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plaintifftax law

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American Locker Co. v. City of New York, 308 N.Y. 264, 125 N.E.2d 421

Facts

The plaintiff owned coin-controlled lockers in which the public could store personal belongings for a maximum of twenty-four hours upon payment. The lockers were permanently attached and could not be moved by patrons, who could only lock and unlock them once during the rental period. If a locker was occupied for more than twenty-four hours, the contents were removed by the plaintiff's employees. The plaintiff sought a declaration that the New York City sales tax was inapplicable to these transactions and requested a refund for taxes previously paid.

Plaintiff is the owner of coin-controlled lockers in which the public checks baggage and other personal belongings for a period of time not in excess of twenty-four hours upon payment of a ‘dime’ or a ‘quarter’, depending upon the size of the locker.

Issue

Whether the receipts from the use of coin-operated lockers constitute receipts from sales of tangible personal property subject to New York City sales tax.

The gist of the argument on that point is that the receipts from plaintiff's lockers are not receipts from ‘sales' of tangible personal property within the meaning of subdivision a, par. 1 of section N41-2.0 of the Administrative Code of the City of New York, which imposes a tax ‘upon the amount of the receipts from every sale of tangible personal property sold at retail’.

Rule

Receipts from transactions are subject to sales tax only if they involve the passage or transfer of title or actual, exclusive possession of tangible personal property.

The purpose of the sale tax law is not to impose a tax on all transactions, but only on transactions which involve the passage or transfer of title (see Personal Property Law, s 82, for definition of sale), or transactions in which the actual, exclusive possession is transferred.

Analysis

The court analyzed the nature of the transactions involving the lockers, determining that there was no transfer of title or actual possession to the patrons. The patrons only had limited constructive possession, as they could not open the locker multiple times without inserting another coin. The court compared the locker service to hand-checking services, concluding that both provided a safe storage solution without transferring actual possession.

However, this is at best, a limited type of constructive possession. The patron has the right only to lock and unlock the locker once during a period not in excess of twenty-four hours. After the door has been locked the patron may not open the locker without ending his right to its further use.

Conclusion

The court reversed the judgments of the lower courts, ruling that the receipts from the lockers were not subject to the New York City sales tax.

The judgment of the Appellate Division and that of the Special Term should be reversed, with costs in all courts, and the matter remitted to Special Term for further proceedings in accordance with this opinion.

Who won?

The owner of the lockers prevailed because the court found that the transactions did not involve the sale of tangible personal property as defined by the tax code.

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