Matter of Michael MacLeod v Robert l. Megna, as Commissioner of Taxation and Finance



 In this Article 78 case, the court reviewed a decision of the Tax Appeal Tribunal which uphold sales and use tax assessment required under Tax Law articles 28 and 2.


Petitioner was the president and sole shareholder of MJM Studios of New York, Inc. This was a New Jersey company that specialized in creating architectural enhancements of buildings in numerous states.


Respondent informed petitioner that they would be conducting a field audit and required access to all MJM’s records. Petitioner could not provide access to the records because they were in possession of a bankruptcy trustee. The auditor made several attempt to contact the bankruptcy trustee and also made several more requests of petitioner to provide the records. After the unsuccessful attempts, the auditor calculated an estimated sales and use tax based on deposits in MJM’s bank records and he adjusted through MJM’s franchise tax returns to include only New York sales. Following a conference, the assessed amount was reduced. In addition to a hearing, the Department agreed to further reduce the assessed amount.


The Tax Appeal Tribunal affirmed the tax assessment. Due to a statutory presumption that all money received by MJM for products and services were taxable, petitioner has the burden of establishing by “clear and convincing evidence” that the money was not taxable and the assessment was erroneous. He failed to prove that the capital improvement exemption applies.


Even though the records were in possession of the trustee, there was no evidence that petitioner attempted to retrieve the records for the auditor.Due to the lack of documentation from petitioner, the auditor needed to come up with its own method to determine the tax assessment.


The determination is confirmed, without costs, and petition dismissed.



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