Airlift International, Inc. v. State Tax Commission

can Locker Co. v Gallman, 38 AD2d 105 , affd 32 NY2d 175 ). In construing a taxing statute in order to determine the scope of a statutorily prescribed exemption, however, the rule is that the exemptions are to be strictly construed and that if any ambiguity or uncertainty exists it is to be resolved in favor of the sovereign and against exemption (Matter of Aldrich v Murphy, 42 AD2d 385 ). Petitioner contends that it is entitled to a refund or credit of sales tax paid on one or more of the following grounds: (1) that the work performed on its aircraft constituted a fabrication within the meaning of section 1119 (subd [a], par [4]) of the Tax Law; (2) that the cost of labor included in Boeing’s bill constituted wages, salaries and other compensation paid by an employer to an employee within the meaning of section 1105 (subd [c], par [5]) of the Tax Law, and/or (3) that its aircraft is a commercial vessel within the meaning of section 1105 (subd [c], par [3]) of the Tax Law. Section 1119 (subd [a], par [4]) of the Tax Law provides that a credit or refund shall be allowed for sales tax paid: "on the sale or use within this state of tangible personal property, not purchased for resale, if the use of such property in this state is restricted to fabricating such property (including incorporating it into or assembling it with other tangible personal property) * * * and such property is then shipped to a point outside this state for use outside this state.” To repair is to restore to a sound or good state after decay, injury, dilapidation or partial destruction; to renew, revive or rebuild; to restore or reinstate as in former standing (Webster’s Third New International Dictionary; see, also, 76 CJS, Repair, p 1169; Direen Operating Corp. v State Tax Comm., 46 AD2d 191 ). On the other hand, to fabricate is to frame, build; or forge; to form into a whole by uniting parts; to make shape or prepare according to standardized specifications so as to be interchangeable; to construct or build up into a whole by uniting interchangeable or standardized parts often made elsewhere (Webster’s Third New International Dictionary; 35 CJS, Fabricate, p 485; 2 CCH State Tax Rep [NY], par 61-425, p 6657-3). Here, as a result of the July 29 incident, petitioner’s aircraft was partially destroyed and the tangible personal property which was incorporated into the aircraft by the employees of Boeing was for the purpose of restoring the aircraft to its original condition and not for the purpose of modifying the aircraft to meet petitioner’s specifications. Accordingly, petitioner is not entitled to a refund or credit of sales tax paid on the ground that the material used on its damaged aircraft was used for fabrication as opposed to repair purposes (Tax Law, § 1119, subd [a], par [4]). The wages, salaries and other compensation paid by an employer to an employee for repairing tangible personal property are not considered to be receipts subject to the sales and use tax (Tax Law, § 1105, subd [c], par [5]). This provision, however, only applies when there is an employer-employee relationship between the person performing the repair work and the person for whom such repair work is done (2 CCH State Tax Rep [NY], par 60-125). If the rule were otherwise, then any time the cost of labor is separately invoiced it would be exempt from the sales tax (cf. Matter of Sweet Assoc. v Gallman, 36 AD2d 95 , affd 29 NY2d 902 ). The services rendered and the materials used in the repair of a commercial vessel engaged in interstate and foreign commerce are exempt from the sales tax (Tax Law, § 1105, subd [c], par [3]; § 1115, subd [a], par [8]). Likewise, the Tax Law exempts from the sales tax property used by or purchased for the use of commercial vessels for fuel, provisions and supplies. The phrase "commercial vessel” is not defined in the Tax Law but in its broadest sense the word "vessel” includes every description of watercraft or other artificial contrivance used, or capable of being used, as a means of

transportation on water (see, US Code, tit 1, § 3; Matter of Great Lakes Dredge & Dock Co. v Department of Taxation & Finance of State of N. Y, 39 NY2d 75 ; Taylor v Central R. R. Co. of N. J., 9 AD2d 101 ; Maloney v State of New York, 207 Misc 894 ). We hold that it is this meaning of the word “vessel” that the Legislature intended to import into the Tax Law. The Tax Law contains specific exemptions for food, drink and fuel sold to airlines (Tax Law, § 1105, subd [d], par [ii], cl [A]; § 1115, subd [a], par [9]). If the word "vessel” were construed to include an airplane, there would be no reason for these exemptions since, as previously observed, the Tax Law exempts fuel, provisions and supplies used by or purchased for use by commercial vessels (see McKinney’s Cons Laws of NY, Book 1, Statutes, § 231). Additionally, the legislative memoranda submitted at the time the exemption contained in section 1105 (subd [c], par [3]) was added clearly indicate that the purpose of this provision was to preserve the ship repair industry in New York (NY Legis Ann, 1966, p 263a). Petitioner contends that even if the repairs to its damaged aircraft are not exempt from the sales and use tax, the tax imposed thereon is void and refundable because it constitutes a violation of the Commerce Clause of the United States Constitution (US Const, art I, § 8). It has been established that the New York sales and use tax is not an unconstitutional burden on interstate commerce (McGoldrick v Berwind-White Co., 309 US 33 ; see, also, McGoldrick v Felt & Tarrant Co., 309 US 70 ; Matter of Atlantic Gulf & Pacific Co. v Gerosa, 16 NY2d 1 ). Article 28 of the Tax Law contains statutory provisions allowing reciprocal credits for taxes paid in other States and, therefore, any possibility of multiple State taxation of the same property has been eliminated (Tax Law, § 1118; 51 NY Jur, Sales and Use Taxes, §§ 2, 24). Despite the fact that only a very short period of time elapsed between the time that the material used in the repair of petitioner’s aircraft arrived in this State after its interstate journey and the time when this material was installed in the aircraft and the aircraft resumed its interstate and international flights, there was a taxable event in this State (Southern Paciñc Co. v Gallagher, 306 US 167 ; Henneford v Silas Mason Co., 300 US 577 ; Matter of Atlantic Gulf & Pacific Co. v Gerosa, supra; cf. Halliburton Oil Well Co. v Reily, 373 US 64 ; see, generally, 51 NY Jur, Sales and Use Taxes, § 43). In Matter of United Air Lines v Joseph ( 281 App Div 876 , mot for lv to app den 306 NY 981 ), the court upheld the imposition of the New York City sales and use tax on airplane parts that were installed in the city on airplanes which, spent most of their time in travel outside the city (cf. Matter of Jacobs v Joseph, 282 App Div 622 ). Miller Bros. Co. v Maryland ( 347 US 340 ), relied upon by the petitioner, is inapposite. In the Miller case, an attempt to force a foreign corporation, not qualified to do business in Maryland, to collect use taxes on purchase made by Maryland residents at its Delaware store and delivered to them within the taxing State was held to be a violation of the Due Process Clause since there was no definite link or minimum connection between the taxing State, and the person, property or transaction it sought to tax (but see Scripto v Carson, 362 US 207 ). Here, the petitioner does not really claim that the imposition of the sales and/or use tax was violative of the Due Process Clause but rather limits its challenge to a violation of the Commerce Clause. In any event, it is submitted that imposition of the sales or use tax on the repairs to petitioner’s aircraft is not violative of the Due Process Clause since there is definite link or minimum connection between New York, the petitioner, the property and the transaction sought to be taxed (see, generally, Antieu, Modern Constitutional Law, §§ 10:56, 10:57). Determination confirmed, and petition dismissed, without costs. Koreman, P. J., Greenblott, Kane, Main and Larkin, JJ., concur.