Proceeding pursuant to CPLR article 78 (initiated in this Court pursuant to Tax Law § 2016) to review a determination of respondent Tax Appeals Tribunal which denied petitioner’s application for a sales and use tax refund.
Petitioner is a common carrier, organized under the laws of New York, engaged in the business of transporting property. After an audit of petitioner by the Division of Taxation (hereinafter the Division), petitioner filed a claim for a refund in the amount of $3,138,786 for sales and use tax paid during the audit period in connection with the purchase of shipping supplies and other materials provided free of charge to its customers which, petitioner asserted, were promotional materials exempt from tax pursuant to Tax Law § 1115 (n) (4). The Division partially granted the refund to the extent of $35,333 for tax paid on items such as “guides, calendars, brochures, rate charts, zone charts, [and] other printed matter,” and denied the claim as to the remaining $3,103,453.1 A conciliation conference resulted in an order sustaining the Division’s determination.
Petitioner thereafter filed a petition for redetermination with the Division of Tax Appeals, with a revised claim for a refund in
Pursuant to Tax Law § 1115 (n) (4), printed promotional materials that are sent to customers or prospective customers by means of a common carrier, without charge to the customer, are exempt from sales and use tax.4 As relevant here, promotional materials consist of advertising literature and “other related tangible personal property” including, among other enumerated items, free gifts (Tax Law § 1101 [b] [12]). Because petitioner does not contend that the supplies at issue are themselves advertising literature, the question before us is whether they constitute “related tangible personal property” for purposes of the statute. We are of the view that they do so qualify and, therefore, that petitioner is entitled to the exemption set forth in Tax Law § 1115 (n) (4).
In matters of statutory interpretation, our “primary consideration is to ascertain and give effect to the intention of the Legislature” (Matter of DaimlerChrysler Corp. v Spitzer, 7 NY3d 653, 660 [2006] [internal quotation marks and citation omitted]; accord Yatauro v Mangana, 17 NY3d 420, 426 [2011]). To this end, the statutory text provides the clearest indication of legislative intent, and should be construed “to give effect to its plain meaning” (Matter of DaimlerChrysler Corp. v Spitzer, 7
Initially, we agree with the Tribunal’s determination that “related tangible personal property” refers to materials that are distributed for advertising purposes. However, we reject the contention of respondent Commissioner of Taxation and Finance that the customer supplies at issue do not qualify as promotional materials because they are neither advertising literature nor related thereto. We have previously defined advertisements as “ ‘the action of making generally known; a calling to the attention of the public’ ” (Matter of Scotsmen Press v State of N.Y. Tax Appeals Trib., 165 AD2d 630, 633 [1991], quoting Random House Dictionary of the English Language 29 [2d ed, unabridged 1987]). With this definition in mind, we are persuaded that the supplies at issue here satisfy the ordinary meaning of “promotional materials” because they were designed and distributed for the purpose of promoting petitioner’s business and contain a clear promotional message.
At the hearing before the ALJ, two of petitioner’s employees — its decentralized tax coordinator and the manager of its
By promoting its air delivery services on the actual shipping materials provided to customers free of charge, petitioner believed that its promotional message would reach a wider audience — initially, petitioner’s customers who ordered and used the supplies for shipping and, subsequently, the recipients of the items shipped, who may or may not be its customers, as well as other persons involved in the chain of delivery — and would foster goodwill. Petitioner provided the shipping supplies as part of a welcome kit to all new customers, which also included a rate and service guide and a booklet explaining available services. Customers could request additional materials through petitioner’s website or by calling a toll-free telephone number. Significantly, customers were not required to utilize the supplies provided in order to use petitioner’s services; conversely, the shipping supplies could even be used in conjunction with a competitor’s services.
In our view, the Tribunal’s determination that the materials in question were merely branded with petitioner’s logo and did not constitute a solicitation is inconsistent with the plain meaning of the statute, and its interpretation of Tax Law § 1101 (b) (12) was “so narrow and literal as to defeat [the provision’s] settled purpose” (Matter of Gordon v Town of Esopus, 15 NY3d at 90 [internal quotation marks and citation omitted]).6 The materials were not merely printed with petitioner’s name or trademark; they were purposefully designed to draw attention to specific aspects of petitioner’s business, primarily its air
We are also of the view that petitioner’s shipping supplies qualify as tax exempt promotional materials under the category of free gifts. The Tribunal’s determination that there was “distinct mutual consideration” for the items is simply not supported by the record, as it is undisputed that customers were under no obligation to use petitioner’s services or to use the supplies when shipping with petitioner. Nor were customers prevented from using the supplies to ship items through other common carriers.8 The items here fit within the ordinary, everyday meaning of “free gifts,” as “a voluntary transfer of property without consideration or compensation” (Batease v Batease, 71 AD3d 1344, 1346 [2010] [internal quotation marks and citations omitted]; see Black’s Law Dictionary 757 [9th ed 2009]). It would be illogical to eliminate an item from the category of promotional “free gifts” because the donor realistically expects
As such, we conclude that the Tribunal’s determination was irrational and clearly erroneous and that petitioner has satisfied its burden of establishing “that its interpretation of the statute is not only plausible, but also that it is the only reasonable construction” (Matter of Moran Towing & Transp. Co. v New York State Tax Commn., 72 NY2d 166, 173 [1988]; see Matter of Charter Dev. Co., L.L.C. v City of Buffalo, 6 NY3d 578, 582 [2006]). The fact that this construction may, as the dissent notes, result in substantial economic benefits to the beneficiaries thereof, such as petitioner, does not require us to defer to the Tribunal where, as here, doing so would invade the province of the Legislature in enacting the promotional materials exemption (see n 6, supra). If the Legislature intended to place the limitations on such exemption imposed by the Tribunal here, it could have done so.
The parties’ remaining contentions have been considered and are either academic or without merit.
Mercure, J.P. and Egan Jr., J., concur.
1.
The items for which the exemption was denied included envelopes, paks, boxes, forms, labels, software, stickers and pouches.
2.
Petitioner asserts that it revised the refund claim by eliminating items with poor descriptions, items yielding a refund of less than $1,000 and items that were not printed, “for the sake of ease and time” in identifying and categorizing the materials at issue.
3.
With respect to the software compact discs, the Tribunal determined that the evidence — consisting of photographs of the discs, rather than the physical discs themselves — was insufficient to prove the contents thereof. Inasmuch as petitioner did not raise this particular issue in its brief, we deem it to be abandoned (see Matter of New York State Defenders Assn. v New York State Police, 87 AD3d 193, 194 n 1 [2011]). As such, the Tribunal’s determination in this regard will be confirmed.
4.
Petitioner and the Division stipulated that the materials at issue here were purchased by petitioner (a common carrier) and shipped to customers, without charge.
5.
For example, one-day air envelopes were designed in red in order to convey urgency, and a diagonal line was used to demonstrate air and lift. Other items carried designs illustrating petitioner’s sponsorship of NASCAR and the Olympics. In addition, each item bears petitioner’s logo.
6.
The purpose of the promotional materials exemption was “to enhance the competitive position of New York printers, mailers and related vendors as compared to their out-of-state competitors” (Letter from Commr of Taxation & Fin, July 15, 1996, at 3, Bill Jacket, L 1996, ch 309).
7.
Tax Law § 1101 provides examples of what qualifies as “other related tangible personal property” including, among other things, “complimentary maps . . . , applications, order forms and return envelopes with respect to such advertising literature, annual reports, [and] prospectuses” (Tax Law § 1101 [b] [12]). Other items which have been accepted as “promotional materials” for purposes of Tax Law § 1115 (n) (4) include telephone directories (see Matter of Yellow Book of N.Y., Inc., DTA No. 820527, 2008 WL 5322434, 2008 NY Tax LEXIS 215 [2008], confirmed sub nom. Matter of Yellow Book of NY., Inc. v Commissioner of Taxation & Fin., 75 AD3d 931 [2010], lv denied 16 NY3d 704 [2011]), inter-aortic balloon pumps and catheters (see Matter of Arrow Intl., Inc., DTA No. 818934, 2004 WL 1434848, 2004 NY Tax LEXIS 140 [2004]), golf balls (see Expanded Sales and Compensating Use Tax Exemption for Promotional Materials, TSB-M-97-6[S], Example 7 [Aug. 20, 1997]) and Triptiks (see NY St Dept of Taxation & Fin Advisory Op No. TSB-A-98[28]S).
8.
In our view, the fact that new or existing customers — many of whom petitioner believed to be ground delivery customers only — were the recipients of the items is immaterial.