On June 7, 2011, the New York Court of Appeals granted the taxpayer’s motion seeking permission for leave to appeal in Matter of Echostar Satellite Corp. v. Tax Appeals Tribunal, (Motion No. 2011-420) (N.Y. June 7, 2001). Echostar had requested permission to appeal a decision of the Appellate Division, Third Department, which had upheld the Department’s denial of a purchase for resale exclusion from sales tax for Echostar’s purchases of satellite television equipment that it, in turn, leased to its customers for a fee. Echostar had collected and remitted more than $2 million in sales tax on those lease charges. However, the Department concluded that $1.8 million in tax was instead due on the equipment purchases, and the Tax Appeals Tribunal agreed. The Court of Appeals has now taken the somewhat unusual step of granting permission and will hear Echostar’s appeal.
Among the important issues that the Court is expected to consider is whether imposition of sales tax on Echostar’s equipment purchases is contrary to the fundamental sales tax principle that the tax should be imposed on end-users, not on interim purchasers of property. Also likely in issue will be whether it is manifestly inequitable to permit New York State to retain the sales tax collected on the equipment lease charges, as well as assess additional tax on Echostar’s purchases of the same equipment.