Not Even a State Legislator Has 'Standing' to Challenge Non-Enforcement of Tax Law

ALBANY, NY (01/15/2010)(readMedia)-- Gov. David A. Paterson has dodged a state legislator's latest attempt to legally require him to collect taxes on cigarettes and gasoline sold by Native American tribal stores to non-Indian customers.

The Appellate Division of State Supreme Court in Albany didn't say Paterson was justified in refusing to collect the taxes, but it sided with him and his Tax Department by affirming a lower court's dismissal of a case brought by Utica-area Assemblyman David R. Townsend Jr. on grounds that he lacked "standing" to file the lawsuit.

In a unanimous decision dated January 7, 2010, the five-member panel held that Townsend didn't have a legal basis to file the case because he did not suffer sufficient "injury" from the policy of forbearance that governors Pataki, Spitzer, and now Paterson have maintained since the tax collection law took effect March 1, 2006. The court said such defiance of the law, which Townsend voted for, "does not constitute an unlawful nullification of his vote."

The ruling said Townsend had only a "generalized interest" that was "insufficient to constitute an injury in fact for standing purposes."

"This is not the end," said Assemblyman Townsend (R,WF-Sylvan Beach). "For the sake of small business owners and taxpayers, and for the rights of ordinary citizens threatened by special interests, we will fight on. The court's January 7 decision requires further clarification. If New York State can grant some entity, business or local group total tax immunity – as they have in the case of Oneida Nation Enterprises and sales taxes – and courts no longer offer any redress to the average citizen as a result of these bad policies, then our system is broken. I encourage Governor Paterson to make 2010 the year of reform in the Empire State. The fairness of the state tax code and the continued credibility of our public institutions depend on it."

This is not the first time a legal challenge to the state's non-enforcement policy on taxing Indian sales to non-Indians has been derailed by "standing" issues rather than decided on the merits. In 2006, the New York Association of Convenience Stores and two of its members filed suit against then-Governor Pataki and the Tax Department. That case was dismissed by then-State Supreme Court Justice E. Michael Kavanagh on grounds that the retailers lacked standing. Judge Kavanagh was one of the five Appellate Division justices who decided this latest appeal in the separate but similar Townsend case.

"If a state legislator who voted for the law doesn't have standing, and small businesses ravaged by the failure to enforce the law don't have standing, then would somebody please tell me who DOES have standing to go to court and challenge this disgraceful dereliction of duty," said James Calvin, President of the New York Association of Convenience Stores, pointing out that the Governor's inaction is costing the state $1 billion a year in lost tax revenue.

For a copy of the Appellate Division decision go to:

http://decisions.courts.state.ny.us/ad3/Decisions/2010/507118.pdf