Mark A. Guterman, individually and on behalf of all others similarly situated, Plaintiff-Appellant,
v.
Costco Wholesale Corporation Defendant-Appellee.
Argued: May 24, 2019
Plaintiff-Appellant
Mark Guterman appeals from an Opinion and Order of the United
States District Court for the Southern District of New York
(Karas, J.), dismissing Guterman's Second
Amended Complaint for failure to state a claim under Federal
Rule of Civil Procedure 12(b)(6). The Second Amended
Complaint alleges, as relevant to this appeal, that
Defendant-Appellee Costco Wholesale Corp.
("Costco") charges its customers sales tax on the
full price of items subject to a manufacturer's discount
in situations where New York law provides that Costco, rather
than the customer, is liable for the tax. The district court
determined that such claims must be brought in a New York
administrative proceeding under New York Tax Law § 1139,
which provides the exclusive remedy for claims that a
"tax, penalty or interest" was "erroneously,
illegally or unconstitutionally collected." We agree
with the district court. Accordingly, the judgment of the
district court is AFFIRMED.
FOR
PLAINTIFF-APPELLANT: WILLIAM R. WEINSTEIN, Law Offices of
William R. Weinstein, White Plains, NY.
FOR
DEFENDANT-APPELLEE: JAMES ARDEN (Caitlin N. Matheny, on the
brief), Sidley Austin LLP, New York, NY.
Before: Livingston, Lynch, and Sullivan, Circuit Judges.
PER
CURIAM
Plaintiff-Appellant
Mark Guterman ("Guterman") appeals from a September
24, 2018 Opinion and Order of the United States District
Court for the Southern District of New York (Karas,
J.), dismissing Guterman's Second Amended
Complaint ("SAC") for failure to state a claim
under Federal Rule of Civil Procedure 12(b)(6). In this
diversity case, the SAC alleges, as relevant to this appeal,
that Defendant-Appellee Costco Wholesale Corp.
("Costco") charges its customers sales tax on the
full price of items subject to a manufacturer's discount
in situations where New York law provides that Costco, rather
than the customer, is liable for the tax. The district court
determined that such claims must be brought in a New York
administrative proceeding under New York Tax Law
("NYTL") § 1139, which provides the exclusive
remedy for claims that a "tax, penalty or interest"
was "erroneously, illegally or unconstitutionally
collected." Guterman v. Costco Wholesale Corp.,
342 F.Supp.3d 468, 477 (S.D.N.Y. 2018).
We
review de novo a district court's grant of a
motion to dismiss under Federal Rule of Civil Procedureopn
12(b)(6), accepting all factual allegations in the complaint
as true and drawing all reasonable inferences in favor of the
plaintiff. See Caro v. Weintraub, 618 F.3d 94, 97
(2d Cir. 2010). Article 28 of NYTL governs New York's
sales tax. In general, vendors like Costco are required to
collect sales tax on behalf of their customers and remit the
tax to the New York Tax Commission ("Commission").
See NYTL § 1131. Vendors thus collect sales tax
from customers "as trustee for and on account of the
state." NYTL § 1132(a)(1). Section 1139 sets out
the "exclusive remedies available to any person for the
review of tax liability imposed by [Article 28]," NYTL
§ 1140, and reads in relevant part:
(a) In the manner provided in this section the tax commission
shall refund or credit any tax, penalty or interest
erroneously, illegally or unconstitutionally collected or
paid if application therefor shall be filed with the tax
commission (i) in the case of tax paid by the applicant to a
person required to collect tax, within three years after the
date when the tax was payable by such person to the tax
commission . . ., or (ii) in the case of a tax, penalty or
interest paid by the applicant to the tax commission, within
three years after the date when such amount was payable under
this article . . . . No refund or credit shall be made to any
person of tax which he collected from a customer until he
shall first establish to the satisfaction of the tax
commission, under such regulations as it may prescribe, that
he has repaid such tax to the customer.
NYTL
§ 1139(a). Determinations made by the Commission in
§ 1139 proceedings may not be "enjoined or reviewed
. . . by any action or proceeding other than a proceeding
under article seventy-eight of the civil practice law and
rules." NYTL § 1140.
Guterman
argues that § 1139 creates an implied private right of
action and that the district court thus erred in dismissing
his claims. Guterman acknowledges that Circuit precedent
"presents a formidable barrier to his claims."
Reply Br. 1. We agree, and conclude that Guterman cannot
surmount that formidable barrier.
In
Estler v. Dunkin' Brands, Inc., 691 Fed.Appx. 3
(2d Cir. 2017), we faced a case similar to this one. There,
as here, the plaintiffs alleged that they were
"unlawfully charged sales tax in violation of New York
state law" and brought suit in federal court rather than
filing an application under § 1139. Id. at 4.
We determined that under Article 28's statutory scheme,
the § 1139 application-and-refund process is the
exclusive remedy available for claims of unlawfully charged
sales tax; indeed, we stated that § 1139 "makes
clear that § 1140's exclusive administrative remedy
is designed for precisely those cases in which a claimant
alleges that a tax has been collected erroneously, illegally,
or unconstitutionally." Id. at 6 (internal
quotation marks omitted). As a result, we affirmed the
dismissal of the plaintiffs' state common law and
constitutional claims, as well as their claims under New York
General Business Law § 349, because the claims
"fail[ed] to comply with the exclusive remedy provision
of [NYTL] § 1140." Id. at 4-5. This result
was consistent with the unanimous practice of the district
courts in this Circuit. See, e.g., Kupferstein
v. TJX Cos., Inc., 2017 WL 590324, at *2 (E.D.N.Y. Feb.
14, 2017); Gilbert v. Home Depot, 2014 WL 4923107,
at *3 (W.D.N.Y. Sept. 30, 2014); Cohen v. Hertz
Corp., 2013 WL 9450421, at *3 (S.D.N.Y. Nov. 26, 2013).
It was also consistent with the practice of New York courts.
See, e.g., CMSG Rest. Grp., LLC v. State,
40 N.Y.S.3d 412, 416 (1st Dep't 2016)
("[P]laintiffs' argument that the performances . . .
were exempt from the sales taxes at issue is not properly
raised in this action, due to the statute's exclusive
remedy provision ([NYTL] § 1140)."); Davidson
v. Rochester Tel. Corp., 558 N.Y.S.2d 1009, 1011 (3d
Dep't 1990) (holding that claim that collection of sales
tax was "improper, unnecessary, [and] unauthorized by
law" must be "raised in an administrative
proceeding" (internal quotation marks omitted)); see
also Metro Enterp. Corp. v. N.Y. State Dep't of Taxation
and Finance, 2019 WL 1714928, at *2 (3d Dep't Apr.
18, 2019) (citing NYTL § 1140 for proposition that
"a taxpayer challenging a tax assessment must first
exhaust the available administrative remedies prior to
commencing an action").
We see
no reason to decide otherwise in this case. Guterman's
principal argument is that Estler is distinguishable
because in that case the sales tax erroneously collected was
conveyed directly to New York, such that New York was
overpaid and the consumer's natural remedy was a refund
from the New York treasury, while his contention in
this case is that Costco charged the consumer for an
amount of tax that, under the regulations governing
manufacturers' coupons, was due to New York from Costco.
Thus, Guterman argues, New York received only what it was
owed, and the amount collected from the consumer in effect
unjustly enriched Costco, not New York. Even assuming
arguendo that Guterman's interpretation of the
regulations is correct, his argument does not undermine the
fact that § 1140 renders the remedies provided in §
1139 exclusive for claims that a sales tax was collected
"illegally"-exactly what Guterman alleges happened
here-as well as for taxes collected "erroneously."
The plain meaning of the statute governs here, just as it did
in Estler.
Guterman's
other arguments fare no better. His argument that only tax
collectors, and not customers, are "required to file the
refund claim under § 1139," Appellant Br. 33, is
unpersuasive in light of the clear and unambiguous text of
§ 1139(a)(i) that persons who have paid tax "to a
person required to collect tax" may file an application
with the Commission. His appeal to legislative history
likewise does not persuade us. See Riley v. Cty. of
Broome, 95 N.Y.2d 455, 463-64 (2000) (noting that though
legislative history can be relevant when interpreting New
York statutes, "the words of the statute are the best
evidence of the Legislature's intent," and
"[a]s a general rule, unambiguous language of a statute
is alone determinative"). Moreover, § 1140 makes
clear that however § 1139 is interpreted, the
application-and-refund process contained therein is the
exclusive remedy for claims of unlawful collection
of sales tax. See Cruz v. TD Bank, N.A., 22 N.Y.3d
61, 70-71 (2013) (stating that New York courts have
"declined to ...