Empire State Building Company v. New York State Department of Taxation and Finance et al.

Court of Appeals of New York.

EMPIRE STATE BUILDING COMPANY, Respondent,

v.

NEW YORK STATE DEPARTMENT OF TAXATION AND FINANCE et al., Appellants.

May 11, 1993.

Commercial landlord brought declaratory judgment action for determination that sales tax was inapplicable to rent inclusion charges for nonmetered electricity services supplied to its tenants. The Supreme Court, New York County, Cohen, J., 150 Misc.2d 747, 570 N.Y.S.2d 419, entered judgment for landlord. State Department of Taxation and Finance appealed. The Supreme Court, Appellate Division, 185 A.D.2d 201, 586 N.Y.S.2d 597, affirmed. On further review, the Court of Appeals held that imposition of sales tax on tenants’ payment to landlord of electricity rent inclusion factor as sale of utility services was improper.

Affirmed.

West Headnotes

Taxation 371 3645

371 Taxation

371IX Sales, Use, Service, and Gross Receipts Taxes

371IX(C) Transactions Taxable in General

371k3645 k. Sale or service transaction. Most Cited Cases

(Formerly 371k1237)

Imposition of sales tax on commercial tenants’ payment to landlord of electricity rent inclusion factor as sale of utility services was improper, as factor payment was for electric service provided only as incident to rental of commercial premises in landlord’s building and not as part of separate transactions which had primary purpose of furnishing utilities or utility services. McKinney’s Tax Law § 1105(b).

*1003 **1020 ***536 Robert Abrams, Atty. Gen., Albany (Vincent Leong, of counsel), for New York State Dept. of Taxation and Finance and another, appellants.

O. Peter Sherwood, Corp. Counsel of New York City (Frances J. Henn, of counsel), for City of New York and others, appellants.

***537 **1021 Wein, Malkin & Bettex, New York City (Marcia E. Kusnetz, of counsel), for respondent.

OPINION OF THE COURT

MEMORANDUM

The order of the Appellate Division, 185 A.D.2d 201, 586 N.Y.S.2d 597 should be affirmed, with costs.

Plaintiff’s tenants’ payment of an Electricity Rent Inclusion Factor (ERIF) was for electric service provided only as an incident to the rental of commercial premises in plaintiff’s building and not as part of “separate transactions which have *1004 as their primary purpose the furnishing of utilities or utility services” ( Debevoise & Plimpton v. New York State Dept. of Taxation & Fin., 80 N.Y.2d 657, 661, 593 N.Y.S.2d 974, 609 N.E.2d 514). The taxing of the ERIF payments as a sale of utility services under Tax Law § 1105(b) was therefore improper.

KAYE, C.J., and SIMONS, TITONE, HANCOCK and BELLACOSA, JJ., concur.

SMITH, J., taking no part.

On review of submissions pursuant to section 500.4 of the Rules of the Court of Appeals (22 NYCRR 500.4), order affirmed, with costs, in a memorandum.

N.Y., 1993.

Empire State Bldg. Co. v. New York State Dept. of Taxation and Finance

81 N.Y.2d 1002, 615 N.E.2d 1020, 599 N.Y.S.2d 536