PROCEEDING under article 78 of the Civil Practice Act (transferred to the Appellate Division of the Supreme Court in the first judicial department by an order of the Supreme Court at
Special Term, entered in New York County) to review a determination of the Comptroller of the City of New York which assessed petitioner for a sales tax deficiency.
Sol Charles Levine of counsel (Joseph M. Godman with him on the brief; S.C. Levine and S. H. Levine, attorneys), for petitioner.
Leroy Mandle of counsel (Stanley Buchsbaum and Seymour B. Quel with him on the brief; Denis M. Hurley, Corporation Counsel, attorney), for respondent.
In this article 78 (Civ. Prac. Act) proceeding petitioner, Colgate-Palmolive-Peet Company, seeks to annul a determination of the city comptroller assessing it for a tax deficiency. The City of New York claims a sales tax (Administrative Code, ch. 41, tit. N) from the company covering paperboard cartons in which the company shipped its soap and toilet products to retail druggists and grocers. The city claims that the company, as vendor, should have collected the retail sales tax from its customers on the theory that the shipping cartons were sold to the retailers for consumption. The company claims that it was right in not collecting the tax from its customers because it sold to them shipping cartons for resale and not for consumption.
We hold that the claims of neither are correct, and that the company itself is the consumer of its shipping cartons. On this view the company may owe the retail sales tax to the city. If it does, it owes it not as a collecting vendor but as a vendee who has failed to pay the tax because the sellers of the cartons failed to collect the tax from the company (Administrative Code, § N41-2.0, subd. f). This would require a new and separate proceeding by the city.
The company manufactures and sells to retailers soaps and toilet articles. The retailers, who are principally the operators of drug and grocery stores, in turn sell these products at retail to the public. The company's products are shipped in paperboard cartons. The cartons are either destroyed by the retailer, sold as waste paper, resold as usable cartons, or are used by the retailers, particularly grocers, to package loosely the merchandise purchased by the retail consumer. There was evidence that the cartons can be skillfully opened so that their re-use for the same shipping purpose is not impaired, except for outside labelling. There was no proof that this method of opening the cartons was in general use. There was evidence of the resale
of these cartons to both waste paper dealers and to dealers in used cartons. There was no evidence as to how extensively such resale occurred in the city. It is conceded that the price of the products manufactured by the company reflects the cost of shipping cartons, but that the cost is no more identifiable in the price than any other overhead cost of doing business.
The city claims that the company sells the cartons as well as the contents to its retailer customers. It claims that the cartons have no persistent usefulness after shipment or in general resale by the retailers except as incidental to the disposal of waste. The company claims that the cartons are not destroyed except occasionally by its customers. It claims that they are resold either to dealers in cartons or that they are sold to the customers at retail, who purchase sundry articles from the retailer and have them delivered in the old broken cartons.
It would seem that the reasonable description of the use of the shipping cartons is that the cartons are consumed by the company in the shipment of its products to its retailer customers. There is no particular interest in the character, type or value of the cartons except as temporary, and not very durable, containers in the shipment of merchandise sold. Whatever proof there was or is as to re-use or resale of the cartons is obviously incidental to sale, salvage and disposal of waste. It is hardly likely that any other view would have been tendered by either the company or the city except for the fact that certain decisions respecting the retail sales tax have been misapplied by them. These cases, to which we will refer in greater detail, involved shipping materials of substantially different character than paperboard cartons. Moreover, in some of the cases there was a visible price differential charged depending upon the kind of shipping carton requested by the purchaser of the contents. In one of the cases, although there was no price differential, the shipping carton was of a physically substantial character. Its cost was not inconsiderable and there was a widespread regular market for its resale and re-use. To apply these cases to the facts at hand is to ignore realities and to convert a verbalism into a philosophy. The law is not a joust with word symbols, and the use of language never can excuse us from the necessity of searching for the ideas and concepts language purports to communicate.
The cases referred to in the discussion immediately preceding are: Sterling Bag Co. v. City of New York (256 A.D. 645, affd. 281 N.Y. 269); Matter of American ...