Hotel Depot Inc., a New Jersey-based company, has learned that the state border does not stop it from paying New York sales taxes.
New York Administrative Law Judge James P. Connolly ruled on Jan. 3 that Hotel Depot is required to pay nearly $2.4 million in sales taxes on products and services sold from 2005 to 2011.
“The sales tax is a destination tax,” Connolly said, citing a state regulation. The point of delivery or the point where the buyer takes possession “controls both the tax incident and the tax rate.”
Hotel Depot is a family owned company based in South Plainfield, New Jersey, that sells and installs hotel furnishings. It has served many customers in New York, including La Quinta Inn & Suites in Elmsford, Hampton Inn in Fishkill and several Manhattan hotels.
The Westchester district office of the New York state Department of Taxation and Finance initiated an audit in 2011.
Hotel Depot’s representative, Buxbaum Sales Tax Consulting, initially responded that the company had no connection to New York taxes, the ruling states, until it hired a salesman to seek additional sales in the state.
But sales invoices showed that Hotel Depot had taken measurements and installed items in New York.
Invoices include sections labeled “Bill to” and “Ship To,” and showed “Sales Tax (0.0%).”
The auditor eventually concluded that 1,675 transactions were taxable by New York. The state issued a tax bill for $2,356,444, plus interest.
The Bureau of Conciliation and Mediation Services upheld the audit and Hotel Depot challenged the audit with the Division of Tax Appeals.
The company argued that there was no rational basis for the tax because New York had failed to prove that any goods were actually shipped to the state, therefore it should be presumed that all transactions happened in New Jersey.
Connolly ruled that the burden of proof was on Hotel Depot and the company did not dispute the “Ship To” addresses on the invoices.
He also ruled that Dipesh Parikh, the company president, is responsible for collecting the tax.