180opn13 decision

7/27/2019 180opn13 Decision

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=================================================================Thi s opi ni on i s uncor r ect ed and subj ect t o r evi si on bef or epubl i cat i on i n the New Yor k Repor t s.- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -No. 180Expedi a, I nc. , et al . , Respondent s,Pr i cel i ne. com I ncor por at ed,et al . , Pl ai nt i f f s, v.

The Ci t y of New Yor k Depar t mentof Fi nance, et al . , Appel l ant s.

Andr ew G. Li pki n, f or appel l ant s.Todd R. Ger emi a, f or r espondent s.

RI VERA, J . :

The Ci t y of New Yor k appeal s f r om an or der of t he

Appel l at e Di vi si on hol di ng Local Law 43, a hot el r oom occupancy

t ax appl i cabl e to onl i ne t r avel compani es, unconst i t ut i onal

( Expedi a, I nc. v Ci t y of N. Y. Dept . of Fi n. , 89 AD3d 640 [ 1st

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Dept 2011] ) . Pl ai nt i f f s ar e a gr oup of t r avel compani es that

enabl e cust omer s t o make onl i ne t r avel arr angement s, i ncl udi ng

hot el r eser vat i ons. Pl ai nt i f f s cl ai m t hat t he Ci t y l acksaut hor i t y t o t ax t he f ees t hey col l ect f r om t hei r cust omer s. The

Ci t y cont ends t hat t he St at e Legi sl at ur e aut hor i zed Local Law 43

t hr ough enabl i ng l egi sl at i on.

We hol d t hat t he Ci t y had t he aut hor i t y t o enact t he

t ax, and t he Appel l at e Di vi si on er r ed when i t decl ar ed t he t ax

unconst i t ut i onal .

I.

St at e l aw aut hor i zes New Yor k Ci t y t o t ax t he " r ent or

char ge" f or hot el r oom occupancy. The enabl i ng st at ut e pr ovi des:

"Not wi t hst andi ng any ot her pr ovi si on of l awt o t he cont r ar y, any ci t y havi ng a popul at i onof one mi l l i on or mor e i s her eby aut hor i zedand empower ed t o adopt and amend l ocal l aws

i mposi ng i n any such ci t y a t ax i n addi t i ont o any t ax aut hor i zed and i mposed pur suant t oar t i cl e t went y- ni ne of t he t ax l aw such ast he l egi sl atur e has or woul d have t he powerand aut hor i t y t o i mpose on persons occupyi nghot el r ooms i n such ci t y. "

( CLS Uncons Laws of NY, ch 288- C, 1 [ 1] ) . Thi s st at ut e al l ows

t he Ci t y to t ax up t o si x per cent "of t he r ent or char ge per day"

f or each hotel r oom ( CLS Uncons Laws of NY, ch 288- c, 1 [ 1-

a] ) . The st at ut e aut hor i zes t he Ci t y t o col l ect t hese t axes f r om

t he hot el oper at or or any "per son ent i t l ed t o be pai d t he r ent or

char ge f or t he hot el r oom" ( CLS Uncons Laws of NY, ch 288- c, 1

[ 3] ) . Under t hi s enabl i ng st at ut e, t he Ci t y has t axed hot el r ent

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si nce 1970, char gi ng hot el oper at or s based on t he dai l y rent

charged ( see Local Law No. 15 [ 1970] of Ci t y of New Yor k 1) .

I n 2009, t he New Yor k Ci t y Counci l amended i t s hot eloccupancy t ax t o capt ur e r evenue f r om f ees char ged t o cust omers

as r ent by t hi r d part y t r avel compani es, known under t he l aw as

" r oom r emarket er s" ( Local Law No. 43 [ 2009] of Ci t y of New Yor k

1) . Local Law 43 def i ned " r ent " as:

" [ t ] he consi der at i on r ecei ved f or occupancyval ued i n money, whet her r ecei ved i n money orot her wi se, i ncl udi ng al l r ecei pt s, cash,

credi t s, and pr oper t y or ser vi ces of any ki ndor nat ur e, including any service and/orbooking fees that are a condition ofoccupancy[ . ] "

( i d. [ emphasi s added] ) . Thus, Local Law 43 t axed t he t ot al r ent

or char ge pai d by a hot el occupant , i ncl udi ng sums pai d di r ect l y

t o t hi r d par t i es. 1

Pl ai nt i f f s ar e t r avel compani es t axed as " r oom

r emarket ers" under Local Law 43. They br ought a decl arat ory

j udgment act i on i n Supreme Cour t chal l engi ng t he

const i t ut i onal i t y of t he t ax. Al t er nat i vel y, pl ai nt i f f s ar gued

t hat t he l aw di d not appl y to them because t hei r ser vi ce f ees are

not "r ent " wi t hi n t he meani ng of t he st at e enabl i ng l egi sl at i on.

Supr eme Cour t gr ant ed t he Ci t y' s mot i on t o di smi ss t he

f i r st cause of acti on chal l engi ng t he f aci al const i t ut i onal i t y of

1Local Law 43 al so def i ned as "net r ent " t he port i on of r entpai d di r ect l y t o a hot el oper at or ( Local Law No. 43 [ 2009] ofCi t y of New Yor k 2) . I t def i ned as "addi t i onal r ent " t hepor t i on of r ent pai d t o t he r oom r emar ket er ( i d. ) .

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t he l aw. The cour t det er mi ned t hat t he pl ai n l anguage of t he

st at e st at ut e aut hor i zed t he Ci t y' s t ax.

Pl ai nt i f f s appeal ed, and t he Appel l at e Di vi si onr ever sed. Accor di ng t o t he Appel l at e Di vi si on, t he enabl i ng

l egi sl at i on di d not "cl ear l y and unambi guousl y pr ovi de t he Ci t y

wi t h br oad t axat i on power s" t o t ax t he pl ai nt i f f s' f ees ( Expedi a,

89 AD3d at 641) . Const r ui ng t he enabl i ng st at ut e nar r owl y, t he

Appel l at e Di vi si on concl uded t hat t axi ng r emar ket er s' f ees was

beyond i t s scope, and hel d t hat t he Ci t y' s t ax was

unconst i t ut i onal ( i d. ) .

The Ci t y sought l eave t o appeal t o t hi s Cour t , whi ch we

deni ed because an appeal l ay as of r i ght under CPLR 5601 ( b) ( 1)

( 20 NY3d 904) . Whi l e t he case was pendi ng bef ore t he Appel l at e

Di vi si on, t he St at e Legi sl at ur e' s 2010 budget l aw expl i ci t l y

aut hor i zed t he Ci t y' s t ax on hot el r emar ket er s ( L 2010 ch 57, pt

AA, 6- 11) . Thus, t he cur r ent appeal , l i ke t he case bef or e t he

Appel l at e Di vi si on, concer ns onl y t he Ci t y' s power t o t ax dur i ng

t he per i od bet ween the 2009 enact ment of Local Law 43 and the

2010 budget l egi sl at i on.

On appeal , t he Ci t y ar gues t hat t he or i gi nal enabl i ng

l egi sl at i on pr ovi ded ampl e aut hor i t y f or t axi ng t he r oom

r emar ket er s. Accor di ng t o t he Ci t y, t he st at ut e gr ant ed t he f ul l

scope of t he St at e' s t ax power f or t he pur poses of t axi ng any

hot el " r ent or char ge. " The Ci t y cl ai ms t hat r emar ket er s'

booki ng f ees, def i ned i n Local Law 43 as a "condi t i on of

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occupancy, " f al l squar el y wi t hi n t hi s aut hor i t y. Mor eover , t he

Ci t y ar gues t hat t he enabl i ng act aut hor i zes i t t o col l ect t he

t ax f r om t he pl ai nt i f f s. The Ci t y mai nt ai ns t hat t he pl ai nt i f f sar e "per son[ s] ent i t l ed t o be pai d t he r ent or char ge f or t he

hot el r oom, " and t hat t he st at ut e accor di ngl y al l ows t he Ci t y t o

t ax them.

The Ci t y al so ar gues t hat t he enabl i ng st at ut e grant s

t he Ci t y t he aut hor i t y t o f i l l gaps i n t he st at ut or y l anguage.

Thi s aut hor i t y al l ows t he Ci t y t o def i ne novel t er ms such as

"r emar ket er , " "net r ent , " and "addi t i onal r ent . "

Pl ai nt i f f s count er t hat t he Ci t y l acks t he st at ut or y

aut hor i t y to t ax t hei r f ees and t hat Local Law 43 i s t hus

unconst i t ut i onal . They ar gue t hat Local Law 43 at t empt ed t o t ax

a servi ce f ee under t he gui se of a t ax on hot el r ent , and t he

enabl i ng st atut e does not support such a br oad t ax. They cont end

t hat t he St at e' s def i ni t i on of "r ent " f or t he pur poses of t he

sal es t ax const r ai ns t he Ci t y' s aut hor i t y t o enact a hot el

occupancy t ax and pr ohi bi t s a t ax on t hi r d- par t y f ees.

Fur t her , pl ai nt i f f s ar gue t hat t he Ci t y can onl y

col l ect t he occupancy t ax f r om a hot el oper at or , not f r om t hi r d

par t i es. Accor di ng t o pl ai nt i f f s, decades of t axat i on pr act i ce

have est abl i shed t hat onl y hotel oper at or s must pay t he tax, and

t he Ci t y cannot now change t hi s pract i ce wi t hout t he St at e

Legi sl at ur e' s appr oval .

Fi nal l y, pl ai nt i f f s argue t hat l egi s l at i ve hi story

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suppor t s t hei r case. I n 2007, t he St at e Legi sl at ur e r ej ect ed a

bi l l t hat woul d have aut hor i zed t he t axat i on of hot el booki ng

f ees. I n 2010, af t er t he pl ai nt i f f s br ought t hi s decl ar at or yj udgment act i on, t he Legi sl at ure passed such an act . Accor di ng

t o t he pl ai nt i f f s, t hi s sequence of event s est abl i shes t hat t he

Legi sl at ur e di d not bel i eve t he Ci t y had aut hor i zat i on t o t ax

t hose f ees under t he or i gi nal enabl i ng l egi sl at i on.

II.

The pl ai nt i f f s' f aci al const i t ut i onal chal l enge t o

Local Law 43 i s wi t hout mer i t . The pl ai n l anguage of t he 1970

enabl i ng st at ut e aut hor i zes t he Ci t y to i mpose "a t ax . . . such

as t he Legi sl atur e has or woul d have t he power and aut hor i t y t o

i mpose on per sons occupyi ng hotel r ooms i n [ t he] ci t y" ( CLS

Uncons Laws of NY, ch 288- c, 1 [ 1] ) . The Ci t y pr oper l y

exer ci sed t hi s broad aut hor i t y when i t enact ed Local Law 43.

I n New Yor k, l ocal government s l ack an i ndependent

power t o t ax. The St at e Const i t ut i on vest s the t axi ng power i n

t he St at e Legi sl at ur e and aut hor i zes t he Legi sl at ur e t o del egat e

t hat power t o l ocal gover nment s ( NY Const , ar t XVI , 1; Ci t y of

New Yor k v St at e of New Yor k, 94 NY2d 577, 591 [ 2000] ; Cast l e Oi l

Corp. v Ci t y of New Yor k, 89 NY2d 334, 338- 339 [ 1996] ; Sonmax,

I nc. v Ci t y of New Yor k, 43 NY2d 253, 257 [ 1977] ; Count y Sec. v

Seacor d, 278 NY 34, 47 [ 1934] ) . The St at e Const i t ut i on pl aces

f undament al l i mi t at i ons on such del egat i ons. The Legi sl at ur e

must descr i be wi t h speci f i ci t y t he taxes aut hor i zed by any

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enabl i ng st at ut e. ( NY Const , ar t XVI , 1; Cast l e Oi l Cor p. , 89

NY2d at 339) . I n t ur n, l ocal gover nment s can onl y l evy and

col l ect t axes wi t hi n t he expr essed l i mi t at i ons of speci f i cenabl i ng l egi sl at i on ( NY Const , ar t I X, 2 [ c] [ 8] ; Mat t er of

Uni t ed St ates St eel Corp. v Ger osa, 7 NY2d 454, 459 [1960] ) .

As a gener al r ul e, t ax st at ut es shoul d be st r i ct l y

const r ued and l i mi t ed t o t hei r t er ms, whi ch shoul d not be

ext ended by i mpl i cat i on ( 1605 Book Cent er , I nc v Tax Appeal s

Tr i bunal , 83 NY2d 240, 244 [ 1994] ; Mat t er of Amer i can Cyanami d &

Chem. Cor p. v J oseph, 308 NY 259, 263 [1955] ; Dun & Br adst r eet ,

I nc. v Ci t y of New Yor k, 276 NY 198, 204 [ 1937] ; McKi nney' s Cons

Laws of NY, Book 1, St at ut es 313 [ b] ) . Any ambi gui t y i n a t ax

l aw shoul d be r esol ved i n f avor of t he t axpayer and agai nst t he

t axi ng aut hor i t y ( Debevoi se & Pl i mpt on v New Yor k State Dept . of

Taxat i on & Fi n. , 80 NY2d 657, 661 [ 1993] ) .

Her e, t he Legi sl at ur e gr ant ed t he Ci t y br oad aut hor i t y

t o enact an occupancy t ax, and t he Ci t y pr oper l y exer ci sed t hat

aut hor i t y. The enabl i ng st at ut e ext ended t o t he Ci t y a t axi ng

power coext ensi ve wi t h t hat of t he St at e (CLS Uncons Laws of NY,

ch 288- c, 1 [ 1] ; cf . Peopl e v Cook, 34 NY2d 100, 111- 112

[ 1974] ) . Mor eover , t he st at ut e aut hor i zed a br oad r ange of

t axat i on. Under t he st at ut e, t he Ci t y may t ax a " r ent or

char ge, " and i t may col l ect t he t ax f r om a hot el "owner . . . or

. . . per son ent i t l ed t o be pai d t he r ent or char ge" ( CLS Uncons

Laws of NY, ch 288- c, 1 [ 3] [ emphasi s added] ) . Nonet hel ess,

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t he Legi sl at ur e set const i t ut i onal l y appr opr i at e l i mi t at i ons on

t he enabl i ng gr ant : t he Ci t y may onl y t ax t he " r ent or char ge"

pai d f or hot el occupancy ( i d. ) . Al t hough not def i ned i n t heenabl i ng act , hot el " r ent " gener al l y means " t he consi der at i on

r ecei ved f or occupancy" ( Tax Law 1101 [ c] [ 6] ) , and, f ol l owi ng

nosci t ur a soci i s, "char ge" must al so r ef er t o a f ee pai d f or

occupancy. Under t he enabl i ng gr ant , t he Ci t y enacted a t ax on

t hi r d- par t y f ees t hat ar e made "a condi t i on of occupancy" ( Local

Law No. 43 [ 2009] of Ci t y of New Yor k 1) . I n ot her words, t he

Ci t y enact ed a t ax on a hotel r ent or charge. 2

Pl ai nt i f f s' ar gument t hat Local Law 43 i mpr oper l y t axes

ser vi ce f ees and not r ent i s wi t hout mer i t . By i t s ter ms, Local

Law 43 appl i es onl y t o f ees r equi r ed f or occupancy. The Ci t y

concedes t hat i t cannot use Local Law 43 t o t ax f ees or cost s f or

goods or servi ces t hat are separate and i ndependent f r om

occupancy or physi cal l y exter nal t o the hot el r oom.3

However ,

t he Ci t y may t ax any ser vi ce f ee t hat i s a "condi t i on of

2 The di ssent mi st akes Local Law 43 f or a t ax on t he onl i necompani es' ser vi ce f ees, whi ch, accor di ng t o the di ssent , ar e nota consi derat i on f or occupancy of a hotel r oom. Local Law 43i mposes a t ax on moni es pai d as a r equi r ement f or occupancy,whet her t hose f unds ar e char act er i zed as " r ent " or as a " char ge"( see CLS Uncons Laws of NY, ch 288- c, 1 [ 3] ) . I ndeed, shor t l yaf t er t he Ci t y passed Local Law 43, t he St at e passed l egi sl at i on

t axi ng the ver y same charge ( L 2010 ch 57, pt AA, 6- 11) .

3For exampl e, t he Ci t y may t ax t he f ee pai d f or usi ng a saf e

l ocat ed wi t hi n t he hot el r oom but not t he f ee pai d f or usi ng asaf e l ocat ed i n t he hot el ' s l obby, unl ess t he cost of usi ng t hel obby saf e i s i ncl uded i n t he r ent pai d f or r oom occupancy ( seeNY Ci t y Dept of Fi n Memorandum 08- 1) .

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occupancy. " To t he ext ent t hat t he pl ai nt i f f s' f ee i s not a

pr econdi t i on f or r oom occupancy, i t woul d not f al l under t he

t axi ng aut hor i t y of Local Law 43. However , wher e t he pl ai nt i f f s'char ge i s, i ndeed, "a condi t i on f or occupancy, " i t f al l s squar el y

wi t hi n t he cat egor y of payment s subj ect t o t axat i on as a "r ent or

char ge. " Fur t her mor e, i nsof ar as pl ai nt i f f s ar e "ent i t l ed t o be

pai d t he r ent or char ge f or t he hot el r oom, " t he Ci t y may col l ect

t he t ax di rect l y f rom pl ai nt i f f s .

Onl i ne t r avel compani es l i ke t he pl ai nt i f f s have

successf ul l y r eshaped t he way peopl e book t r avel . Now, a

cust omer can conveni ent l y and ef f i ci ent l y sear ch t he pl ai nt i f f s'

websi t es f or a hot el r oom and r eser ve i t wi t h t he cl i ck of a

but t on. Whi l e i t may no l onger seem novel t o r eserve a hot el

r oom onl i ne, t hi s i nnovat i on r evamped t he i ndust r y, and t he

i ndust r y pl ayer s have r eaped consi der abl e pr of i t s. However , t hi s

i nnovat i on has not changed t he mai n pur pose of a hot el

r eser vat i on pr ocess: sel ect i ng and payi ng f or a r oom f or f ut ur e

occupancy. Local Law 43 adheres t o i t s enabl i ng pur pose, t he

t axat i on of hot el occupancy rent and char ges, by t axi ng

ever yt hi ng a hotel occupant act ual l y pays f or occupancy when

booki ng onl i ne.

Cont r ar y t o pl ai nt i f f s' ar gument , t he 2010 st at e l aw

does not pr ovi de pr oof t hat t he Ci t y l acked aut hor i t y t o enact

Local Law 43. The f act t hat t he St at e l at er endor sed t he Ci t y' s

t ax does not af f ect our anal ysi s. As l ong as t he Ci t y had

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aut hor i t y under t he or i gi nal enabl i ng act t o pass Local Law 43,

t he f act t hat t he St at e l at er aut hor i zed t he Ci t y t o t ax onl i ne

ser vi ce f ees i s i r r el evant . The Ci t y ei t her had or di d not havet he aut hor i t y t o t ax hot el r emar ket er s. We deci de t oday t hat t he

Ci t y had t he aut hor i t y under t he pl ai n l anguage of t he 1970

enabl i ng st at ut e t o tax hot el occupancy f ees.

Local Law 43 i s not unconst i t ut i onal because t he St at e

Legi sl at ur e gr ant ed t he Ci t y br oad aut hor i t y t o i mpose a t ax on

hot el occupant s, and Local Law 43 t axes onl y payment s f or t he

occupancy of a hot el r oom. Accor di ngl y, t he or der of t he

Appel l at e Di vi si on shoul d be r ever sed wi t h cost s, and t he or der

of t he Supr eme Cour t r ei nst at ed.

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Expedi a, I nc. , et al . v The Ci t y of New Yor k Depart mentof Fi nance, et al .

No. 180

PI GOTT, J . ( di ssent i ng, i n par t ) :

Local Law No. 43 r uns af oul of t he enabl i ng l egi sl at i on

( see CLS Uncons Laws of NY, ch 288- C 1) t o t he ext ent t hat i t

i mposes a tax on t he f ees ear ned by r oom r emarket er s, l i ke

pl ai nt i f f s, f or assi st i ng t hei r customer s i n f i ndi ng, and

f aci l i t at i ng t he r ent al of , a hot el r oom, as opposed t o t axat i on

on t he r oom i t sel f . Ther ef or e, I r espect f ul l y di ssent .

The enabl i ng l egi sl at i on provi des, as r el evant here,

that:

"Not wi t hst andi ng any ot her pr ovi si on of l awt o t he cont r ar y, any ci t y havi ng a popul at i on

of one mi l l i on or mor e i s her eby aut hor i zedand empower ed t o adopt and amend l ocal l awsi mposi ng i n any such ci t y a t ax i n addi t i ont o any t ax aut hor i zed and i mposed pur suant t o[ Tax Law ar t i cl e 29] such as t he l egi sl at ur ehas or woul d have t he power and aut hor i t y t oi mpose on persons occupyi ng hot el r ooms i nsuch ci t y" ( CLS Uncons Laws of NY, ch 288- C 1 [ 1] ) .

The enabl i ng st at ut e del i neat es a f or mul a f or t he cal cul at i on of

t he t ax based upon t he pr i ce of t he r oom ( i d. at 1 [ a] , [ b] ) ,

and t hen goes a st ep f ar t her , st at i ng t hat , "[ i ] n addi t i on t o t he

t ax i mposed at t he r at es aut hor i zed i n ei t her [ 1 ( a) and ( b) ] .

. . , any l ocal l aw i mposi ng such t ax may i mpose an addi t i onal t ax

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on per sons occupyi ng hot el r ooms i n such ci t y as provi ded f or i n

subdi vi si on one at a r at e of up t o si x per cent of t he r ent or

charge per day f or each such r oom" ( i d. at 1 [ 1- a] [ emphasi ssuppl i ed] ) .

The l ocal l aw pl ai nt i f f s chal l enge cr eat ed a new cl ass

of i ndi vi dual s, i . e. , "r oom r emar ket er s, " f r om whom a t ax coul d

be col l ect ed. A " r oom r emar ket er " i s def i ned as " [ a] per son who

r eser ves, ar r anges f or , conveys, or f ur ni shes occupancy . . . t o

an occupant f or r ent i n an amount det ermi ned by such r oom

r emar ket er . . . whet her pur suant t o a wr i t t en or ot her

agr eement " ( Local Law No. 43 [ 2009] of Ci t y of NY 1) .

Pl ai nt i f f s, who consi st of onl i ne t r avel compani es,

f al l squar el y wi t hi n t he def i ni t i on of "r oom r emar ket er s. " They

chal l enge Local Law 43 on t wo gr ounds, namel y, t hat i t i mpr oper l y

r equi r es t he t axat i on of t he f ees t hat t hey ear n whi l e act i ng as

a thi r d- par t y i nt er medi ar y bet ween t he hot el oper at or and t he

r oom occupant , and t hat i t i mper mi ssi bl y r equi r es t hem t o col l ect

and r emi t t he t axes i mposed on t he r ent al of t he r oom. I n my

vi ew, onl y pl ai nt i f f s' f i r st ar gument has mer i t .

Local Law 43 must be vi ewed t hr ough t he pr i sm of t he

enabl i ng l egi sl at i on because t he Ci t y may not i mpose a t ax

out si de t he expr essed l i mi t at i ons of t he enabl i ng st at ut e ( see

Cast l e Oi l Corp. v Ci t y of New Yor k, 89 NY2d 334, 339 [ 1996] ) .

As r el evant her e, t he l ocal l aw expanded t he def i ni t i on of " r ent "

whi ch pr evi ousl y had been def i ned as i ncl udi ng, among ot her

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t hi ngs, " [ t ] he consi der at i on r ecei ved f or occupancy val ued i n

money, whet her r ecei ved i n money or other wi se" ( Admi ni st r at i ve

Code of Ci t y of NY 11- 2501 [ 7] ) t o al so i ncl ude "any ser vi ceand/ or booki ng f ees t hat ar e a condi t i on of occupancy . . . "

( Local Law No. 43 1 [ emphasi s suppl i ed] ) . I t al so par sed t he

def i ni t i on of r ent i nt o t wo subsect i ons, "net r ent " and

"addi t i onal r ent , " t he f or mer bei ng def i ned as " r ent r ecei ved by

t he oper at or f r om a r oom r emar ket er , " and t he l at t er def i ned as

" [ t ] he excess of t he r ent r ecei ved f r om an occupant by a r oom

r emar ket er over t he net r ent " ( Local Law No. 43 2) .

Pl ai nt i f f s recei ve f ees f or t hei r ser vi ces i n

f aci l i t at i ng onl i ne hot el r oom r ent al s. The Ci t y cl ai ms t hat t he

enabl i ng l egi sl at i on per mi t s i t t o t ax t hese f ees, t he so- cal l ed

"addi t i onal r ent . " I di sagr ee. Af f or di ng t he st at ut e a nar r ow

const r uct i on, as we must when exami ni ng l egi sl at i on t hat i mposes

a t ax ( see Debevoi se & Pl i mpton v New Yor k Stat e Dept . of

Taxat i on & Fi n. , 80 NY2d 657, 661 [ 1993] ) , i t i s my vi ew t hat t he

Ci t y exceeded i t s aut hor i t y by t axi ng t he f ees pl ai nt i f f s ear ned

i n f aci l i t at i ng hot el room rent al s .

The maj or i t y r el i es on bl ack l et t er l aw t hat t ax

st at ut es are t o be st r i ct l y const r ued, and "shoul d not be

ext ended by appl i cat i on" ( maj or i t y op, at 7) , but t hen di sr egar ds

t hese gener al pr i nci pl es and concl udes t hat t he enabl i ng

l egi sl at i on gr ant ed t he Ci t y "br oad aut hor i t y" t o t ax pl ai nt i f f s'

f ees ( maj or i t y op, at 7- 8) . However , t he enabl i ng st at ut e

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per mi t s t he Ci t y t o i mpose t axes onl y "on per sons occupyi ng hotel

r ooms i n [ t he] Ci t y, " and "at a r at e of up t o si x per cent of t he

r ent or charge per day f or each such r oom" ( emphasi s suppl i ed) ,and, t her ef or e, t he Ci t y does not possess t he addi t i onal

aut hor i t y t o tax t he f ees ear ned by onl i ne t r avel compani es t hat

f aci l i t at e t he t ransact i on i t sel f . 4 Nor does t he Ci t y have t he

excess aut hor i t y "t o t ax any ser vi ce f ee t hat i s a ' condi t i on of

occupancy' " ( maj or i t y op, at 8) , si nce t he enabl i ng l egi sl at i on

i s di r ect ed at "per sons occupyi ng hot el r ooms" and t he t ax i s

based on " t he r ent or char ge f or each such r oom. " The payment of

t he f ee does not const i t ut e consi der at i on " f or each such r oom, "

but , r at her const i t ut es a consi der at i on bet ween t he oper at or and

t he t hi r d- par t y i nt er medi ar i es l i ke pl ai nt i f f s who assi st t he

hot el oper at or i n booki ngs. Ther ef or e, i n my vi ew, Local Law 43

pl ai nl y exceeded t he scope of t he enabl i ng st at ut e.

4 Not abl y, t he Legi sl at ur e under st ood t hat t he enabl i ng

l egi sl at i on di d not r equi r e t r avel compani es t o col l ect sal es t axon t hei r char ges t o cust omer s, and t hus pr oposed l egi sl at i on i n

2007, t wo year s bef ore Local Law 43 was passed, t o " r equi r et r avel compani es t hat r ent hotel r ooms onl i ne or by t el ephone tocol l ect t he sal es t ax on mar kups and servi ce f ees char ged t ocust omers" ( 2007 NY Senat e- Assembl y Bi l l S2110, A4310) . Thatl egi sl at i on event ual l y passed i n 2010, and t hus t he Local Lawenact ed i n 2009 pl ai nl y exceeded the enabl i ng st atut e at t hatt i me.

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* * * * * * * * * * * * * * * * *

Or der r ever sed, wi t h cost s, and t he or der of Supr eme Cour t , NewYor k Count y, r ei nst at ed. Opi ni on by J udge Ri ver a. Chi ef J udge

Li ppman and J udges Gr af f eo, Read and Smi t h concur . J udge Pi got tdi ssent s i n par t i n an opi ni on i n whi ch J udge Abdus- Sal aamconcurs.

Deci ded November 21, 2013

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180opn13 decision

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