Home / Case Digests / Court of Appeals — Tax Law: EchoStar Satellite Corp. v. Tax Appeals Tribunal of the State of New York, et al.

Court of Appeals — Tax Law: EchoStar Satellite Corp. v. Tax Appeals Tribunal of the State of New York, et al.

New York State Court of Appeals

Tax Law

Resale Exemption

EchoStar Satellite Corp. v. Tax Appeals Tribunal of the State of New York, et al.
No. 87
Judge Graffeo

Background: On appeal, the issue was whether a satellite television provider’s purchases of equipment that is used to deliver programming to its customers were exempt from sales and use taxes under New York’s Tax Law. The plaintiff leased its equipment to subscribers under customer lease agreements, wherein the plaintiff would repossess the equipment upon the termination of services. The plaintiff did not pay sales or use taxes on its equipment purchases from manufacturers, but rather collected sales taxes from its customers at the time the equipment was leased to them. The Appellate Division confirmed the tribunal’s determination that the equipment was provided as a part of the services and the additional charge in its monthly bills was merely an “add-on” for the use of the equipment and not a true rental.

Ruling: The Court of Appeals reversed. The court found that the plaintiff had purchased the equipment for resale purposes consistent with the tax exemption of Section 1101 (b) (4) (i) (A) of the Tax Law.  The court saw no distinction between the outright purchase of equipment and its temporary transfer for valuable consideration. Both types of transactions fit within the definition of “sale,” especially considering the equipment charges were part of the plaintiff’s business model.

Paul H. Frankel for the appellant; Kathleen M. Arnold for the respondents

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