Tom Hoffman, Jr. recently received a favorable decision from the State of New York Division of Tax Appeals. This case arose out of an audit by the New York State Division of Tax and Finance (DTF) where DTF determined that Hoffman’s Car Wash owed sales tax in the amount of $108,097.88 for failure to collect tax on receipts from the in-bay carwash services during the period from 12/01/00 to 8/31/03. The administrative law judge ruled that receipts from the sale of carwashes at in-bay automatic carwash facilities are exempt from the imposition of sales tax under Tax Law § 1115. This statute was subsequently amended to make it clear that in-bay automatics were not covered. The administrative law judge decided that the sales tax statute (Tax Law § 1115) did not literally require the purchaser to manually wash the car. The DTF argued that the statute required the vendor to assist in the washing process. The administrative law judge effectively determined that the DTF interpretation was straining the statutory construction.
This is the good news. The bad news is that DTF has appealed the decision to the Tax Appeals Bureau. It is anticipated that the case will be argued sometime in May. Anyone who has been audited and paid tax on in-bay automatic wash sales should contact their legal counsel to file a refund claim. This needs to be done within two years of payment to assure that your rights to assert a refund claim are protected.
The Governor’s 2008-09 budget proposal recommends spending of $124.3 billion, which represents 5.1 percent growth in spending over last year. The Governor’s proposed budget raises fees by $450 million and taxes by $1.1 billion. The revenue bill submitted by the Governor contains a provision to require every corporate taxpayer whose tax in the prior year exceeded $100,000 to remit 30 percent instead of the current 25 percent of its preceding years’ corporation tax as a mandatory first installment. This spin up of the corporate franchise tax increases tax receipts by an estimated $100 million. There are no positive tax proposals in the proposed budget directed at the carwash industry. We will continue to advocate to the Legislature that the sales tax as applied to carwash operations is inequitable and should be repealed. The declining economy, with lower than projected tax collections, will make it difficult to achieve this year.
The Republicans control the majority in the State Senate by a slim two member majority. Senator Jim Wright (48th Senate District) resigned in early January to become a lobbyist. A special election was held on February 26, 2008, to fill that vacant seat (after the writing of this article). The race to
replace him pits Assemblyman Will Barclay (R-Pulaski) against Assemblyman Darrel Aubertine (D-Cape Vincent). The latest Zogby poll predicts the race as too close to call. This hotly contested race, in a solid Republican district (from a registration perspective), is easily going to cost in excess of $3 million. Both candidates are popular incumbent Assemblymen. The implications of this election are significant on the current balance of Albany power. A loss by Will Barclay would leave the Senate with a one member swing for Democratic control. A loss by the Senate Republicans would have a significant impact on the Albany agenda for this session and the future.
William Y. Crowell, III is a partner with the Albany-based law firm of Whiteman Osterman & Hanna LLP. He can be contacted at 518/487-7677, or email him.
