A. R. Gundry, Inc. v. State Tax Commission

Koreman, P. J.

Petitioner is a New York corporation engaged in the business of transporting petroleum products. Since 1951, it has paid a highway use tax for its vehicles used in transporting such products. Petitioner has always computed its tax on the gross weight method under section 510 of the Tax Law. The actual mileage traveled by petitioner’s trucks on New York highways has been determined consistently, since the inception of the tax, by the use of tariff schedules and mileage used for billing purposes.

From time to time since 1951 petitioner was audited by respondent to determine the correctness of its highway use *263tax returns. Respondent never questioned the method by which petitioner calculated the number of miles its vehicles had traveled on New York roads, until an audit dated August 5, 1974. In that audit, respondent for the first time determined the mileage traveled by petitioner’s vehicles on the basis of tachograph readings and issued an assessment against petitioner for $42,532.19 for additional highway use tax for the period May, 1970 through March, 1974. The audit was conducted by sampling 50 of petitioner’s 120 trucks for the month of July, 1973 and by taking from tachograph readings the actual miles traveled based on daily odometer readings. The sample taken was used by respondent to determine a percentage "error” in reported mileage which was then applied to all of petitioner’s reported mileage for the whole audit period. During the sample period the 50 trucks traveled fewer than 310,000 miles while during the audit period of May, 1970 through March, 1974 petitioner’s fleet of 120 trucks traveled more than 20 million miles.

Petitioner and respondent have stipulated that if the auditing convention (tachograph readings) applied by respondent is used to determine actual mileage traveled by petitioner’s vehicles, the net deficiency for the period covered by the assessment would be $32,104.58 plus interest, and if the auditing convention (tariff schedules and mileage used for billing purposes) applied by petitioner is used to determine actual mileage traveled in the State, there would be no deficiency.

After a series of requests for a formal hearing and the commencement of an article 78 proceeding which was later withdrawn, petitioner submitted to the commission a proposed stipulation of facts upon which the central issue on petitioner’s challenge to the assessment could be decided. Respondent commission signed the stipulation of facts and reached a formal decision dated October 22, 1976, sustaining the imposition of the additional highway use tax. The commission determined that the audit had been made on a reasonable basis, and that the use of tariff schedules or records of mileage used for billing purposes by petitioner does not estop the commission from auditing petitioner’s records and determining the actual mileage to be used in imposing the highway use tax. The commission also found that the fact that prior returns of petitioner, filed on the basis of tariff schedules and mileage used for billing purposes, were not the subject of an assess*264ment of additional tax due, does not bear on a proper audit and assessment for the period May, 1970 through March, 1974.

We disagree with the determination made by respondent. The commission has issued regulations which specifically govern how a taxpayer should calculate mileage in order to determine highway use tax due, and what records should be kept by the taxpayer for auditing purposes. In regard to determining mileage, respondent has provided that: "Mileage within this State shall be computed on the basis of the actual mileage traveled by each motor vehicle. Such mileage shall be based on speedometer readings, fuel consumption records, map mileage from the point of origin to the point of destination, tariff schedules or mileage used for billing purposes, and shall be subject to audit by the State Tax Commission” (20 NYCRR 481.12; emphasis supplied).

In terms of record-keeping, respondent’s regulations require that: "Every carrier reporting under the gross weight or unloaded weight method shall keep available speedometer readings, fuel consumption records, maps, mileage or tariff schedules or record of mileage used for billing purposes and used to compute the taxable mileage (20 NYCRR 483.4; emphasis supplied).

It is obvious that the above regulations provide alternative means by which a taxpayer can calculate mileage and keep records to substantiate the calculation. As a result, it was unfair for respondent to audit petitioner using a different method of calculating mileage than that which petitioner had used during the period of the audit. Petitioner had kept the records necessary to support the method it chose to calculate mileage, and should not be penalized for not having records which it was not required to keep because of the particular permissible method it chose to follow.

Furthermore, respondent’s use of tachograph readings prevented petitioner from proving its exempt mileage during the audit period, such as mileage traveled on the New York Thruway (Tax Law, § 501, subd 6) and use of vehicles with a gross weight of 18,000 pounds or less (Tax Law, § 504, subd 4).

"All taxing statutes of doubtful meaning are, we are admonished, to be construed in favor of the taxpayer and against the taxing authority, and the burdens they impose are not to be extended by implication” (Matter of American Cyanamid & *265Chem. Corp. v Joseph, 308 NY 259, 263). Respondent’s regulations permit the taxpayer to choose any one of several alternative methods of calculating mileage, and to keep the records necessary to support the method chosen. To permit the respondent to audit a taxpayer’s records using a different method than that selected by the taxpayer would compel one subject to the highway use tax to keep all of the different types of records enumerated in respondent’s regulations in order to be prepared for any one of the different auditing methods. Article 21 of the Tax Law and the applicable regulations should not be construed to impose such an unreasonable burden upon one subject to the highway use tax.

The determination should be annulled, with costs, and the matter remitted for further proceedings not inconsistent herewith.