Harcel Liquors, Inc. v. New York State Tax Commission, 48 N.Y.2d 503 (1979)
A purchaser in a bulk sale who fails to notify the State Tax Commission of the proposed sale, as required by Tax Law § 1141(c), becomes personally liable for the seller’s unpaid sales and use taxes, regardless of any affidavit from the seller stating the business is free of debt.
Summary
Harcel Liquors purchased a liquor store from Evsam Parking, Inc. without notifying the New York State Tax Commission as required by law. Evsam’s president provided an affidavit stating the corporation had no debts. The Tax Commission later audited Evsam and determined it owed sales and use taxes. The Commission then notified Harcel that, as the purchaser, it was liable for Evsam’s unpaid taxes. Harcel sued, seeking a declaration that it was not liable and an injunction against the Commission collecting the taxes. The New York Court of Appeals held that Harcel was liable for the taxes because it failed to comply with the notice requirement, irrespective of the seller’s affidavit. The Court emphasized the State’s right to collect taxes and the purchaser’s ability to avoid liability by providing notice.
Facts
Evsam Parking, Inc. sold its liquor store to Harcel Liquors, Inc. on February 28, 1974.
Samuel Karpoff, Evsam’s president, provided an affidavit stating the corporation was not indebted to anyone and had no creditors.
Harcel Liquors did not notify the New York State Tax Commission of the proposed sale before taking possession of the business.
The Tax Commission learned of the sale nine months later and audited Evsam’s books, which were in Harcel’s possession.
The Commission determined that Evsam owed $6,216.23 in sales and use taxes for the period from February 29, 1972, to February 28, 1974.
The Commission notified Harcel that it was liable for these back taxes under Tax Law § 1141(c).
Procedural History
Harcel Liquors sued the New York State Tax Commission, seeking a declaration that it was not liable for the taxes and an injunction against their collection.
The lower courts ruled against Harcel.
The New York Court of Appeals reviewed the case.
Issue(s)
Whether a purchaser in a bulk sale is liable for the seller’s unpaid sales and use taxes under Tax Law § 1141(c) when the purchaser fails to notify the State Tax Commission of the proposed sale, despite possessing an affidavit from the seller stating the business has no debts.
Holding
No, because Tax Law § 1141(c) unequivocally states that a purchaser who fails to give notice of the proposed sale to the tax commission becomes personally liable for the payment of the seller’s unpaid sales and use taxes, irrespective of any affidavit from the seller attesting to the lack of debt.
Court’s Reasoning
The court reasoned that Tax Law § 1141(c) clearly makes a purchaser who fails to notify the Tax Commission liable for the seller’s unpaid taxes. The court stated, “[T]o exempt any purchaser who has failed to comply with the clear notice requirements of this section would work to deprive the State of a means of collecting taxes duly imposed pursuant to the State’s taxing power.”
The court rejected the argument that the seller’s affidavit absolved the purchaser of liability, emphasizing that the statutory notice requirement is paramount. The court emphasized the importance of allowing the state to collect duly owed taxes. The court stated, “[T]he State merely preserves its indisputable right to collect taxes which could otherwise be extinguished by the simple expedient of a taxpayer transferring its assets.”
The court also noted that the statute provides adequate protection for purchasers, who can avoid liability by simply notifying the Tax Commission of the sale.
The court concluded that Harcel’s failure to exhaust administrative remedies to challenge the tax assessment required dismissal of the complaint against the New York State Department of Taxation and Finance. Because the statute applied to Harcel, the failure to seek administrative review was fatal to their claim.