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Volume 6 - Opinions of Counsel SBEA No. 62

Opinions of Counsel index

Real property, definition of (car wash equipment) - Real Property Tax Law, § 102(12)(f):

Equipment used in a car wash is used for a “trade” within the meaning of section 102(12)(f) of the Real Property Tax Law, but should not be considered “movable” if not readily or regularly removed but simply replaced at the expiration of its useful life.

We have been asked to reconsider our opinion with respect to the taxable status of car wash equipment (see, 2 Op.Counsel SBEA No. 94), in light of the 1976 decision of Justice Gibson in Matter of West Mountain Corp. v. Miner, 85 Misc.2d 416, 381 N.Y.S.2d 606. The equipment is owned by a corporation subject to taxation under Article 9-A of the Tax Law and, as a result, may be entitled to the exemption from taxation provided by section 102, subdivision 12, paragraph (f) of the Real Property Tax Law. The owner has also suggested that other property used in connection with this equipment for the distribution of heat, light, power and the like is also entitled to exempt status.

Subdivision 12 of section 102 defines “real property” for purposes of the Real Property Tax Law. Paragraph (f) thereof, in part, excludes the following from the definition:

movable machinery or equipment consisting of structures or erections to the operation of which machinery is essential, owned by a corporation taxable under article nine-a of the tax law, used for trade or manufacture and not essential for the support of the building, structure or superstructure, and removable without material injury thereto.

Although this statutory language is couched in terms of an exclusion from the definition of real property (i.e., a classification of the equipment as personal property), the Court of Appeals has held the language to be an exemption from real property taxation and therefore subject to the attendant rules of strict construction applicable to all exemption statutes (see, City of Lackawanna v. State Board of Equalization and Assessment, 16 N.Y.2d 222, 212 N.E.2d 42, 264 N.Y.S.2d 528).

The central questions presented by the facts before us are whether the equipment is used for trade or manufacture and whether, if so, it is movable.

Prior to Justice Gibson’s decision in the West Mountain Corp. case (supra), it had been our opinion that the exemption provisions of section 102(12)(f) were limited by the language “used for trade or manufacture. . . .” That is, we tad construed the word “trade” to mean only the buying and selling of a tangible product (see, e.g., 4 Op.Counsel SBEA No. 74). Therefore, if property was used in the furnishing of a service (such as machinery of a car wash business), we had advised assessors that an exemption for movable equipment was not available as it was not used in a “trade” within our interpretation of section 102(12)(f).

However, in the West Mountain Corp. decision. Justice Gibson, after an extensive review of the legislative development of section 102(12)(f) and its predecessor statutes, held that the term “trade” was intended to have a far less restrictive meaning. In support, he cited such broad definitions of the word as a “business of any kind,” and “any occupation or employment pursued as a calling” (381 N.Y.S.2d at 609). In conclusion, he held that the operation of a ski lift was a business, and that the ski lift equipment was “used for trade” within the meaning of section 102(12)(f).

The analysis and rationale of Justice Gibson’s decision relative to the meaning of the word “trade” is fully persuasive. Therefore, to the extent that previous opinions indicate that machinery and equipment used in the furnishing of a service could not be considered as used in a “trade” under section 102(12)(f) they should no longer be considered controlling (see, 4 Op.Counsel SBEA No. 74; see also, 1 id. 69). With respect to the facts at hand, we conclude that car wash equipment is used for a trade within the meaning of section 102(12)(f). The remaining issue is whether the property is movable.

The determination of whether a particular item should be considered “movable” is primarily one of economic feasibility. That is, does the cost of disassembly and reassembly elsewhere make the movement of the property so expensive that it would make more business sense to install new equipment at the new site rather than to transport the old? This test was suggested by the Court of Appeals in the City of Lackawanna case (supra) and is still cited today (see, e.g., Roberts v. Assessment Board of Review of the Town of New Windsor, 84 Misc.2d 1017, 375 N.Y.S.2d 988).

The best evidence of a claim of movability would be a showing that this equipment or equipment of a similar nature has been or is regularly moved from place to place. In the Roberts case, supra, for example, the court found significant to the issue of “movability,” the fact that the type of equipment in question (a particular kind of swimming pool) had, in fact, been moved on a lumber of occasions in the past.

The owner of the car wash equipment has stated that it has been his experience with three other car wash facilities that “virtually all of this equipment must be replaced every 5-6 years.” This suggests to us that this type of equipment is neither readily nor regularly removed but rather is installed in one location on a continuous basis and simply replaced once its useful life has expired. Therefore, we conclude that the owner’s statement just cited is not supportive of his claim that the property is “movable” within the meaning of section 102(12)(f).

Finally, it is our opinion that, contrary to the owner’s claim, there is no “grey area” regarding that part of section 102(12)(f), which defines as real property “equipment for the distribution of heat, light, power, and gases and liquids.” That equipment is taxable real property regardless of the classification or taxable status of other property or equipment with which it is used. Such equipment was clearly defined as taxable real property prior to the recodification of the Real Property Tax Law (L. 1958, c.959) in former section 3 of the Tax Law, and the Legislature (Real Property Tax Law, § 2002(5)) and the courts (see, City of Lackawanna case, supra) have unequivocally declared that no change in the provisions of former section 3 was intended by the recodification.

February 10, 1978