70 A.D.2d 978 | N.Y. App. Div. | 1979
— 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 the State Tax Commission which sustained a deficiency in sales tax due of $11,468.56 plus statutory interest for the period March 1, 1970 to May 31, 1973. Petitioner, individually, owns and operates Singer’s Restaurant in Liberty, Sullivan County, New York. In addition to restaurant service for consumption on-premises, petitioner maintained a service bar where delicatessen cold cuts, sandwiches and beverages were sold for off-premises consumption. Since petitioner sold some food items for off-premises consumption, he was entitled to the benefit of the exemption provided in section 1105 (subd [d], par [i], cl [3]) of the Tax Law to the effect that receipts from sales of food or beverages in a restaurant are exempt from the sales and use taxes, if sold for consumption off the premises and, except for sandwiches, are in an unheated state, and are of a type commonly sold in the same form in establishments which are food stores. During the period from April 1 to April 8, 1973, respondent conducted a field audit of petitioner’s business for the period of March 1, 1970 to May 31, 1973 which resulted in the issuance by the Sales Tax Bureau on March 19, 1974 of a notice of determination and demand for payment of sales and use taxes due for the audit period in the amount of $23,781.37, plus penalty and interest of $7,389.15, for a total of $31,170.52. Petitioner had failed to keep register tapes or copies of customers’ sales receipts for the period in issue as required by section 1135 of the Tax Law. The auditor, therefore, made estimates based on two test analyses he conducted. During the period April 1 to April 8, 1973, the field auditor found that the cash register was short $149.55 on a gross of $5,017.50, or 3.1% shortage. The auditor assumed that the 3.1% shortage was the average for the entire period in question, and multiplied 3.1% times the gross sales of the entire 314-year audit period to arrive at additional taxable sales of $26,623. In addition, on March 30, 1973, the auditor computed the sales tax returns for that one day, and discovered that the guest checks available showed sales tax overcharges of 0.8%. The
Field Audit Report Tax Comm.
Determination
Gross sales reported $ 858,425.00 $ 858,425.00
Sales unreported 26,623.00 26,623.00
Add’l beer & liquor sales 28,345.00 28,345.00
Total gross sales 913,393.00 913,393.00
Nontaxable sales 40,681.30 259,403.81
Total taxable sales $ 872,711.70 $ 653,989.19
Total tax due 49,074.49 36,762.22
Add’l tax overcharge 204.52 203.98
Total $ 49,279.01 $ 36,966.20
Tax paid 25,497.64 25,497.64
Total due $ 23,781.37 $ 11,468.56
Petitioner asserts that his total tax payments for this period, $25,497.64, represent his complete sales tax obligation. Petitioner contends that he had no- notice of the tests conducted by the auditor and that it is irrational to base 39 months of taxes on such test results. Petitioner also asserts that the markup on liquor, beer and soda sales, which added some $28,345 to petitioner’s taxable sales, has no support in the record. Respondent argues that petitioner did not sustain his burden of proving error in the method of determining taxes due, and the exact amount of such error. Respondent asserts that the auditing procedure it used was both reasonable and proper in view of petitioner’s totally inadequate records, and that the determination is supported by substantial evidence. While petitioner did maintain certain records such as sales journals and ledgers, this information could not be verified because petitioner did not retain cash register tapes or guest checks prior to notice of the audit. This failure to keep the cash register tapes was a clear violation of section 1135 of the Tax Law. These inadequate records forced the auditor to pick a test period for which cash register tapes were available. This was done, and the period of April 1 to April 8, 1973 became the test period. The tapes were compared to the records which petitioner had, and it was discovered that sales, as recorded in petitioner’s journals, were underestimated by 3.1%, and a markup test applied to petitioner’s beer and liquor sales resulted in an increase in gross sales. Respondent found that these two items of increased sales were the result of