249 A.D. 49 | N.Y. App. Div. | 1936
In this proceeding petitioner is asking us to review a final determination of respondents, denying its application for a refund of certain retail sales taxes. On the argument counsel for the respective parties requested the court to disregard technical objections and to decide the issue on the merits. We are complying with that request.
The question of law presented is Whether a trustee in bankruptcy operating, under an order of the bankruptcy court, the business of a bankrupt corporation and selling tangible personal property at retail, is subject to the sales tax imposed by article 17 of the Tax Law (added by Laws of 1933, chap. 281), in a case where the corporation, if conducting the business itself, Would have been subject to such tax.
Petitioner contends that the statute imposing a retail sales tax did not include a trustee in bankruptcy. Respondents, assert that it did.
On January 16, 1933, petitioner, the corporate name of which at that time was X Shops, Inc., was adjudicated a bankrupt and one Sinclair was appointed as trustee in bankruptcy of its estate by the United States District Court with authority to carry on and continue its business of selling at retail men’s wearing apparel and haberdashery. It appears that the trustee conducted the business of the estate until January 24, 1934, on which date the United States District Court confirmed a composition upon petitioner’s estate and upon the same day the trustee, by an instrument in writing, assigned to petitioner all the assets in his hands as such trustee.
In its petition for the order of certiorari petitioner alleges that during the time when the trustee in bankruptcy was conducting the business he filed sales tax returns and paid to the State retail sales taxes for that period amounting to the sum of $13,241.25. In this respect petitioner is clearly mistaken. Practically the entire amount of the tax in question covered periods of time when petitioner and not the trustee was conducting the business. That is not very material, however, in view of the fact that our decision is predicated on other grounds.
Section 390 of the Tax Law as it then existed defined the word “ person ” as follows:
“ When used in this article:
“ (a) The word ‘ person ’ includes an individual, copartnership, society, association, joint stock company, corporation and any combination of individuals.”
By chapter 394 of the Laws of 1935 the quoted portion of that statute was amended to read:
“ When used in this article:
“ (a) The word ‘ person ’ includes an individual, copartnership, society, association, joint stock company, corporation and any combination of individuals and also an executor, administrator, receiver, trustee or other fiduciary.”
The Legislature made this amendment retroactive to April 19, 1933, which is the effective date of the original enactment of article 17 of the Tax Law.
Petitioner strenuously urges that the term “ person,” defined by section 390 of article 17 of the Tax Law, prior to the 1935 amendment of such section, does not include a trustee in bankruptcy, and that consequently such an official was immune from the payment of retail sales taxes. In taking this position petitioner finds consolation and support in the case of Matter of Flatbush Gum Co., Inc. (73 F. [2d] 283). In that case the Circuit Court of Appeals for the Second Circuit had before it the question as to whether a receiver in bankruptcy was subject to the provisions of sections 390 and 391. The court held that a receiver in bankruptcy did not come within the definition of “ person ” subject to the tax. The court, after reviewing the legislative definition of the term “ person ” as contained in the statute said: “ Its failure to include a receiver in this enumeration was, we think, highly significant, and indicates an intention to permit such sales to be made by a receiver
Petitioner has also called to our attention Reinecke v. Gardner (277 U. S. 239), upon which it relies. In that case the question involved was whether the Excess Profits Tax Law of 1917 imposing a tax on corporations, partnerships and individuals engaged in trade or business included a trustee in bankruptcy. The United States Supreme Court held that it did not and said: “ The title made no mention of executors, receivers, trustees or persons acting in a fiduciary capacity, and contained no language corresponding to the quoted provision of Title I, § 4, extending the additional income tax to 1 the same incomes ’ taxed by § 10 of the Act of 1916. A tax imposed on corporations alone does not extend to a trustee in bankruptcy of a corporation.”
The decision of the Circuit Court of Appeals in Flatbush Gum Co., Inc. (supra), is not binding upon the courts of this State. The construction of State statutes is primarily a matter for the State courts. As this court said in People ex rel. Rice v. Graves (242 App. Div. 128; affd., 270 N. Y. 498; certiorari denied by the United States Supreme Court, 298 U. S. 683) the decisions of Federal courts not involving the construction of the Constitution or laws cf the Federal government have only persuasive force in our courts on a similar set of facts, but are not to be regarded as binding precedents. The correct interpretation of section 390 of the Tax Law is still an open question to be decided by our own tribunals. We feel compelled to reject the construction which the Circuit Court of Appeals placed upon that section in the Flatbush Gum Co., Inc., case. In our opinion it is too restricted, too narrow.
The definition of the word “ person ” contained in section 390 is clearly indicative of a legislative intent to subject all receipts from sales of tangible property at retail to the tax, whether made by an individual on his own behalf or while acting as receiver
There is another reason why the doctrine announced in the Flatbush Gum Co., Inc., Case (supra), does not apply here. That case is distinguishable upon the facts. It involved the imposition of a sales tax upon the sum realized upon a final liquidation sale by a receiver in bankruptcy who was neither authorized to conduct the bankrupt’s business, nor actually did not. The court there said: “ The business was not continued by the receiver, and the sale was an essential step in Hquidation.” Here the trustee was authorized to carry on the business and it actually was continued. We may safely assume that the trustee made purchases and sales exactly as petitioner had done prior to bankruptcy; that he advertized his goods and did everything he could to make his operations profitable and successful in competition with other merchants in the same line of business. Any influence which the Flatbush Gum Co., Inc., case might otherwise have upon us is of little avail in
It is at once apparent that a wide distinction exists between the situation of a receiver in bankruptcy conducting a single, isolated sales transaction in liquidating and winding up a bankrupt estate and that of a trustee empowered to continue the bankrupt business and who actually does carry on the business in competition with other merchants in the same business. The courts have been cognizant of this distinction in matters relating to taxation. (Michigan v. Michigan Trust Co., 286 U. S. 334; Central Trust Co. v. N. Y. C. & N. R. R. Co., 110 N. Y. 250; New York Terminal Co. v. Gaus, 204 id. 512.)
In Reinecke v. Gardner (supra) the court was considering a Federal statute. We are here concerned with the interpretation of a State law, the exclusive province of the State courts, and on such a question Federal decisions construing Federal statutes while instructive are not conclusive.
\ In this proceeding we think the respondents have correctly construed and applied the provisions of the tax statutes. Because of that conclusion we deem it unnecessary to decide the interesting question discussed in the briefs of counsel as to the retroactive application of the amendment to section 390 of the Tax Law by chapter 394 of the Laws of 1935.
The determination of the State Tax Commission is confirmed, with fifty dollars costs and disbursements.
[ Hill, P. J., Rhodes, Crapser and Bliss, JJ., concur.
Determination confirmed, with fifty dollars costs and disbursements.