Henry v. Wetzler, 82 N.Y.2d 872 (1993)
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A sales tax exemption for equipment used in producing tangible personal property for sale applies only when the property is transferred for consideration, meaning a direct exchange of title or possession for payment.
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Summary
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Henry, an officer of a company publishing free shopping newspapers funded by advertising revenue, challenged a tax assessment on equipment and electricity used in newspaper production. He argued that the equipment should be exempt from sales and use tax under Tax Law § 1115(a)(12), which applies to property used to produce tangible goods for sale. The New York Court of Appeals upheld the Tax Appeals Tribunal’s decision, finding that the newspapers were not sold but distributed freely, and the advertising revenue was for services, not the transfer of the newspapers themselves. The Court also rejected the argument that the tax violated the First Amendment because the tax scheme applies to any business not producing goods “for sale.”
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Facts
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Petitioner’s company owns shopping newspapers distributed to the public at no charge. The newspapers’ revenue is derived from paid advertisements. The Department of Taxation and Finance assessed sales and use taxes on the company’s purchases of equipment and electricity used between 1982 and 1985.
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Procedural History
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The Tax Appeals Tribunal ruled against the petitioner, finding the sales tax exemption inapplicable. The Appellate Division confirmed the Tribunal’s determination, holding that the exemption did not apply and that other claims were not properly raised at the administrative level. The petitioner appealed to the New York Court of Appeals as of right under CPLR 5601(b)(1).
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Issue(s)
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1. Whether the equipment and electricity used to produce free shopping newspapers funded by advertising revenue qualify for a sales and use tax exemption under Tax Law § 1115(a)(12) as property used to produce tangible personal property “for sale.”
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2. Whether the tax assessment violates the First Amendment by singling out shopping newspapers for unfavorable tax treatment.
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3. Whether penalties and interest were improperly assessed because the failure to pay sales and use tax was not