Petroleum Sales & Service Inc. v. Bouchard , 470 N.Y.S.2d 865 ( 1983 )

— Proceeding pursuant to CPLR article 78 (transferred to this court by order of the Supreme Court at Special Term, entered in Albany County) to review a determination of the State Tax Commission which sustained a motor fuel tax assessment imposed pursuant to article 12-A of the Tax Law. Petitioner is a licensed distributor of fuel oil to retail gasoline stations in western New York and also the operator of a single retail truck stop where it sells diesel motor fuel. It filed excise tax returns for its sales in both of these enterprises covering approximately two-year periods each within the years 1973 through 1975. The Department of Taxation and Finance’s audit division conducted a field audit for the pertinent time periods, following which deficiencies were assessed in the sums of $13,248.90 for the diesel fuel tax and $40,367.16 for the motor fuel tax. Petitioner filed for a redetermination with the Tax Commission and, after a hearing, the Tax Commission overruled the audit division regarding any additional diesel fuel tax due, but affirmed the deficiency assessed for the motor fuel tax. Petitioner then commenced the instant proceeding to review the latter determination, alleging that the Tax Commission erred in sustaining the imposition of an additional motor fuel tax based upon a discrepancy over the entire period of more than 300,000 gallons of gasoline between petitioner’s purchases of fuel from refineries and what it reported as its sales. On its tax returns, petitioner had attributed the shortage to fuel lost through spillage, leakage, evaporation and contraction of volume. Pursuant to section 286 of the Tax Law, distributors of motor fuel, such as petitioner, are required, for the purpose of the tax imposed by article 12-A, to “keep a complete and accurate record of all purchases and sales or other dispositions [of motor fuel]”. There is nothing irrational or unreasonable in the Tax Commission’s determination which had the effect of imposing the burden on the taxpayer of establishing its compliance with this statutory requirement by showing that its records indicating losses of in excess of 300,000 gallons of motor fuel were in fact accurate. The only evidence on this issue presented by petitioner was the testimony of one of its officers that losses due to spillage, leakage, evaporation and contraction in volume can occur in the type of business conducted by petitioner. Notably absent, however, is any direct proof of specific leakage, spillage or other actual loss during the period at issue. Also absent is proof from a qualified expert establishing that such losses regularly occur, and there is no evidence that the figures contained in petitioner’s records fall within the range of anticipated loss for the particular activity (see Matter of Allied N. Y. Seros, v Bragalini, 4 AD2d 802). There is nothing irrational or unreasonable in the Tax Commission’s determination which rejected petitioner’s conclusory assertion that the discrepancy between purchases and sales must be attributed to losses, rather than some other taxable dispositions. That the Tax Commission has in the past accepted a 1% loss allowance for evaporation and spillage of gasoline from tanks used by distributors exclusively for bulk storage does not undermine the rationality of the determination herein. As this court held in Matter of Evans v Gallman (48 AD2d 466, mot for lv to app den 37 NY2d 712), there is a rational basis for the distinction drawn by the Tax Commission which results in the recognition of a loss allowance without actual proof of loss for gasoline stored in bulk, but not for gasoline involved in retail trade. Thus, in Evans, as here, the Tax Commission rejected a taxpayer’s claim that it was entitled to a loss allowance for evaporation and spillage of gasoline involved in retail trade despite the absence of actual proof of such loss, and this court confirmed the determination. The same result should obtain here. Determination confirmed, and petition dismissed, without costs. Sweeney, Casey and Weiss, JJ., concur.