People v. Nappo, 94 N.Y.2d 564 (2000)
The State of New York is not an “owner” of uncollected motor fuel taxes under the Penal Law; thus, failure to pay such taxes does not constitute larceny from the state.
Summary
Defendants were indicted for enterprise corruption, conspiracy, and grand larceny for importing motor fuel from New Jersey to New York without paying required motor fuel taxes. The prosecution argued that failing to pay these taxes constituted larceny of state property. The New York Court of Appeals reversed the Appellate Division’s reinstatement of the larceny and conspiracy charges, holding that the State was not the “owner” of the uncollected taxes under the Penal Law. The court distinguished between failing to pay taxes due and failing to remit sales taxes collected from consumers, the latter of which involves holding funds in trust for the state. Because the defendants’ tax liability did not depend on collecting taxes from consumers and they held no funds in trust for the state, their failure to pay did not constitute larceny.
Facts
The defendants, William S. Nappo, William K. Nappo, and John Rocco, were accused of importing motor fuel from New Jersey into New York without filing the necessary reports or paying the required motor fuel taxes, as mandated by New York Tax Law.
Procedural History
The defendants were indicted in County Court on multiple charges, including enterprise corruption, conspiracy in the fourth degree, and grand larceny in the first degree. The County Court dismissed the first three counts of the indictment (enterprise corruption, conspiracy, and grand larceny), with leave to resubmit. The Appellate Division reversed the County Court’s decision and reinstated the larceny and conspiracy charges, finding sufficient evidence that the defendants withheld property from the State of New York. The New York Court of Appeals granted the defendants leave to appeal.
Issue(s)
Whether the defendants’ failure to pay taxes on motor fuel imported from New Jersey to New York constitutes larceny from New York State, based on the theory that New York was the owner of the unpaid taxes?
Holding
No, because the State of New York is not an “owner” of taxes required to be paid for the importation and distribution of motor fuel, as defined by the Penal Law. The taxes due were not the property of the State prior to their remittance; therefore, the defendants did not steal money belonging to New York State but rather failed to make payments of taxes which were their personal obligations under the Tax Law.
Court’s Reasoning
The Court of Appeals reasoned that larceny, as defined in Penal Law § 155.05 (1), involves stealing property by taking, obtaining, or withholding it from an owner. An owner is defined as any person with a right to possession superior to that of the taker, obtainer, or withholder (Penal Law § 155.00 [5]). The court distinguished this case from situations where a party holds funds in trust for the State, such as collected sales taxes. In those instances, failure to remit collected sales taxes constitutes larceny because the State is deemed the “owner” of those funds. In this case, the defendants’ tax liability arose from the importation and distribution of motor fuel and did not depend on collecting taxes from consumers. The court cited prior cases such as People v Jennings, People v Yannett and People v Wilson to illustrate instances where a defendant was not in possession of monies owned by the alleged victim. The court explicitly stated, “[D]efendants were not in possession, by trust or otherwise, of monies owned by the State.” The court acknowledged Tax Law § 1817 (k), which overruled the result in People v Valenza, but clarified that this law only authorizes prosecution under the Penal Law for failing to remit sales taxes that have been collected from consumers, and is not applicable in this case. The court emphasized that “[a] seller who collects sales taxes holds money in trust for the State (Tax Law § 1817 [k]).” Because the defendants did not collect taxes from consumers or hold funds in trust, their failure to pay motor fuel taxes did not constitute larceny from the State.