Section 3.18 - Exclusion Vs

• Jurisdiction: New York

[3.18] b. Exclusion vs. Exemption

In Grace, excerpted at length above, the Court of Appeals ruled that a taxing statute is construed against the state only when determining whether property, income, a transaction or event is subject to taxation. On the other hand, when an exemption from taxation is in question, the statute will be construed against the taxpayer. In Grace itself, a deduction, described as "functionally a particularized species of exemption," was involved, and the taxpayer was held to bear the burden of establishing his right to it.⁹⁰ On a number of occasions the Grace distinction has redounded to the benefit of taxpayers. In 107 Delaware Associates v. New York State Tax Commission,⁹¹ for instance, the Appellate Division stated that

[w]hile in the past there has been some conflict or difference of opinion as to whether [the sales tax provision on interior cleaning and maintenance at Tax Law section 1105(c)(5)] provided an exemption or an exclusion, it is now settled that the relief provided is an exclusion. Thus, while the taxpayer must ordinarily bear the burden of overcoming a tax assessment, where, as here, an exclusion rather than an exemption is involved, the statute must be strictly construed in favor of the taxpayer ⁹²

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Notes:

^[90] Grace v. New York State Tax Comm'n, 37 N.Y.2d 193 (1975); see Great Lakes Dredge & Dock Co. v. Dep't of Tax. & Fin., 39 N.Y.2d 75 (1976); Towne-Oller & Assocs., Inc. v. State Tax Comm'n, 120 A.D.2d 873 (3d Dep't 1986); Bredero Vast Goed, N.V. v. Tax Comm'n of N.Y., 138 Misc. 2d 27 (Sup. Ct., Albany Co. 1988), aff'd, 146 A.D.2d 155 (3d Dep't 1989); Robert Bruce McLane Assocs., Inc. v. Urbach, 232 A.D.2d 826 (3d Dep't 1996); but see Mobil Oil Corp. v. Finance Administrator of N.Y., 58 N.Y.2d 95 (1983); Colt Industries, Inc. v. New York City Dep't of Fin., 66 N.Y.2d 466 (1985).

^[91] 99 A.D.2d 29 (3d Dep't 1984), rev'd on other grounds, 64...