigning the right to collect the debts from the customers was intended also to assign the ancillary right to file a sales tax refund claim with the Division. This assumption is central to this dispute for petitioner claims that it obtained from the retail vendors the right to apply for the refunds directly from the Division, not merely the right to receive any proceeds of refund claims filed by the vendors.
. The dissenter’s argument that the Legislature could not have conceived of sales taxes being paid in circumstances where a purchaser paid nothing is refuted by express language in the sales tax statutes. Tax Law § 1105 (a) states that “there is hereby imposed and there shall be paid a tax of four and one-quarter percent upon . . . [t]he receipts from every retail sale of tangible personal property.” Receipts are defined as “[t]he amount of the sale price of any property and the charge for any service taxable under this article, . . . valued in money, whether received in money or otherwise, including any amount for which credit is allowed by the vendor to the purchaser” (Tax Law § 1101 [b] [3] [emphasis added]). And a retail sale encompasses “[a]ny transfer of title or possession or both . . . conditional or otherwise, in any manner or by any means whatsoever for a consideration, or any agreement therefor” (Tax Law § 1101 [b] [5]; [b] [4] [emphasis added]). Under these statutes, sales taxes are due when property is transferred in exchange for an agreement to pay in the future, even though the purchaser pays nothing at the time of the sale transaction. Although the dissent is skeptical that a receipt can include money not actually received, the definitions adopted by the Legislature so provide.
. This “unconsummated sale” phraseology is drawn from an Appellate Division decision
(see Matter of Yonkers Plumbing & Heating Supply Corp. v Tully,
. We said in
Abraham & Straus
that “we do not reject the view . . . that it was within the discretion of the Tax Commission whether to provide for any credit or refund resulting from uncollectible credit transactions” (
. I am bemused by the majority’s suggestion that “[p]etitioner has not borne any sales tax burden” (majority op at 259). The State has obviously collected and retained a sales tax; the purchasers have borne no burden, for they paid nothing; and, by the majority’s reasoning, the whole point of the regulation is to avoid burdening trustee-vendors. If the assignees are bearing no burden, the State has apparently achieved a miracle—it has collected a tax without burdening anyone.
. Respondents cite section 13-105 in their brief, but only to argue that this provision “does not help [petitioner’s] argument.” Respondents do not argue that it helps their own.