ALJ Disallows Taxpayer’s Demand for Particulars Regarding  Department’s  Pleadings 

An Administrative Law Judge has issued an Order rejecting a taxpayer’s Demand for a Bill of Particulars seeking information and the identification of documents supporting the Department’s Answer in a personal income tax case. Under the Rules of Practice and Procedure before the Tax Appeals Tribunal, a party may serve a demand for a Bill of Particulars to seek further details regarding allegations in a pleading in order to prevent surprise at the hearing and limit the scope of proof. The ALJ ruled that the taxpayer’s detailed demand was overbroad and constituted “an improper effort at discovery.” Given the substantial number of improper requests, the ALJ vacated the entire demand, declining to “prune” the demands to identify those that may have been proper. Matter of Patrick Murphy, et al., DTA No. 825277 (N.Y.S. Div. of Tax App., Nov. 7, 2013).

Tribunal Upholds Denial of Innocent Spouse Relief

A previous ruling denying a wife’s request for innocent spouse relief relating to final income tax assessments resulting from disallowed business expenses and itemized deductions principally relating to her husband’s law practice has now been upheld by the Tax Appeals Tribunal. Matter of Carnesi, DTA No. 823507 (N.Y.S. Tax App. Trib., Nov. 7, 2013). As discussed in the January 2013 issue of New York Tax Insights, an Administrative Law Judge had rejected the wife’s claim for relief, finding that the disallowed deductions were not “grossly erroneous items” attributable to her husband – one of the conditions for innocent spouse relief. The Tribunal upheld the ALJ’s conclusion, and went further, noting that such relief was also appropriately denied because the wife “deliberately distanced herself from any and all aspects of the couple’s tax filings.”

Third Department Confirms Tribunal on Payment of Interest

In Michael A. Goldstein A No. 1 Trust v. Tax Appeals Tribunal, 2013 N.Y. Slip. Op No. 7220 (3rd Dep’t, Nov. 7, 2013), the Appellate Division, Third Department, affirmed the decision of the Tax Appeals Tribunal that a statutory amendment that allows interest to be paid on a refund from the due date of the original return, rather than only from the date of the amended return, cannot be applied retroactively. The court found no merit in the taxpayers’ assertion that, because the amended returns in this case arose from federal changes, the former version of the statute did not apply.

Department Issues Advisory Opinion Requiring Out-of- State Wine Seller to Collect New York Sales Tax

In an Advisory Opinion, TSB-A-13(35)S (N.Y.S. Dep’t of Taxation & Fin., Oct. 16, 2013), the Department determined that a California retailer of bottled wine must collect sales tax on sales of bottled wine to New York State residents, even though it has no employees or agents of any kind in New York and no place of business or property in the State. The Department found that the New York statute, Alcoholic Beverage Control Law § 79-c[3][f], which conditions permission to sell out-of- state wine in New York on the seller collecting sales tax and consenting to jurisdiction in New York State, was constitutional, regardless of whether the seller had a physical presence in New York. The Department’s Advisory Opinion relied on language in Granholm v. Heald, 544 U.S. 460, 491 (2005), which struck down New York’s former ban on direct sales of wine by out-of- state distributors, but which also noted that New York “‘could protect itself against lost tax revenue by requiring a permit as a condition of direct shipping.’”