                          State of New York
                   Supreme Court, Appellate Division
                      Third Judicial Department
Decided and Entered: October 23, 2014                   516631
________________________________

In the Matter of ATLAS VAN
   LINES, INC.,
                    Petitioner,
      v                                     OPINION AND JUDGMENT

TAX APPEALS TRIBUNAL OF THE
   STATE OF NEW YORK et al.,
                    Respondents.
________________________________


Calendar Date:   September 5, 2014

Before:   Stein, J.P., McCarthy, Egan Jr., Lynch and Clark, JJ.

                             __________


      Bond, Schoeneck & King, PLLC, Albany (Arthur Siegel of
counsel), for petitioner.

      Eric T. Schneiderman, Attorney General, Albany (Robert M.
Goldfarb of counsel), for respondents.

                             __________


Egan Jr., J.

      Proceeding pursuant to CPLR article 78 (initiated in this
Court pursuant to Tax Law § 2016) to review a determination of
respondent Tax Appeals Tribunal which sustained a highway use tax
assessment imposed under Tax Law article 21.

      Petitioner is a motor carrier registered by the Federal
Motor Carrier Safety Administration and, at all times relevant,
was engaged in the interstate transportation of household goods
and other property for a fee. To that end, petitioner's federal
registration vested it with the authority to transport shipments
of such goods either through New York, from points outside New
York into the state or from New York to points outside the state
                              -2-                516631

(see 49 §§ USC 13501 [1] [A], [B]; 13901). This proceeding
concerns the taxability of certain of petitioner's interstate
shipments of household goods during the audit period at issue.
Before addressing the particulars of this dispute, however, a
review of the relevant state and federal provisions governing the
definition of household goods and the taxability of such
shipments is in order.

      Insofar as is relevant here, Tax Law § 503 (1) imposes "a
highway use tax for the privilege of operating any vehicular unit
upon the public highways of this state and for the purpose of
recompensing the state for the public expenditures incurred by
reason of the operations of such vehicular units on the public
highways [there]of." Tax Law § 504 (5), however, exempts from
such tax any vehicular unit "[u]sed exclusively in the
transportation of household goods (as defined by the commissioner
of transportation of this state or the interstate commerce
commission) by a carrier under authority of the commissioner of
transportation of this state or of the interstate commerce
commission."

      Prior to January 1, 1996, for purposes of regulation by the
now defunct Interstate Commerce Commission (hereinafter ICC),
federal law defined "household goods" as including – subject to
certain enumerated exceptions – three distinct categories:
"personal effects and property used or to be used in a dwelling
when a part of the equipment or supply of such dwelling,"
"furniture, fixtures, equipment, and the property of stores,
offices, museums, institutions, hospitals or other establishments
when a part of the stock, equipment, or supply of such stores,
offices, museums, institutions, hospitals, or other
establishments" and "articles, including objects of art,
displays, and exhibits, which because of their unusual nature or
value require the specialized handling and equipment usually
employed in moving household goods" (Household Goods
Transportation Act of 1980, former 49 USC § 10102 [10] [A], [B],
[C], as added by Pub L 96-454, 94 US Stat 2011). In 1983, the
Legislature adopted a definition of household goods that mirrored
that previously promulgated by Congress (see Transportation Law
§ 2 [15] [a], [b], [c], as added by L 1983, ch 635, § 1) – an
enactment designed to ensure compatibility with then-existing
                              -3-                516631

federal law (see Mem of State Exec Dept, 1983 McKinney's Session
Laws of NY at 2650). The state and federal definitions of
household goods thereafter existed in harmony until Congress
enacted the Interstate Commerce Commission Termination Act of
1995 (hereinafter ICCTA) (Pub L 104-88, 109 US Stat 803, eff Jan.
1, 1996), abolishing the ICC and, insofar as is relevant here,
eliminating two of the three categories of household goods.
Going forward, the federal definition of household goods included
only "personal effects and property used or to be used in a
dwelling, when a part of the equipment or supply of such
dwelling, and similar property if the transportation of such
effects or property is . . . arranged and paid for by the
householder, including transportation of property from a factory
or store when the property is purchased by the householder with
the intent to use in his or her dwelling, or . . . arranged and
paid for by another party" (former 49 USC § 13102 [10] [A],
[B]),1 thereby placing the federal definition of household goods
at odds with that contained in Transportation Law § 2 (15) (b)
and (c).

      Following the enactment of the ICCTA, the then Commissioner
of Transportation notified state-regulated carriers that federal
law now preempted the Department of Transportation (hereinafter
DOT) from including in its definition of household goods the
items described in Transportation Law § 2 (15) (b) and (c) –
commonly referred to as commercial shipments and shipments
requiring the care and handling normally associated with the
moving of household goods, respectively – and that, henceforth,
the transportation of such goods would constitute the
transportation of "property." The Commissioner's notice was
accompanied by an administrative order to that effect but, in the
years that followed, no effort was made to expressly repeal or
amend Transportation Law § 2 (15) (b) or (c) to bring such
provisions into accord with either federal law or the DOT's
interpretation thereof.


    1
        This definition of household goods was amended in minor
respects by the Motor Carrier Safety Improvement Act of 1999 (Pub
L 106-159, 113 US Stat 1748) (see 49 USC § 13102 [10] [A], [B];
49 CFR 375.103).
                              -4-                516631

      In the context of the proceeding now before us, the Audit
Division of the Department of Taxation and Finance audited
petitioner's records for the period from August 1, 1998 to April
30, 2003 and, in the course thereof, consulted with DOT to
ascertain the proper definition of household goods for purposes
of the exemption set forth in Tax Law § 504 (5). DOT, in turn,
held to the position that the ICCTA preempted Transportation Law
§ 2 (15) (b) and (c) and, therefore, only those items set forth
in Transportation Law § 2 (15) (a) qualified as household goods.
Based upon DOT's analysis, the Division concluded that petitioner
had claimed certain exemptions from the highway use tax to which
it was not entitled and issued notices of determination.2

      During the relevant time period, petitioner utilized five
commodity code definitions to describe the items it transported
and to determine the taxability thereof for purposes of the
highway use tax imposed under Tax Law § 503 (1). Ultimately, the
Division and petitioner entered into a stipulation, wherein it
was agreed that petitioner's commodity code 1 shipments qualified
for the exemption set forth in Tax Law § 504 (5), while those
shipments classified under commodity codes 4 and 5 did not so
qualify. Accordingly, the dispute distilled to whether
petitioner's shipments of items described in commodity codes 2
and 3 qualified for the household goods exemption.3


    2
        Two of the four notices of determination issued
subsequently were withdrawn, leaving only those notices dated
June 29, 2009 in contention.
    3
        Petitioner's definition of commodity code 2 items
essentially mirrored the definition of household goods set forth
in Transportation Law § 2 (15) (b), while its definition of
commodity code 3 items was in substantial accord with the
definition of household goods contained in Transportation Law § 2
(15) (c). As acknowledged in the underlying stipulation,
petitioner did on occasion – during the audit period – pay taxes
on shipments of goods that bore commodity codes 2 and 3 and,
hence, fell within the purview of Transportation Law § 2 (15) (b)
and (c). As a result, the Division agreed to, among other
things, waive all penalties associated with the notices of
                              -5-                516631

      Petitioner waived a hearing and agreed to have the dispute
resolved upon documentary submissions. After an Administrative
Law Judge upheld the notices of determination, petitioner filed
exceptions – contending that it was entitled to the requested
exemption. Respondent Tax Appeals Tribunal sustained the notices
of determination, prompting petitioner to commence this
proceeding pursuant to Tax Law § 2016 to challenge the Tribunal's
determination.

              "It is well settled that [s]tatutes
           creating tax exemptions must be construed
           against the taxpayer, and the taxpayer, in
           turn, bears the burden of establishing
           that the requested exemption applies. To
           that end, it is not sufficient for the
           taxpayer to establish that its
           construction of the underlying statute is
           plausible; rather, the taxpayer must
           demonstrate that its interpretation of the
           statute . . . is the only reasonable
           construction" (Matter of 677 New Loudon
           Corp. v State of N.Y. Tax Appeals Trib.,
           85 AD3d 1341, 1342 [2011], affd 19 NY3d
           1058 [2012], cert denied ___ US ___, 134 S
           Ct 422 [2013] [internal quotation marks
           and citations omitted]; see Matter of
           Piccolo v New York State Tax Appeals
           Trib., 108 AD3d 107, 111-112 [2013];
           Matter of Stevenson v New York State Tax
           Appeals Trib., 106 AD3d 1146, 1147
           [2013]).

Based upon our review of the record, we cannot say that
petitioner discharged that burden here. Accordingly, the
Tribunal's determination is confirmed.



determination issued and, in the event that petitioner prevailed,
to refund or credit any tax previously paid in connection with
the contested commodity codes.
                              -6-                516631

      Initially, we reject petitioner's contention that it is
entitled to the exemption set forth in Tax Law § 504 (5) so long
as it is able to demonstrate that it transported household goods
within the meaning of Transportation Law § 2 (15) – regardless of
the impact of the ICCTA and the subsequent change in the
definition of household goods under federal law. As noted
previously, Tax Law § 504 (5) exempts from the highway use tax
otherwise imposed any vehicular unit "[u]sed exclusively in the
transportation of household goods (as defined by the commissioner
of transportation of this state or the interstate commerce
commission) by a carrier under authority of the commissioner of
transportation of this state or of the interstate commerce
commission." Once the ICC was abolished in 1996, petitioner's
argument continues, the term household goods was – according to
the plain language of Tax Law § 504 (5) – defined exclusively by
reference to Transportation Law § 2 (15); therefore, petitioner's
shipments bearing commodity codes 2 and 3, which generally
correspond with the definition of household goods set forth in
Transportation Law § 2 (15) (b) and (c), are entitled to the
subject exemption.

      The flaw in petitioner's argument on this point is twofold.
First, petitioner overlooks the fact that, despite indeed being
subject to certain DOT rules and regulations governing, among
other things, safety issues (see 49 USC § 14501 [a] [2]; [c] [2]
[A]), petitioner remains a federally registered interstate motor
carrier and, with respect to the transportation of household
goods, is subject to the provisions of the Motor Carrier Safety
Improvement Act of 1999 (see 49 USC § 13102 [10] [A], [B]).
Hence, petitioner cannot ignore the applicable federal regulatory
scheme and statutes simply because it perceives state law to
afford more advantageous tax benefits. More to the point, we are
of the view that the definition of household goods set forth in
Transportation Law § 2 (15) (b) and (c) has been preempted by
and, hence, must yield to the definition set forth in 49 USC §
13102 (10) (A) and (B).4


    4
        Rather than directly analyzing whether the relevant
provisions of the Transportation Law had been preempted by
federal legislation, the Tribunal elected to defer to DOT's
                              -7-                516631

              "The federal preemption doctrine has
           its roots in the Supremacy Clause of the
           United States Constitution, . . . [and]
           [f]ederal preemption of state laws
           generally can occur in three ways: where
           Congress has expressly preempted state
           law, where Congress has legislated so
           comprehensively that federal law occupies
           an entire field of regulation and leaves
           no room for state law, or where federal
           law conflicts with state law" (Sharabani v
           Simon Prop. Group, Inc., 96 AD3d 24, 27-28
           [2012] [internal quotation marks and
           citations omitted]; see People v Miran,
           107 AD3d 28, 36 [2013], lv denied 21 NY3d
           1044 [2013], cert denied ___ US ___, 134 S
           Ct 2312 [2014]; Biscone v JetBlue Airways
           Corp., 103 AD3d 158, 165-166 [2012],
           appeal dismissed 20 NY3d 1084 [2013]).

Without belaboring the point, we agree with petitioner that
Congress has neither expressly preempted the relevant provisions
of Transportation Law § 2 (15) nor evidenced an intent to


resolution of that issue, ultimately finding that "the
Commissioner['s] . . . determination that the Transportation Law
definition of 'household goods' was preempted by the ICCTA
definition appears reasonable under the circumstances." Although
the Tribunal's determination and, more particularly, its analysis
of the parties' competing preemption arguments could have been
drafted with greater clarity, it nonetheless is apparent that the
denial of the requested tax exemption was grounded in the belief
that petitioner, as an interstate motor carrier, was bound by the
federal definition of household goods and, in this regard, should
have been well aware of the "significant [federal] legislation"
in which such preemption "manifested itself." As the Tribunal's
determination – although inartfully expressed – ultimately hinged
upon whether Transportation Law § 2 (15) (b) and (c) indeed has
been preempted by federal law, we now turn our attention to this
issue.
                                -8-                516631

exclusively regulate the transportation of household goods in all
instances, thereby precluding any state regulation with respect
thereto.5 That said, we nonetheless are persuaded that this
matter presents an instance of conflict preemption, which occurs
when "compliance with both federal and state [law] is a physical
impossibility," or where the state law at issue – here,
Transportation Law § 2 (15) and its corresponding impact upon the
availability of the exemption set forth in Tax Law § 504 (5) –
"stands as an obstacle to the accomplishment and execution of the
full purposes and objectives of Congress" (Sharabani v Simon
Prop. Group, Inc., 96 AD3d at 28 [internal quotation marks and
citations omitted]; see Doomes v Best Tr. Corp., 17 NY3d 594, 603
[2011]; Biscone v JetBlue Airways Corp., 103 AD3d at 165-166).

      Simply put, the federal and state definitions of household
goods stand in direct conflict with one another and, consistent
with the doctrine of conflict preemption, the more expansive
definition of household goods set forth in Transportation Law § 2
(15) (b) and (c) must yield to its more restrictive federal
counterpart. To hold otherwise would frustrate Congress' long-
standing regulation of this particular aspect of interstate
commerce. Accordingly, in order to avail itself of the exemption
embodied in Tax Law § 504 (5), petitioner – as a federally
registered motor carrier engaged in the interstate transport of
household goods – must demonstrate that its shipments qualify as
household goods within the meaning of 49 USC § 13102 (10) (A) and
(B). As petitioner failed to make such a showing here, the
Tribunal properly concluded that the contested shipments bearing
commodity codes 2 and 3 were not exempt from the highway use tax
imposed by Tax Law § 503 (1). Petitioner's remaining
contentions, to the extent not specifically addressed, have been
examined and found to be lacking in merit.

        Stein, J.P., McCarthy, Lynch and Clark, JJ., concur.




    5
        Indeed, such a conclusion would be contrary to the
provisions of 49 USC § 14501 (c) (2) (B), which expressly permits
state regulation of the intrastate transport of household goods.
                              -9-                  516631

      ADJUDGED that the determination is confirmed, without
costs, and petition dismissed.




                             ENTER:




                             Robert D. Mayberger
                             Clerk of the Court
