Crystal v. City of Syracuse, Department of Assessment

Simons, J.

This is a proceeding to review a tax assessment pursuant to article 7 of the Real Property Tax Law. The items of property assessed are portable plug-in telephones owned by petitioners and located in their law offices. The trial court held that these telephones were not subject to real property tax assessment. Appellant contends that telephones are .real property and *30subject to taxation pursuant to Real Property ¡Tax Law (§ 102, subd. .12, par. [d] ).1

The taxation of real property is authorized .solely by statute. It is competent for the Legislature to determine that any property, including telephones, is real property for tax purposes (People ex rel. Hudson Riv. Day Line v. Franck, 267 N. Y. 69; Herkimer County Light & Power Co. v. Johnson, 37 App. Div. 257). But just as the Legislature may reasonably change the nature of property ¡for tax purposes by statutory definition, it follows that if it fails, to do so, property which by common acceptance is an article of personalty is free from assessment.2 The issue which divides us is whether by using the word appurtenances ” in paragraph (d) (of subdivision 12 of section 102 the Legislature has done so with respect to subscriber-owned telephones.

Looking to the statute (Real Property Tax Law, § 102) and mindful that the cases instruct us that tax statutes must not be extended by implication beyond the clear import of the language used, that they are to be construed most strongly against the government and in favor of the taxpayer (Matter of Grumman Aircraft Eng. Corp. v. Board of Assessors, 2 N" Y 2d 500, 510) and that they must be given a practical construction and be interpreted as an ordinary person reading them would understand them (Matter of New York Tel. Co. v. Ferris, 257 App. Div. 415, 416, affd. 282:N. Y. 667), we affirm the trial court’s *31determination that subscriber-owned telephones are not taxable as real property.

By common definition realty includes land and the buildings and improvements affixed to the land. The statute includes that definition and expands it with respect to utility property, for it is obvious that in the cases of telephone companies a substantial portion of the assets of the taxpayer consists of distribution lines and supporting apparatus. Thus, paragraph (d) of subdivision 12 provides that real property shall include, for assessment purposes: “ Telephone and telegraph lines, wires, poles and -appurtenances; supports and incl-osures for electrical conductors and other appurtenances, upon, above, and under ground”. The telephone company is -liable for taxes assessed upon real property, not only as -such property is traditionally conceived but also w-ith respect to the various components which make up the supply system and the special franchises required for the system’s operations (Real Property Tax Law, § 102, subd. 12).

In interpreting -similar statutory language (former Tax Law, § 2, s-ubd. 6) the courts have held that the telephone company may be assessed and taxed for the central office equipment of the company, even though detachable or movable (Matter of New York Tel. Co. v. Ferris, supra), and also for the company’s station apparatus, installations and private branch exchanges whether located on company-owned realty or privately-owned realty (Matter of New York Tel. Co. [Canough], 290 N. Y. 537). The eases -went no further than deciding that company-owned telephone property is -taxable to the company whether situated on company property or private property. The taxability of subscriber-owned telephones was not decided -for the simple reason that subscribers were not permitted to own telephones at that time.3 It was not until a Federal tariff revision that subscribers were permitted to purchase -and own a variety of stylized *32private telephones or independently designed office systems. For the same reason it can hardly be said that the Legislature addressed itself to the question before us when it adopted the statute several years earlier.

In the Canough and Ferris cases the courts were able to hold in favor of taxability because, in the language of the statute, the telephone was clearly appurtenant to the company’s property. An appurtenance is something annexed to or belonging to a “ more important ” thing and not having .an independent existence (Harris v. Elliott, 10 Pet. [35 U. ,S.] 25; Bouvier’s Law Dictionary). It has been held that the word appurtenances ” in this statute refers to those things owned by the .utility which are appurtenant to the system as an integrated whole (Matter of New York Tel. Co. v. Ferris, supra, p. 419).

It is argued in the 'dissenting opinion that telephones should be taxed consistently and that since they have been held taxable to the telephone company because appurtenant to the company’s lines, they must also be taxable to private subscribers. There are legitimate distinctions which arise because of different ownership, however, and which justify this different tax treatment. The company-owned telephone may or may not be a permanent installation and it is part of an integrated and extensive communication system which is necessarily defined by referring in a general way to its various parts. The privately-owned telephone is removable and may be taken from the premises by its owner. It is not a part of the realty any more than is the occupant’s furniture or appliances.

The concept of treating similar property differently for tax purposes, (depending on the status of the owner or Ms use of the property, is not new (see, e.g., Real Property Tax Law, § 102, subd. 12, pars, [f] and [g]; Real Property Tax Law, art. 4; People ex rel. Dexter Sulphite Pulp Paper Co. v. Hughes,246 N. Y. 35) and the discrete classification of electric .utility equipment, depending on whether it is located on public or private property, has been recognized for years (People ex rel.. Glen Tel. Co. v. Failing, 57 Misc. 808, affd. 130 App. Div. 888, affd. 195 N. Y. 618; People ex rel. New York Edison Co. v. Feitner, 99 App. Div. 274, affd. 181 N. Y. 549). The dissenter would hold the property taxable solely because it has a use related to taxable real property and is located proximate to the company’s lines. ITMs is not a proper criterion for finding the instrument an appurtenance. Similar examples may be recited endlessly. Is the telephone book or the personal number file on the desk beside the telephone or which may be attached to the tele*33phone instrument an .appurtenance ? Is the reading lamp real property because connected to electrical conductors or is the kitchen range real property because connected to the gas line? In a period during which the public enjoys the benefits of the most sophisticated scientific, medical and business equipment for transmitting data by connections to telephone lines, the implications of the ruling suggested in the dissent are far too profound to be accomplished by a mechanical application of the holding of the Canough case. To do so would clear the way to reclassification for tax purposes of hundreds of types of such equipment solely because telephone .facilities are used to .transmit the data produced.

There is no statute from which it can reasonably be inferred that the Legislature has decided to classify privately-owned telephones as real estate for tax purposes and we decline to extend the ruling of the Canough case to do so.

The judgment should be affirmed.

. While we are not confronted with the problem in this case, because petitioners own both the building and the telephones, the assessment of telephone equipment will present some difficult clerical problems if appellant’s position is correct. The real property tax is an in rem tax but if the telephone and the building are owned separately, the tax will be assessed on the owner personally. Presumably, tenants owning no real property but a single telephone would be assessed upon the tax rolls, for it is suggested that telephones should be separately assessed in the name of the owner of the equipment rather than the owner of the land or building (3 Opns. Counsel St. Bd. of Equal. Assessm. No. 27) (But see Real Property Tax Law, § 502, subd. 3 and Matter of Doughty v. Loomis, 9 A D 2d 574, affd. 8 N Y 2d 722; cf. Real Property Tax Law, § 102, subd. 12, par. [g]).

. Certainly portable telephones meet all the standard criteria for personal property and it is a well-settled rule that in the absence of statute, installations of public utilities retain their character as personal property (People ex rel. Glen Tel. Co. v. Failing, 57 Misc. 308, affd. 130 App. Div. 888, affd. 195 N. Y. 618; People ex rel. New York Edison Co. v. Feitner, 99 App. Div. 274, affd. 181 N. Y. 549; Matter of City of New York [Fort Greene Mouses], 266 App. Div. 795, affd. 291 N. Y. 788). The courts in the Camough and Ferris eases (infra) were confronted with the question of whether telephones could be considered real property because there were “ appurtenances ”, the inherent qualities of the property as personalty notwithstanding.

. Prior to 1967 a Federal tariff provided that all equipment connected with telephone company facilities must be furnished by the telephone company.

Tariff FCC No. 132:

“7. Unauthorized attachments or Connections:

“No equipment, apparatus, circuit or device not furnished by the Telephone Company shall be attached to or connected with the facilities furnished by the Telephone Company, whether physically, by induction or otherwise, except as provided in this Tariff. In case any such unauthorized attachment or connection is made, the Telephone Company shall have the right to remove or disconnect the same; or to suspend the service during the continuance of said attachment or connection or to terminate the service.” (See, also, Garter v. American Tel. é Tel. Go., 365 F. 2d 486, cert. den. 385 U. S. 1008.)