American Locker Co. v. New York State Tax Commission, 30 N.Y.2d 820 (1972)
Renting coin-operated lockers constitutes “storing tangible personal property” under New York tax law, making the locker company a vendor responsible for collecting sales tax.
Summary
American Locker Company, which owned and contracted out coin-operated lockers, was assessed sales tax by the New York State Tax Commission for storing tangible personal property. The court affirmed the assessment, holding that the rental of these lockers constituted “storage” despite the short-term nature of the rentals. The court reasoned that the essence of the service was providing a place for safekeeping goods, aligning with the common understanding of storage. Furthermore, American Locker Company was deemed the vendor because it owned, maintained, and branded the lockers, directly influencing the customer relationship.
Facts
American Locker Company owned patented coin-operated lockers. The lockers were placed under contract with operators at various locations. Patrons deposited coins to lock their property in a locker for up to 24 hours. American Locker installed and maintained the lockers, retaining ownership. The lockers displayed American Locker’s name, contract terms, and operating instructions. Operators collected receipts, cleaned lockers, and handled customer issues. American Locker typically indemnified operators against claims for loss or damage to checked articles and processed these claims.
Procedural History
The New York State Tax Commission determined that American Locker was a vendor engaged in the business of storing tangible personal property and was liable for sales tax. The Appellate Division confirmed the Tax Commission’s determination. The New York Court of Appeals granted leave to appeal.
Issue(s)
- Whether the rental of coin-operated lockers constitutes “storing tangible personal property” within the meaning of the New York Tax Law.
- Whether American Locker Company is the “vendor” of the storage services and thus responsible for collecting sales tax.
Holding
- Yes, because the essence of the service is the provision of a place for the safekeeping of goods, which accords with the ordinary meaning of storage.
- Yes, because the nature of the contractual relationship between American Locker and its operators indicates that American Locker is the vendor within the meaning of the statute.
Court’s Reasoning
The court reasoned that the term “storage” encompasses the service provided by coin-operated lockers, despite the short-term nature of the rentals. It emphasized that the tax law was intended to have a broad base, including charges for services. The court referenced its prior decision in American Locker Co. v. City of New York, noting that the court had previously recognized that patrons of the lockers bargain for a safe place to “store” their baggage. Semantical distinctions between “storage” and “checking” were deemed inappropriate in the context of the statute. The court stated, “Certainly, the essence of this service is the provision of a place for the safekeeping of goods, which generally accords with the ordinary and common meaning of storage.” The court distinguished the case from zoning cases where distinctions based on the duration of an activity were relevant. As to who was the vendor, the court noted that American Locker installed and maintained the lockers, retained ownership, and displayed its name on the lockers. The court stated, “For all intents and purposes, when a patron makes use of a locker he is dealing with the American Locker Company.” The company also typically indemnified operators against claims for lost or damaged articles and processed these claims. The court analogized the situation to a case where a person engaged in the business of maintaining jukeboxes was held liable for the tax provided by statute for this privilege. The court affirmed the order of the Appellate Division, holding American Locker liable for the sales tax.