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Servomation Corp. v. State Tax Commission
Citations: 51 N.Y.2d 608; 416 N.E.2d 1022; 435 N.Y.S.2d 686; 1980 N.Y. LEXIS 2816
Court: New York Court of Appeals; December 21, 1980; New York; State Supreme Court
The court addresses the enforceability of a State Tax Commission regulation that interprets section 1115(a)(19) of the Tax Law, specifically regarding the taxation of containers and packaging materials used by food service businesses. Servomation, which operates food service establishments and purchases substantial amounts of disposable products for its operations, challenges the regulation that mandates taxation on such items. Section 1115(a)(19) exempts from taxation containers and wrapping materials used by vendors for packaging tangible personal property for sale. In contrast, the Tax Commission's 1977 regulation asserts that packaging materials used in restaurants and similar establishments are taxable regardless of separate charges for those items. Servomation seeks a judicial declaration that this regulation is invalid as it conflicts with the Tax Law. Initially, the Supreme Court ruled against Servomation, but the Appellate Division reversed this decision, aligning with a previous case, Matter of Burger King v State Tax Comm. The court confirms that Servomation's purchases are not subject to tax, emphasizing that the Tax Commission's regulation contradicts the statutory exemption for items sold for resale. The court highlights the principle that an administrative agency cannot override legislative statutes through regulation. The ruling affirms that the regulation is unenforceable and states that, while courts typically defer to administrative agency interpretations, pure statutory interpretation doesn't warrant such deference. The order of the Appellate Division is affirmed, with costs awarded. Specific examples provided in the regulation illustrate taxable items, such as paper bags and beverage containers used in restaurants, which do not qualify as packaging for tangible personal property.