Acres Storage Co. v. Chu

— Weiss, J.

Proceeding pursuant to CPLR article 78 (transferred to this court by order of the Supreme Court at Special Term, entered in Albany County) to review a determination of the State Tax Commission which sustained a sales and use tax assessment imposed under Tax Law articles 28 and 29.

*855In 1979, Shepard Levine and Stanley Nordheimer entered into negotiations to take over the operation of a Gulf Oil Corporation automobile service station located on Second Avenue in Manhattan. At that time, the station was being operated by Adam Calderone and Oscar Calderone under the name Caiga Service Center. The Calderones’ lease with Gulf forbade their selling, assigning, pledging, subletting or mortgaging their rental interest in the station. As a result, two agreements signed by Levine, Nordheimer and the Calderones on December 5, 1979 provided, inter alia, that the Calderones would surrender their lease to Gulf if Gulf would agree to lease the station to Levine and Nordheimer and that Levine and Nordheimer would then purchase from the Calderones the tools, equipment, oil and gasoline in the station’s inventory at the time of closing. A set purchase price for the foregoing was to be paid by Levine and Nordheimer.

On April 1, 1980, Gulf accepted the Calderones’ surrender of their lease. At the closing on April 4, 1980, the Calderones executed a surrender of the lease to Gulf and of "the equipment and the station itself * * * to the new lessees of the station, Stanley H. Nordheimer and Shepard Levine”. In addition, the Calderones executed a bill of sale to Levine and Nordheimer. Also on April 4, 1980, Levine and Nordheimer assigned all rights with regard to these transactions to petitioner, a corporation, the stock of which is owned entirely by Levine, Nordheimer and one other individual. At no time did any party notify the State Tax Commission, pursuant to Tax Law § 1141 (c), of the sale of the business assets of Caiga Service Center.

When a subsequent audit was performed and it was discovered that sales and use taxes were due from Caiga Service Center, petitioner was notified of its liability on such amounts due to the fact that it had failed to give the notice required by Tax Law § 1141 (c). The Tax Commission, following a hearing requested by petitioner, ultimately found that a bulk sale had taken place for purposes of Tax Law § 1141 (c) and that, with the exception of certain penalties, petitioner was liable on such amounts as were assessed against Caiga Service Center. Petitioner then commenced this CPLR article 78 proceeding challenging the Tax Commission’s determination.

Tax Law § 1141 (c) provides in pertinent part that:

"Whenever a person required to collect tax shall make a sale, transfer, or assignment in bulk of any part or the whole of his business assets, otherwise than in the ordinary course of *856business, the purchaser, transferee or assignee shall at least ten days before taking possession of the subject of said sale, transfer or assignment, or paying therefor, notify the tax commission by registered mail of the proposed sale * * *.

"For failure to comply with the provisions of this subdivision the purchaser, transferee or assignee * * * shall be personally liable for the payment to the state of any such taxes * * * due to the state from the seller, transferrer or assignor”.

Initially, it is quite clear that the transaction between the Calderones and the Levine/Nordheimer partnership constituted a "bulk sale” within the context of the statute. For purposes of a bulk sale, "business assets” include an "item of value owned” whether tangible or intangible (Matter of Long Is. Reliable Corp. v Tax Commn., 72 AD2d 826, 827, Iv denied 49 NY2d 707; see, Matter of Allied Stores Corp. v State Tax Commn., 115 AD2d 207). The written surrender of the lease, together with the business equipment and inventory on hand, certainly come within this characterization (see, Matter of Allied Stores Corp. v State Tax Commn., supra).

The issue thus distills to whether petitioner may properly be charged as a purchaser or transferee of these assets from the Calderones. The statute makes a purchaser at a "bulk sale” secondarily responsible for "any such taxes” due from the seller (see, Matter of Higgins & McLaughlin v New York State Tax Commn., 109 AD2d 1029). The statute is not so narrowly written as to focus responsibility solely on the immediate purchaser who has failed to notify the Tax Commission of the bulk sale, and we decline to impose such a limitation. Since the transfer from Levine and Nordheimer to petitioner constituted a bulk sale in itself, petitioner became responsible for the taxes due from Levine and Nordheimer, including the assessments attributable to the Calderones’ service station, Caiga Service Center. In response to the suggestion that such a construction unjustly penalizes the subsequent purchaser, it need only be emphasized that a purchaser may easily protect its interests by timely notifying the Tax Commission of the pending sale (see, Tax Law § 1141 [c]).

While we further find that, in the absence of available records, the Tax Commission properly estimated the sales tax due from the Calderones (see, Tax Law § 1138 [a] [1]; see also, Matter of Micheli Contr. Corp. v New York State Tax Commn., 109 AD2d 957, 959; Matter of Day Surgicals v State Tax Commn., 97 AD2d 865, 868), the record is not altogether clear *857as to either the value of the assets transferred or the amount that Levine and Nordheimer actually paid. Consequently, the matter should be remitted to the Tax Commission for an appropriate calculation of petitioner’s personal liability (see, Tax Law § 1141 [c]).

Determination annulled, without costs, and matter remitted to the State Tax Commission for further proceedings not inconsistent herewith. Kane, J. P., Weiss and Mikoll, JJ., concur.