[*2]Upon the following papers numbered 1 to 6 read on this motion for a default judgment: Proposed Judgment and supporting papers 1-6 ; it is,

ORDERED that pursuant to a stipulation between the parties the proposed ex parte application for a default judgment is withdrawn and the matter is set down for a preliminary conference to be held in the Courtroom of Justice Sgroi, Courtroom S23, John P. Cohalan Courthouse, Central Islip, New York on January 12, 2006 at 9:30 a.m.

The defendants, as the commissioner of an agency and an agency of the State of New York, enjoy the same sovereign immunity as the State of New York when first created ( Trippe v Port of NY Auth., 14 NY2d 119). However, the Legislature has consented to waive sovereign immunity and permit suits against the State and agencies of the State.



Although generally most actions against the State of New York and its agencies are commenced in the Court of Claims, it is proper to commence a declaratory judgment action against an agency of the State and the Commissioner of that agency in the New York Supreme Court for the relief sought herein.

The Plaintiff, Michael A. Castino, Jr., commenced this action against the Commissioner of Taxation and Finance and the New York State Department of Taxation and Finance by service of the summons and complaint on the Attorney General, by delivery to Anthony Gonzalez, alleged in the affidavit of service to be a managing agent and service to D.A. Montqutte, also alleged in the affidavit of service to be a managing agent.

The Plaintiff, Michael Castino, Jr., seeks an order declaring that he is not a responsible officer or employee of Rosinante Corp. liable under New York State law for the payment of sales and use taxes by Rosinante Corp.; declaring the Sales Tax Assessment Notices and Warrant filed by the Defendants against the Plaintiff in the amount of $119,754.67 null and void; vacating the Sales Tax Assessment Notices and Sales Tax Warrant filed against the Plaintiff and enjoining the Defendants from enforcing the Sales Tax Assessment Notices and the Sales Tax Warrant and enjoining the Defendants from taking any further action against the Plaintiff with regard to the obligation of Rosinante Corp. to pay sales and use tax.

In his affidavit in support of this application for a default judgment against the State, the Plaintiff alleges that he is a former shareholder of Rosinante Corp., a New York corporation that was dissolved by proclamation on or about December 27, 2000. Apparently from January 1, 1997 through April 30, 1999, the Corporation engaged in a restaurant business under the name "Pacific East (NYC)" located at 318 West 23rd Street, New York, New York and at that time the Plaintiff was the chef for said restaurant. The New York Tax Law provides that any person required to collect any tax imposed will be personally liable for the tax and that any officer or employee of a corporation who is under a duty to act for the corporation may be personally liable for the tax due but not paid (see, Tax Law §1133).

Tax Law § 1133 provides that every person responsible for the collection of sales and use taxes [*3]imposed by Article 28 of the Tax Law is personally responsible for the payment of such taxes. Thus, a corporate officer or employee responsible for the collection of sales taxes on behalf of the corporation can be compelled personally to pay such taxes if the corporation fails to file tax returns (see, Massa v. New York Tax Com'n, 102 AD2d 968, 477 N.Y.S.2d 838). Pursuant to Tax Law § 1138(a)(3)(B) the Commissioner determines the amount of sales tax owed by a responsible person when the corporation has failed to file a return or pay its taxes. The Department issues a determination to the responsible individual, and the statute provides, "(s)uch determination shall finally and irrevocably fix the tax and liability for the tax with respect to such person unless such person, within ninety days after the giving of notice of such determination, shall apply to the tax commission for a hearing". In addition to the previously discussed administrative and Article 78 remedies, movant had available to him another avenue of judicial review. Many taxpayers attempting to challenge an assessment are confronted with the requirement set forth in Tax Law § 1138(a)(4) that before judicial review can be instituted the amount of the tax sought to be reviewed, with penalties and interest, must first be deposited with the Commissioner of Taxation or in the alternative an undertaking in an amount approved by a Supreme Court Justice must be filed with the Commissioner of Taxation and Finance.



An individual taxpayer confronted with the requirement set forth in Tax Law § 1138(a)(4) that before judicial review can be instituted as to an assessment, the amount of the tax, with penalties and interest, must first be deposited with the Commissioner of Taxation or an undertaking in an amount approved by a Supreme Court Justice be filed with the Commissioner of Taxation and Finance can be faced with an onerous financial burden prior to being able to challenge an unfair levy against him for a corporate obligation. That issue was before the Court in Horner v. State of New York, 125 Misc 2d 1, 478 N.Y.S.2d 467, affd. 107 AD2d 64, 485 N.Y.S.2d 595 (see also, Two Twenty East Limited Partnership v. New York State Dept. of Tax. and Fin., 185 AD2d 202, 586 N.Y.S.2d 596). In Horner v. State of New York, the Court held that the shareholder of the corporation that had failed to file sales tax returns could maintain a declaratory judgment action, without exhausting administrative remedies, challenging the Tax Commission's statutory authority to proceed administratively against the shareholder upon a determination, without notice or hearing, that the shareholder was liable for corporation's unpaid taxes. If the individual shareholder was denied access to the Courts and an adverse administrative determination resulted from the State Tax Commission, the shareholder would not be able to obtain judicial review in an Article 78 proceeding until he had either paid the tax or posted an undertaking. Horner has been cited with approval by the Court of Claims (see, Ouziel v. State, 174 Misc 2d 900, 667 N.Y.S.2d 872).

The Court acknowledges that a corporate officer's personal liability for a corporate taxpayer's unpaid sales and use taxes may not be abated by simply delegating responsibility to pay the taxes to a subordinate in the business (see, Landau v. Tax Appeals Tribunal of State of New York, 214 AD2d 857, 625 N.Y.S.2d 343 leave to appeal denied 86 NY2d 705, 632 N.Y.S.2d 498, 656 N.E.2d 597; NY Jur. 2d Taxation & Assessment §§ 1635, 1795). The issue of whether an employee should be held liable for the State Corporate Tax is driven by the facts of each case and the fact dependent nature of such a determination is recognized by the State regulations for the [*4]Tax Commission. The regulations provide that, "[w]hether an officer or employee of a corporation is a person required to collect, truthfully account for, or pay over the sales or use tax is to be determined in every case on the particular facts involved" (20 NYCRR 526.11[b][2]).

In certain situations the manager of a restaurant has been held liable for the tax owed by a corporation (see, Hall v. Tax Appeals Tribunal of State of New York, 176 AD2d 1006, 574 N.Y.S.2d 862 ) but in that case the manager had

***the authority to hire and fire certain kitchen employees, was authorized to sign business checks, was responsible for controlling inventory and, in that connection, ordered and paid for deliveries of food, wine and small equipment. Further, all sales and use tax returns filed for the period from December 1, 1977 to November 30, 1979 were signed by petitioner, in all but one case setting forth his capacity as vice-president of the corporation. On two different occasions when the restaurant account was frozen, petitioner channeled business funds through his personal checking account and, on other occasions, petitioner paid suppliers out of his own funds and thereafter reimbursed himself from restaurant receipts. (Hall v. Tax Appeals Tribunal of State of New York, supra).