Expedia, Inc., et al., Respondents, Priceline.com Incorporated, et al., Plaintiffs,v.The City of New York Department of Finance, et al., Appellants.BriefN.Y.October 9, 2013To Be Argued By: TODD R. GEREMIA Time Requested: 15 Minutes Supreme Court, New York County Index No. 650761/2009 Court of Appeals STATE OF NEW YORK EXPEDIA, INC., HOTELS.COM, L.P., HOTWIRE, INC., ORBITZ, LLC, TRIP NETWORK, INC. (D/B/A CHEAPTICKETS.COM), TRAVELOCITY.COM L.P., PRICELINE.COM INCORPORATED, AMERICAN SOCIETY OF TRAVEL AGENTS, INC., and UNITED STATES TOUR OPERATORS ASSOCIATION, Plaintiffs-Respondents, —and— PRICELINE.COM INCORPORATION and UNITED STATES TOUR OPERATORS ASSOCIATION, Plaintiffs, —against— THE CITY OF NEW YORK DEPARTMENT OF FINANCE and THE CITY OF NEW YORK, Defendants-Appellants RESPONDENTS’ BRIEF d ROBERT W. GAFFEY TODD R. GEREMIA JONES DAY 222 East 41st Street New York, New York 10017 Telephone: (212) 326-3939 Facsimile: (212) 755-7306 rwgaffey@jonesday.com trgeremia@JonesDay.com Attorneys for Plaintiffs-Respondents Expedia, Inc., Hotels.Com, L.P., and Hotwire, Inc. (Counsel continued on inside cover) March 29, 2013 LINDSAY M. LACAVA MCDERMOTT WILL & EMERY LLP 340 Madison Avenue New York, New York 10173 Telephone: (212) 547-5400 Facsimile: (212) 547-5444 llacava@mwe.com Attorneys for Plaintiffs-Respondents Orbitz, LLC and Trip Network, Inc. (d/b/a Cheaptickets.com) JOSEPH G. TULLY ALSTON & BIRD LLP 90 Park Avenue New York, New York 10016 Telephone: (212) 210-9400 Facsimile: (212) 210-9444 joe.tully@alston.com Attorneys for Plaintiff-Respondent Travelocity.com LP THOMAS P. LYNCH JENNIFER CHAVEZ LYNCH ROWIN, LLP 630 Third Avenue New York, New York 10017 Telephone: (212) 682-4001 Facsimile: (212) 682-4003 tlynch@lynchrowin.com Attorneys for Plaintiff-Respondent American Society of Travel Agents, Inc. DISCLOSURE STATEMENT Pursuant to 22 N.Y.C.R.R. § 500.1(f), Plaintiffs-Respondents make the following disclosures. For Plaintiffs-Respondents Expedia, Inc., Hotels.Com, L.P., and Hotwire, Inc.: Expedia, Inc. the Delaware corporation (“Expedia DE”) is a publicly traded corporation with no parent corporation. Liberty Interactive Corporation, a publicly traded company, indirectly holds 10% or more of Expedia DE common stock. Expedia, Inc. the Washington corporation (“Expedia WA”) is a wholly-owned subsidiary of Expedia DE. Hotels.com, L.P. is a Texas limited partnership. Hotels.com GP, LLC, a Texas limited liability company, and HRN 99 Holdings, LLC, a New York limited liability company, are the General and Limited Partner, respectively, of Hotels.com, L.P. Both Hotels.com GP, LLC and HRN 99 Holdings, LLC are wholly-owned subsidiaries of Expedia WA. Expedia WA is a wholly-owned subsidiary of Expedia DE. Hotwire, Inc., a Delaware corporation, is a wholly-owned subsidiary of Expedia WA. Expedia WA is a wholly-owned subsidiary of Expedia DE. Travelscape, LLC, a Nevada limited liability company, is a wholly- owned subsidiary of Expedia WA. Expedia WA is a wholly-owned subsidiary of Expedia DE. For Plaintiff-Respondent Travelocity.com LP: Travelocity.com LLC owns ten percent of Travelocity.com LP as its general partner and eighty-nine percent of Travelocity.com LP as its limited partner. ii Travelocity Holdings I, LLC owns one percent of Travelocity.com LP as its limited partner. Travelocity Holdings I, LLC is a wholly-owned subsidiary of Travelocity.com LLC. Travelocity.com LLC is a wholly-owned subsidiary of Travelocity Holdings, Inc., which, in turn, is wholly-owned by Sabre Inc. Sabre Inc. is a wholly owned subsidiary of Sabre Holdings Corporation which, in turn, is wholly-owned by Sovereign Holdings, Inc. Sovereign Holdings, Inc. is a privately held corporation that is owned by Silver Lake Partners and TPG Capital. Plaintiffs-Respondents Orbitz, LLC and Trip Network, Inc. (d/b/a Cheaptickets.com) have the following parents, subsidiaries, or affiliates: Cheap Tickets Limited, ebookers Limited, ebookers.com Deutschland GmbH, ebookers.com SA, ebookers.ie Ltd, ebookers.nl BV, ebookers Scandinavia AB, Fairview Travel Hotel Club S.L., Fairview Travel Limited, Flightbookers Limited, Global Travel Online, S.L. Unipersonal, Hotelclub Limited, HotelClub Pty Limited, Insurancebookers Limited, Internetwork Publishing Corporation, La Compagnie Des Voyages SAS, Mr Jet Oy (Finland), Neat Group Corporation, O Holdings Inc., Orbitz Away LLC, Orbitz Financial Corp., Orbitz for Business, Inc., Orbitz India Services Private Limited, Orbitz, Inc., Orbitz (Israel) Ltd., Orbitz. LLC, Orbitz Mexico Services, S. de R.L. de C.V., Orbitz Travel Insurance Services, LLC, Orbitz Worldwide, LLC, Orbitz Worldwide Finance Company, LLC, Orbitz Worldwide (UK) Limited, OWW Fulfillment Services, Inc., Oy ebookers Finland Ltd, Terren Corporation, Travel Acquisition Corporation Pty Limited, Trip Network, Inc. Plaintiff-Respondent American Society of Travel Agents, Inc. has no parents, subsidiaries, or affiliates. TABLE OF CONTENTS iii DISCLOSURE STATEMENT .................................................................................. i TABLE OF AUTHORITIES .................................................................................... v INTRODUCTION .................................................................................................... 1 QUESTIONS PRESENTED ..................................................................................... 5 STATEMENT OF THE CASE ................................................................................. 6 A. The Enabling Legislation for the Occupancy Tax ..................... 6 B. The Occupancy Tax and Local Law 43’s Expansion of It ........ 8 C. The Legislature’s Decisions About Expanding the Occupancy Tax ........................................................................ 11 D. The Parallel Application by the City and the State of the Occupancy Tax and the Hotel Sales Tax ................................. 13 E. The Complaint, the City’s Motion to Dismiss, and the Lower Court’s Order ................................................................ 16 F. The Appellate Division’s Order ............................................... 19 G. The City’s Motion for Leave to Appeal and Appeal as of Right ......................................................................................... 20 ARGUMENT .......................................................................................................... 21 I. LOCAL LAW 43 IS NOT AUTHORIZED BY THE ENABLING LEGISLATION ............................................................ 22 A. The Enabling Legislation Does Not Authorize the City to Tax a Third-Party Intermediary’s Fees as “Rent” ................... 23 B. The Enabling Legislation Also Does Not Authorize the City to Hold a Non-Hotel Operator Liable for the Occupancy Tax ........................................................................ 33 II. THE LEGISLATURE’S ENACTMENT OF, AND PRIOR FAILURE TO ENACT, A NEW HOTEL ROOM OCCUPANCY TAX SHOWS THE CITY LACKED AUTHORITY TO ENACT LOCAL LAW 43 .................................. 36 A. The Legislature’s Conduct Underscores the City’s Lack of Authority to Enact Local Law 43 ........................................ 37 B. The City’s Attempts to Cabin the Legislative History Here Fail ................................................................................... 39 TABLE OF CONTENTS (continued) Page - iv - III. FOUR DECADES OF PAST PRACTICE FURTHER SHOWS THE CITY DID NOT HAVE AUTHORITY TO ENACT LOCAL LAW 43 ................................................................................ 43 A. “Rent” in the Occupancy Tax Should Be Construed In Pari Materia With the Same Term in the Related Sales Tax ............................................................................................ 44 B. For Forty Years, Only a Hotel “Operator” Was Subject to the Hotel Occupancy and Sales Taxes ..................................... 48 C. The City’s Remaining Arguments For Disregarding This Long-Standing Practice Are Not Persuasive ........................... 50 CONCLUSION ....................................................................................................... 53 - v - TABLE OF AUTHORITIES Page CASES Am. Locker Co. v. City of New York, 308 N.Y. 264 (1955) ............................................................................... 23, 25, 30 BLF Realty Holding Corp. v. Kasher, 299 A.D.2d 87 (1st Dep’t 2002) ......................................................................... 45 Brooklyn Union Gas Co. v. McGoldrick, 270 A.D. 186 (1st Dep’t 1945) ..................................................................... 22, 31 Carey Transp., Inc. v. Perrotta, 34 A.D.2d 147 (1st Dep’t 1970) ................................................................... 22, 25 Castle Oil Corp. v. City of New York, 89 N.Y.2d 334 (1996) ............................................................................. 21, 23, 25 City of New York v. Bernstein, 84 N.Y.S.2d (Sup. Ct. Queens Cty. 1948) .......................................................... 31 City of New York v. State, 282 A.D.2d 134 (1st Dep’t 2001) ................................................................. 44, 52 Compass Adjusters & Investigators Inc. v. Comm’r of Taxation & Fin., 197 A.D.2d 38 (3d Dep’t. 1994) ......................................................................... 23 Debevoise & Plimpton v. New York State Dep’t of Taxation & Fin., 80 N.Y.2d 657 (1993) ..................................................................................passim DiBattista v. McDonough, 80 A.D.3d 936 (3d Dep’t 2011) .......................................................................... 46 Good Humor Corp. v. McGoldrick, 289 N.Y. 452 (1943) ......................................................................... 22, 25, 27, 43 Grimmer v. Tenement House Dep’t of the City of N.Y., 205 N.Y.549 (1912) ............................................................................................ 44 vi Kennedy v. Kennedy, 195 A.D.2d 229 (4th Dep’t 1994) ....................................................................... 48 Nat’l Org. for Women v. Metro. Life Ins. Co., 131 A.D.2d 356 (1st Dep’t 1987) ....................................................................... 43 Nostrom v. A.W. Chesterton Co., 15 N.Y.3d 502 (2010) ................................................................................... 37, 40 People v. Cook, 34 N.Y.2d 100 (1974) ................................................................................... 32, 33 People v. Pagan, 76 A.D.3d 414 (1st Dep’t 2010) ......................................................................... 45 People v. Rice, 44 A.D.3d 247 (1st Dep’t 2007) ......................................................................... 37 Plato’s Cave Corp. v. State Liquor Auth., 68 N.Y.2d 791 (1986) ......................................................................................... 45 Roberts v. Tischman Speyer Properties, L.P., 12 N.Y.3d 270 (2009) ......................................................................................... 42 Samiento v. World Yacht Inc., 10 N.Y.3d 70 (2008) ..................................................................................... 29, 30 Siemens Corp. v. Tax Appeals Tribunal, 217 A.D.2d 247 (3d Dep’t 1996) ........................................................................ 46 Soc’y of Plastics Indus., Inc. v. City of New York, 326 N.Y.S.2d 788 (Sup. Ct. N.Y. Cty. 1971) ......................................... 22, 25, 32 U.S. Steel Corp. v. Gerosa, 7 N.Y.2d 454 (1960) ....................................................................................passim Waste-Stream Inc. v. St. Lawrence Cty. Solid Waste Disposal Auth., 167 Misc. 2d 542 (Sup. Ct. Lawrence Cty. 1995) .............................................. 42 STATE CONSTITUTION, STATUTES, AND RULES N.Y. Const. Article IX § 2(a)(b)(1) ......................................................................... 39 vii N.Y. Const. Article IX, § 2(c)(8) ............................................................................... 3 N.Y. Const. Article XVI, § 1 ......................................................................... 3, 17, 25 CPLR § 3001 ............................................................................................................ 16 CPLR 3211(a)(7) ...................................................................................................... 17 CPLR 5601(b)(1) ..................................................................................................... 21 N.Y. Tax Law § 1101(e)(6) ..................................................................................... 46 N.Y. Tax Law § 1105(e)(1) ..............................................................................passim N.Y.C. Admin. Code § 11-2501 .................................................................. 28, 30, 26 OTHER AUTHORITIES BLACK’S LAW DICTIONARY 1322 (8th ed. 2004) ............................................... 24, 29 INTRODUCTION This appeal arises from the City’s attempt to expand a municipal tax beyond the scope of the State enabling legislation that limits the City’s taxing power. It presents a narrow issue, confined to whether the City had the legal authority to expand its hotel room occupancy tax to include fees for services and facilitating reservations (collectively, “service fees”) earned by online travel companies such as Expedia and Travelocity. The issue concerns only a one-year period from September 1, 2009, when the City enacted an ordinance to expand the scope of its taxing authority, until September 1, 2010, the effective date of a legislative enactment that gave the City authority to tax certain service fees for the first time. In its November 29, 2011 decision, the Appellate Division, First Department, applied this Court’s “well-established rule” that “a statute that levies a tax ‘must be narrowly construed’ and ‘any doubts concerning its scope and application are to be resolved in favor of the taxpayer.’” (R.362, quoting Debevoise & Plimpton v. New York State Dep’t of Taxation & Fin., 80 N.Y.2d 657, 661 (1993)). The City’s brief fails even to mention this controlling principle, but the Appellate Division faithfully applied it and held that the enabling legislation authorized the City to impose an occupancy tax only on the basis of the “rent or charge per day for each hotel room” (R.362), and that the City’s authority “may not be extended” to “encompass the service fees charged by [] travel 2 intermediaries” in the manner the City attempted. (R.363). That ruling was correct and should be affirmed. Before the State enacted the 2010 legislation that directly amended the City’s occupancy tax, the City was authorized in pertinent part only to (i) impose a 6% tax on the “rent or charge for [the] hotel room,” and (ii) hold liable for the collection and payment of this occupancy tax the “owner or person entitled to be paid the rent or charge.” (See R.118-19, N.Y. Unconsol. Laws Ch. 288-C, §§ 1(1- a), (3) (the “Enabling Legislation”)). For nearly four decades, the City imposed the occupancy tax, in accordance with the Enabling Legislation, only on the basis of the “rent” for the hotel room, defined by the City’s Administrative Code as “consideration received for occupancy valued in money” and held only the hotel owner or “operator” responsible for collecting and remitting the tax. (R.121). The State’s parallel hotel sales tax has also been consistently applied in tandem with the City’s hotel occupancy tax, and, before the City departed from the Enabling Legislation with Local Law 43 for the one-year period at issue, the key terms “rent” and “operator” were applied in such a way that neither the City nor the State had or claimed the authority to tax a third-party intermediary’s fee. In June 2009, however, the City Council tried to unlawfully expand its powers. It enacted Local Law 43, which purported to tax not only the rent or charge for a hotel room, but also service fees earned by online travel companies. 3 (R.105-17). These service fees are not “rent or charge . . . for [the] room” within the express limits of the Enabling Legislation; they are fees for the online service of helping travelers find a suitable hotel and facilitating their reservations with the hotel. Moreover, although the Enabling Legislation permitted the City to require only the “owner or person entitled to be paid the rent or charge” to collect the tax, Local Law 43 imposed an obligation on a whole new category of persons—defined as “room remarketers”—to collect a tax. (R.106). In expanding the occupancy tax in these two ways, the City acted outside the scope of its taxing authority. The New York State Constitution lodges the exclusive power of taxation in the Legislature. See N.Y. Const. art XVI, § 1. Municipalities have no inherent taxing power, but only that which is expressly delegated to them by the State. See N.Y. Const. art IX, § 2(c)(8) & art XVI, § 1. The City contends that the Enabling Legislation gave it a “wide berth” to exercise “the furthest reaches of the power to tax.” (City Br. at 9, 15). But it relies on an inapposite provision in the Enabling Legislation that applies to a flat tax not at issue on this appeal. Moreover, the City elsewhere in its brief properly concedes that its authority is limited by “general boundaries” to impose the occupancy tax only on the “rent or charge per day for each [] room” and require only the “owner or person entitled to be paid the rent or charge” to collect and remit the tax. (City Br. at 6-7, emphasis added). With Local Law 43, the City exceeded these 4 legislatively drawn boundaries by imposing a new tax on fees for assisting a consumer in finding a hotel and making a reservation, which are not rent or charge “for the room,” and requiring third-party intermediaries to remit and collect this tax. The legislative context surrounding the enactment of Local Law 43 highlights the City’s lack of authority. In 2007, the Legislature actually considered and rejected a proposal that would have given the City the requisite authority to tax online travel companies’ service fees. Two years later, the City attempted to arrogate such authority to itself by enacting Local Law 43. But it was not until September 2010 that the Legislature conferred upon the City the authority it had previously lacked to tax service fees as part of the occupancy tax. This is not mere “legislative inactivity,” at the City contends (City Br. at 34), but shows that the Legislature understood that, in 2007, the City did not have the authority to tax a third-party intermediary’s service fees. As the Appellate Division correctly observed: “To extend the tax to cover these fees requires action by the State Legislature, such as that taken in 2010.” (R.363). In sum, the Appellate Division properly held that, before the Legislature expanded the scope of the City’s hotel room occupancy tax in 2010, the City lacked the authority to tax a travel intermediary’s service fees. That Order should be affirmed. 5 QUESTIONS PRESENTED If the Court answers any of the following three questions in the affirmative, the Appellate Division’s Order should be affirmed: 1. Under the rules requiring strict construction of taxation statutes and that any doubt be resolved against imposing a tax, did the Appellate Division properly rule that the City lacked authority to impose an “occupancy tax” on a third-party intermediary’s service fees prior to the Legislature’s 2010 enactment of specific legislation conferring such authority, because either (a) these service fees should not be deemed “rent or charge . . . for [the] room” under the express terms of the applicable Enabling Legislation; or (b) a third-party intermediary does not fit within the express scope of “the owner of the hotel room occupied or [] the person entitled to be paid the rent or charge” under the Enabling Legislation? 2. Does the Legislature’s decision not to enact proposed legislation in 2007 that would have given the City express authority to tax a third-party intermediary’s fees and the Legislature’s subsequent enactment in 2010 conferring such express authority show that there was, at a bare minimum, some doubt in 2009 as to whether the City had the authority to enact Local Law 43, which purported to levy a tax on a third-party intermediary’s service fees? 3. For four decades prior to the City’s enactment of Local Law 43, the City and State had construed and applied the related hotel sales and occupancy 6 taxes in parallel and in a manner that did not allow for taxation of a third-party intermediary’s service fees. Does this prior practice show that there was, at a bare minimum, some doubt as to whether the City acted within the scope of its express authority when, before the Legislature enacted legislation to amend the City’s code, the City arrogated to itself the power to tax a third-party intermediary’s service fees under the guise of a “hotel room occupancy tax”? STATEMENT OF THE CASE A. The Enabling Legislation for the Occupancy Tax The State first gave the City limited authority to impose a hotel occupancy tax in June 1, 1970. (R.120). The Legislature has authorized the City to impose a “tax on persons occupying hotel rooms” at a “rate up to six percent of the rent or charge per day for each such room.” (R.118, § 1(1-a)). This Enabling Legislation further authorizes the City to impose liability for the collection and payment of the occupancy tax on only “the owner of the hotel room occupied or [on] the person entitled to be paid the rent or charge for the hotel room occupied.” (R.119, § 1(3)).1 1 The Enabling Legislation states in pertinent part: (1-a) In addition to the tax imposed at the rates authorized in either paragraph (a) or (b) of subdivision one of this section, any local law imposing such tax may impose an additional tax on persons occupying hotel rooms in such city as provided for in such subdivision 7 Under the authority of the Enabling Legislation, the City enacted its occupancy tax in 1970. (R.120). For nearly four decades thereafter, this tax was imposed on “every occupancy of each room in a hotel in the city of New York” based on only the “rent or charge” per day for the room. (R.107). The Enabling Legislation was amended on several occasions, including in 1980, 1986, 1990, 1992, and 1998. (R.120). Each time, the City revised its Administrative Code, but none of those amendments purported to alter the scope of the City’s authority to (continued…) one at a rate up to six percent of the rent or charge per day for each such room. * * * (3) Such local laws may provide that any tax imposed shall be paid by the person liable therefor to the owner of the hotel room occupied or to the person entitled to be paid the rent or charge for the hotel room occupied for and on account of the city imposing the tax and that such owner or person entitled to be paid the rent or charge shall be liable for the collection and payment of the tax; and that such owner or person entitled to be paid the rent or charge shall have the same right in respect to collecting the tax from the person occupying the hotel room, or in respect to non-payment of the tax by the person occupying the hotel room, as if the tax were a part of the rent or charge and payable at the same time as the rent or charge; provided, however, that the finance administrator or other fiscal officers of such city, specified in such local law, shall be joined as a party in any action or proceeding brought to collect the tax by the owner or by the person entitled to be paid the rent or charge. (R.118-19). 8 impose the occupancy tax only “on persons occupying hotel rooms” and on the basis of only the “rent or charge per day for each such room.” (R.118). Nor did any of these amendments purport to enlarge the scope of the persons who could be required to collect and pay the tax beyond the “owner or person entitled to be paid the rent or charge” for the hotel room, as expressly authorized by the Enabling Legislation. (R.118). B. The Occupancy Tax and Local Law 43’s Expansion of It Before the City Council introduced Local Law 43, the occupancy tax was set at the rate of five percent of the “rent or charge per day for [a] room.” (R.123). “Rent” was defined, as it had been since 1970, as “[t]he consideration received for occupancy valued in money, whether received in money or otherwise, including all receipts, cash, credits, and property or services of any kind or nature.” (R.122). And the tax was required to be collected and remitted only by a hotel “operator,” defined in pertinent part as “[a]ny person operating a hotel in the city of New York.” (R.121). Under this regime, the City did not tax any of Plaintiffs’ service fees or require Plaintiffs to collect and remit the occupancy tax. Plaintiffs are online travel companies and other third-party intermediaries who do not own, operate, or manage hotel rooms, or confer any rights to occupy any hotel rooms. (R.85-87). 9 Plaintiffs are intermediaries who facilitate travel reservations for consumers and provide them with online trip-planning services. (R.83-86). The City’s stated purpose in introducing Local Law 43 was to impose a tax on the “mark-up or charges” that an “online travel company . . . imposes on the customer.” (R.258-59). The City Council did not even mention the Enabling Legislation, let alone try to articulate a principled basis in the Enabling Legislation for the expansion effected by Local Law 43. Instead, the City laid bare that its expansion of the tax was really just raw fundraising, citing “the financial stress under which the City [was] currently operating” and stating that “the need for this legislation [was] pressing given the trend towards the greater use of online travel companies.” (R.259). Local Law 43, approved by the full City Council on June 19, 2009, departed from the City’s forty-year history with the occupancy tax and the Enabling Legislation in two principal ways that are at issue on this appeal. First, the City unilaterally redefined the term “rent” in a manner contrary to its plain meaning, common understanding, and four decades of custom and practice— by both the City in administering the hotel room occupancy tax and also the State in administering the closely related hotel sales tax. Specifically, Local Law 43 imposed the occupancy tax on an entirely new category of charges by artificially expanding the definition of “rent” to include “any service and/or 10 booking fees that are a condition of occupancy.” (R.105). The City further chopped up “rent” into what the City called, with no basis in the Enabling Legislation, (i) “net rent,” defined as the “rent received by an operator from the remarketer” (R.106), i.e., the actual rent for the room that was historically subject to the occupancy tax; and (ii) “additional rent,” defined as the “excess of the rent received from an occupant by a room remarketer over the net rent.” (Id.) Second, the City unilaterally expanded the category of persons responsible for collecting and remitting the tax. The Enabling Legislation authorized the City to impose liability to collect and pay the occupancy tax on only “the owner of the hotel room occupied or person entitled to be paid the rent or charge.” (R.119 § 1(3)). Local Law 43, however, imposed an obligation to collect on an entirely new class of persons, so-called “room remarketers.” (R.106-07 §§ 2.12, 3). Contrary to more than forty years of prior practice, Local Law 43 defined this new term to include online travel companies and to expressly exclude hotel operators. (R.106 § 2.12). A “room remarketer” under Local Law 43 was [a]ny person, excluding the operator, having any right, access, ability or authority, through an internet transaction or any other means whatsoever, to offer, reserve, book, arrange for, remarket, distribute, broker, resell, or facilitate the transfer of rooms the occupancy of which is subject to tax under this chapter. (R.106 § 2.12). Under the City’s new law, the hotel “operator” remained responsible for collecting and paying the tax on the basis of the real rent, i.e., the 11 “net rent.” But the newly defined “room remarketer” was made responsible for collecting and remitting an occupancy tax on the artificial concept of the “additional rent.” (R.106 § 2.14). Local Law 43, as enacted by the City Council, was effective as of September 1, 2009 and remained in place until August 31, 2010, when, as discussed in more detail below, the Legislature exercised its constitutional authority to enact provisions of the City’s Administrative Code. C. The Legislature’s Decisions About Expanding the Occupancy Tax The Legislature has not been silent with respect to the City’s authority to impose an occupancy tax on an online travel company’s service fees. Before the City enacted Local Law 43, the Legislature already had considered and rejected a 2007 budget proposal that would have amended the State sales tax on hotel rooms to “require travel companies that rent hotel rooms online or by telephone to collect the sales tax on the markups and service fees charged to customers,” and also would have effectuated parallel changes to the City’s authority to levy an occupancy tax. (R.155). In August 2010, the Legislature reversed course and effected a change to the Tax Law, similar to the one it had rejected in 2007, that was intended to “put room remarketers on the same footing as hotel operators” for purposes of both the State hotel sales tax and the City’s hotel room occupancy tax. (R.348). In this 2010 12 legislation, the State invoked its constitutional authority to amend the City’s Administrative Code and repealed several provisions of Local Law 43, including the definitions of the terms “net rent” and “additional rent,” which were the underpinnings for the City’s unauthorized effort to impose an occupancy tax on online travel companies’ fees. (R.348-52). For the first time, the Legislature redefined “rent,” in a way the Enabling Legislation does not, to authorize the imposition of an occupancy tax on the basis of not only the “consideration received for occupancy,” but also on the basis of “any service or other charge or amount required to be paid as a condition for occupancy.” (R.350, § 6.7). The Legislature also, and again for the first time, gave the City the authority to impose the occupancy tax on a “room remarketer,” although the Legislature repealed the City’s definition of that term in its entirety and defined it to as [a] person who reserves, arranges for, conveys, or furnishes occupancy, whether directly or indirectly, to an occupant for rent in an amount determined by such room remarketer, directly or indirectly, whether pursuant to a written or other agreement. (R.350, § 6.12). The State’s legislation authorizing an expansion of the hotel room occupancy tax did not take effect until September 1, 2010. (R.352, § 12). Before that date, the City lacked express legislative authority to impose a tax on a room 13 remarketer’s fees. The City’s appeal is therefore limited in temporal scope to the one-year period that Local Law 43 was in effect, i.e., from September 1, 2009, through August 31, 2010. D. The Parallel Application by the City and the State of the Occupancy Tax and the Hotel Sales Tax Through the same 2010 legislation that expanded the City’s authority to levy the occupancy tax, the State also expanded the scope of the sales tax on hotel occupancy in a parallel manner. This was no coincidence. It was part of a consistent practice of applying in tandem these two closely related taxes that treat the same subject—hotel occupancy. Section 1105(e)(1) of the Tax Law authorizes the State to impose a sales tax on “[t]he rent for every occupancy of a room or rooms in a hotel in this state.” N.Y. Tax Law § 1105(e)(1). In revising both the sales tax and the occupancy tax with the recent 2010 legislation, the Legislature defined the terms “occupancy,” “occupant,” “operator,” and “rent” to be nearly identical under both the hotel sales tax and the occupancy tax. (R.348). Pursuant to the 2010 legislation, both the State and the City are now authorized to impose, respectively, a sales tax and an occupancy tax on the service fees earned by a “room remarketer,” as defined by the 2010 legislation. (R.348, 350). No such authority had existed before September 2010, as the City and State themselves showed by their administration of these taxation schemes. Before the 14 City attempted to unilaterally expand its taxing power through Local Law 43, both the City and the State had defined rent as “[t]he consideration received for occupancy valued in money, whether received in money or otherwise.” (R.169). See also R.121 (before enactment of Local Law 43 “[r]ent” was “[t]he consideration received for occupancy valued in money, whether received in money or otherwise, including all receipts, cash, credits, and property or services of any kind or nature”). Similarly, except for that same one-year period when Local Law 43 was in effect, the only person who could be held liable for collecting the occupancy tax and the sales tax was the hotel “operator,” and both taxation schemes provided similar definitions of this term. (R.169, “Operator” is “[a]ny person operating a hotel.”); (R.121, “Operator” is “[a]ny person operating a hotel in the city of New York, including but not limited to, the owner or proprietor of such premises, lessee, sublessee, mortgagee in possession, licensee or any other person otherwise operating such hotel.”). The State and City also had previously issued express guidance unambiguously acknowledging that, before September 2010, they did not have the authority to tax a third-party intermediary’s service fees. In March 2008, the State Department of Taxation and Finance issued a “Guide to Sales Tax for Hotel and Motel Operators” that set forth the State’s position at that time, namely, that travel agents and other third-party travel intermediaries could not be held liable for the 15 collection of the State hotel sales tax. (See R.212). In that public announcement, the State made crystal clear that a hotel “operator” on whom a tax may be imposed did not include “[t]ravel agents or travel agent companies, or persons or companies that provide information and resources that are intended to replace the services provided by traditional travel agents. . . . This is typically because such persons or entities do not maintain any buildings or portions thereof for the lodging of guests.” (Id.) The City responded to the State’s public guidance with a memorandum of its own to hotel operators because, according to the City, “it is important that we clarify the taxable status of the various types of rentals of room in the same way that New York State has done for sales tax.” (R.271). Among other things, the City made clear in its guidance that “[t]he hotel operator must collect Hotel Tax,” i.e., the occupancy tax, and that an “operator is any person operating a hotel in the City of New York,” a definition that did not include a third-party intermediary. (R.274, 273). Moreover, although the City highlighted the handful of instances where its guidance differed from that provided by the State with respect to the sales tax (R.273), the City did not disagree in any way with the State’s view that travel agents and other third-party intermediaries are not taxable as hotel “operators.” 16 Just as the State did in its guidance, the City further acknowledged that “rent” for purposes of the occupancy tax was only “the consideration for occupancy of a room or rooms in a hotel, valued in money or otherwise.” (R.274). “Rent,” as the City stated in its guidance that was nearly verbatim to the State’s guidance, included charges for services that “accompany the use or possession of a room,” such as “maid service” and “towel and linen service” which are provided in the room. (Id.) But, importantly, “rent” did not include fees for things like parking and transportation and other services that do not “accompany the occupancy of a room” and (like reservation facilitation services) are provided outside the room. (Id.) A table of taxable charges in the City’s memorandum underscored this distinction. For example, the City stated that charges for storing valuables in a safe were deemed taxable as “rent for occupancy” only if the safe is “located within the room,” but “[n]ot taxable if [the] safe [is] located elsewhere in hotel, such as behind front desk.” (R.286). The City also did not list as taxable any fees for services that, like Plaintiffs’, are not customarily provided in a hotel. (R.285-87). E. The Complaint, the City’s Motion to Dismiss, and the Lower Court’s Order On December 21, 2009, Plaintiffs challenged Local Law 43 in a two-count declaratory judgment action pursuant to CPLR § 3001 in the Supreme Court, New York County, naming the New York City Department of Finance and the City of New York as defendants. Count One challenged the City’s authority to enforce 17 Local Law 43 on the basis that this ordinance violated Article XVI, § 1 of the New York State Constitution, because the City had imposed an occupancy tax that exceeded the scope of its authority under the applicable Enabling Legislation. Count Two alleged that, even assuming the City had the authority to enact Local Law 43, the occupancy tax as amended did not apply to Plaintiffs. (R.72-104). On February 26, 2010, the City moved for an order pursuant to CPLR 3211(a)(7) dismissing Count One. (R.175). The City argued that the constitutionality of Local Law 43 should be decided based solely on the plain language of the Enabling Legislation and Local Law 43 as it then existed, without any reference to the City’s history in administering the occupancy tax, the State’s history in administering the parallel sales tax, or the Legislature’s history in attempting to modify the scope of the City’s authority. The City made painstaking efforts to avoid that, prior to the enactment of Local Law 43, the City had for decades interpreted and exercised its authority to impose the occupancy tax in essentially the same fashion that the State had in administering the sales tax—and that the State had made clear that third-party intermediaries are not “hotel operators” and that their service fees cannot be deemed “rent” subject to taxation. The IAS court (Ramos, J.) granted the City’s motion. The court purported to apply only the “plain language of the statute,” i.e., the Enabling Legislation. But the lower court did not do that. Nor did the court analyze Local Law 43’s 18 expanded definition of the term “rent,” which included not just the “consideration received for occupancy” but also “any service and/or booking fees that are a condition of occupancy.” (R.105). As to whether the Enabling Legislation gave the City the necessary express authority to require an online travel company or other third-party intermediary to collect an occupancy tax, the IAS court stated that “the Enabling Legislation does not distinguish between operators and room remarketers when imposing the [occupancy tax], and focuses only on what is being paid by the consumer” (R.18-19), notwithstanding that the Enabling Legislation does not include the term “room remarketer” and expressly allows for the tax to be imposed only on “the owner of the hotel room occupied or [] the person entitled to be paid the rent or charge.” (R.119, § 1(3)). The lower court further stated that there was “no basis whatsoever to infer” anything about the scope of the City’s authority from the Legislature’s express consideration and rejection of legislation in 2007 that would have authorized the City to impose an occupancy tax on the basis of a third-party intermediary’s service fees, i.e., the very power the City purported to give to itself with Local Law 43. (R.21). Although the parties made submissions to Justice Ramos concerning the bill that was the basis for the 2010 legislation—which was enacted after the City’s motion had been fully briefed—the lower court did not separately analyze that 2010 legislation in its order dismissing Count One of the Complaint. 19 Finally, the lower court discounted the City’s and the State’s decades-long history of parallel application of the related occupancy and sales taxes on the ground that the occupancy tax “does not incorporate by reference any provision of the Sales Tax.” (R.22). Similarly, the lower court wrote off as “irrelevant” the City’s own guidance to hotel operators on the occupancy tax and its prior practice of construing such terms as “operator” and “rent” in a manner consistent with the State sales tax on hotel operators, on the ground that this guidance “pre-date[d] the enactment of [Local Law 43].” (R.23). That, of course, is the entire point: this prior practice shows how the City had previously interpreted the scope of its legislatively granted authority to impose the occupancy tax—in a manner consistent with the State’s treatment of the parallel sales tax—only on “rent,” not a third-party intermediary’s service fees, and to require only an “operator,” not a third-party intermediary, to collect and remit it. F. The Appellate Division’s Order The Appellate Division unanimously reversed the lower court’s order and ruled that Local Law 43 violated the New York State Constitution. (R.361-63). The Appellate Division specifically held that “[c]ontrary to the motion court’s finding, the plain language of [the Enabling Legislation] did not clearly and unambiguously provide the City with broad taxation powers with respect to imposing a hotel occupancy tax.” (R.362). Rather, the Enabling Legislation 20 authorized the City only “to impose on a hotel occupant a tax at a rate of up to six percent of the rent or charge per day for each hotel room.” (Id., emphasis added); see also R.188, § 1(1-a) (providing that City had the authority to levy the occupancy tax “at a rate up to six percent of the rent or charge per day for each [] room”). Quoting from and applying Debevoise &Plimpton v. New York State Dept. of Taxation & Fin., 80 N.Y.2d 657, 661 (1993), the Appellate Division held that “[g]iven the well-established rule that a statute that levies a tax ‘must be narrowly construed’ and ‘any doubts concerning its scope and application are to be resolved in favor of the taxpayer,’” the plain meaning of the Enabling Legislation “did not encompass the service fees charged by the travel intermediaries.” (R.362-63). The Court concluded: “To extend the tax to cover these fees requires action by the State Legislature, such as that taken in 2010.” (R.363). G. The City’s Motion for Leave to Appeal and Appeal as of Right The City moved in the Appellate Division for reargument and leave to appeal to this Court. In that motion, the City made all of the same arguments that it makes in its brief on appeal now. The Appellate Division denied the City’s motion on April 26, 2012. The City thereafter moved for leave to appeal in this Court, repeating the arguments it made in its Appellate Division application. On November 20, 2012, this Court too denied the City’s motion, but also sua sponte 21 ruled that the City had an appeal as of right pursuant to CPLR 5601(b)(1), which allows for an appeal “from an order of the appellate division which finally determines an action where there is directly involved the construction of the constitution of the state or of the United States.” ARGUMENT The Appellate Division’s Order should be affirmed upon proper application of two principles that control this appeal, both of which the City ignores. First, it is “well established” that a statute that levies a tax “must be narrowly construed and that any doubts concerning its scope and application are to be resolved in favor of the taxpayer.” Debevoise, 80 N.Y.2d at 661. Although the Appellate Division predicated its Order on this principle—and quoted Debevoise—the City completely ignores it in its brief and does not even cite this Court’s Debevoise decision. Second, “[i]n New York, the State Legislature has the exclusive power to tax, including the power to determine the class of persons to be taxed, which it may delegate to its municipal subdivisions, including the City of New York.” U.S. Steel Corp. v. Gerosa, 7 N.Y.2d 454, 459 (1960). Accordingly, any municipal tax “must be within the expressed limitations of the enabling legislation and, unless authorized, a tax so levied is constitutionally invalid.” Castle Oil Corp. v. City of New York, 89 N.Y.2d 334, 339 (1996) (alterations omitted). The City ignores this rule as well. 22 I. LOCAL LAW 43 IS NOT AUTHORIZED BY THE ENABLING LEGISLATION It has long been a bedrock principle in New York law that any doubt in the construction of a tax statute is to be resolved against the taxing authority: A statute which levies a tax is to be construed most strongly against the government and in favor of the citizen. The government takes nothing except what is given by the clear import of the words used, and a well- founded doubt as to the meaning of the act defeats the tax. Good Humor Corp. v. McGoldrick, 289 N.Y. 452, 455 (1943) (quotations omitted).2 Under this principle, which is so firmly entrenched that it is included in McKinney’s treatise on statutory construction, all “doubt as to the construction of a tax statute is resolved in favor of the taxpayer and against the taxing authority.” McKinney’s Cons. Laws of N.Y., Book 1, Statutes § 313(c). Accordingly, “[i]n the interpretation of statutes levying taxes it is the established rule not to extend their provisions, by implication, beyond the clear import of the language used, or to enlarge their operations so as to embrace matters not specifically pointed out.” Am. Locker Co. v. City of New York, 308 N.Y. 264, 269 (1955) (emphasis added).3 2 See also Carey Transp., Inc. v. Perrotta, 34 A.D.2d 147, 149 (1st Dep’t 1970) (same); Brooklyn Union Gas Co. v. McGoldrick, 270 A.D. 186, 195 (1st Dep’t 1945) (same); Soc’y of Plastics Indus., Inc. v. City of New York, 326 N.Y.S.2d 788, 793-94 (Sup. Ct. N.Y. Cty. 1971) (“[S]tatutes authorizing the levy of taxes are to be strictly construed,” and so “[i]f the authority of the City to tax is doubtful, the doubt must always be resolved against the tax.”). 3 See also id. (“In case of doubt [‘statutes levying taxes’] are construed most strongly against the Government, and in favor of the citizen.”); Castle Oil Corp., 23 The Enabling Legislation did not expressly authorize the City to either (i) impose a tax on an online travel company’s service fees in the guise of “rent or charge . . . for [the] room”; or (ii) require an online travel company to collect the occupancy tax and pay a portion of it. At a bare minimum, there was doubt as to the City’s authority to do this. And so, under the applicable principles governing construction of taxation statutes, the Appellate Division properly ruled that Local Law 43 was invalid as an improper exercise of the City’s authority. A. The Enabling Legislation Does Not Authorize the City to Tax a Third-Party Intermediary’s Fees as “Rent” The City was authorized by the plain language of the Enabling Legislation to impose an occupancy tax “at a rate up to six percent of the rent or charge per day for each such [hotel] room.” (R.118, § 1(1-a), emphasis added). Local Law 43 did not fit within the express scope of this legislative authorization. It imposed a tax on the basis of an online travel company’s fees, which are not rent or charge “for [a] room” within the ordinary meaning of that phrase. The City sought to accomplish this by artificially re-defining the term “rent” to include “service and/or booking fees” that are paid to online travel companies, not to hotel operators for the use and occupancy of a hotel room. (R.105). What (continued…) 89 N.Y.2d at 339; U.S. Steel Corp., 7 N.Y.2d at 459 (same); Compass Adjusters & Investigators Inc. v. Comm’r of Taxation & Fin., 197 A.D.2d 38, 42 (3d Dep’t. 1994) (applying the “general rule that tax statutes are to be strictly construed with any doubt resolved in favor of the taxpayer”). 24 the City referred to as “net rent” in Local Law 43 was “[t]he rent received by an operator from a room remarketer,” i.e., the actual rent for the room that an online travel company transfers to the hotel operator for the consumer’s use and occupancy of a room. (R.106). That is the plain and commonly understood meaning of “rent” as this term was used in the Enabling Legislation, namely, “[c]onsideration paid, usu[ally] periodically for the use or occupancy of property.” BLACK’S LAW DICTIONARY 1322 (8th ed. 2004) (emphasis added); see also id. at 851 (defining “net rent” to mean “rent”). The City overstepped the bounds of its taxation authority, however, by creating a new (and now-repealed) concept in Local Law 43 that it misnamed “additional rent” which meant, literally, something other than rent: “[t]he excess of rent received from an occupant by a room remarketer over the net rent.” (R.106). This so-called “additional rent” is the fee a travel intermediary retains for its services after it has transferred the real “rent” to the hotel operator. (R.105, “service and/or booking fees” are part of “rent,” but not “net rent”). That is not consideration for the use and occupancy of a hotel room. The Enabling Legislation did not expressly permit the City to contort the plain meaning of the term “rent” to impose a tax on service fees that are not consideration for the use or occupancy of property; and, as noted, the City had to have such express authority to enact such a change. See Am. Locker Co., 308 N.Y. at 269. On this ground alone, the Appellate Division’s Order should be affirmed. 25 The Appellate Division properly held that the “plain language” of the Enabling Legislation “did not encompass the services fees charged by the travel intermediaries and the legislation may not be extended so as to permit the imposition of the tax in a situation not embraced by it.” (R.363); see also Good Humor Corp., 289 N.Y.at 455 (City could not impose a sales tax on ice cream bars under the “well-established rule” of construing taxing authority narrowly; only by giving the pertinent tax provision an improperly “broad construction” could ice cream bars be deemed taxable “candy and confectionary”).4 1. The City Does Not Have the “Broad” Authority It Claims The City’s brief not only ignores but subverts the principle that all doubts must be construed against the imposition of a tax. It relies heavily on the mistaken notion that the Enabling Legislation confers upon it the “broadest authority to 4 Accord U.S. Steel Corp., 7 N.Y.2d at 459-60 (City had no authority to assess deficiency tax where holding company did not fit within the express limitation of a “financial business” in an enabling statute authorizing a tax on the gross receipts of such a business); Am. Locker, 308 N.Y. at 267, 269 (applying the principle that, in case of doubt, taxation statutes are “construed most strongly against the Government” in ruling that City improperly attempted to levy a property tax on receipts from vendable lockers; such transactions are not “‘sales’ of tangible personal property” within meaning of enabling statute); Castle Oil, 89 N.Y.2d at 340 (City-imposed tax “transgresses the fixed parameters and exceeds the authorization of the enabling act, and therefore violates article XVI, § 1 of the State Constitution”); Carey Transp., 34 A.D.2d at 149 (holding that, although in that case there was no doubt, “the rule of construction requires that the doubt be resolved in favor of the petitioner taxpayer”); Soc’y of Plastics, 326 N.Y.S.2d at 796 (invalidating City’s Local Law that “strains the plain meaning of the [enabling] law and contravenes the tenet of strict construction of tax statutes”). 26 enact a tax on hotel room occupancy” because, in its view, the Legislature gave it the same authority “‘as the legislature had or would have.’” (City Br. at 15, quoting N.Y. Unconsol. Laws Ch. 288-C, § 1[1]). This did not provide a basis for the City to enact Local Law 43. As an initial matter, the snippet from the Enabling Legislation on which the City bases its argument is inapposite. The provision pertinent to the specific tax at issue on appeal states: “In addition to the tax imposed at the rates authorized in either paragraph (a) or (b) of subdivision one of this section, any local law imposing such tax may impose an additional tax on persons occupying hotel rooms in such city . . . at a rate up to six percent of the rate or charge per day for each such room.” (R.118, § 1(1-a)). This provision, which is § 1-a in the Enabling Legislation, makes quite clear that the City’s authority to tax is expressly limited to no more than 6% “of the rent or charge per day for [the] room.” (R.118, emphasis added). There is no mention in this provision of the City having the same scope of authority as the Legislature has. The provision of the Enabling Legislation on which the City bases its argument is one which authorizes certain fixed-sum taxes on rooms, ranging from $0.25 per day to $2 per day. That is in § 1 of the Enabling Legislation. It starts with a sentence that has the phrase the City quotes repeatedly throughout its brief—“such as the legislature has or would have the power and authority to 27 impose on persons occupying hotel rooms”—but then specifies that “[t]he rates of such tax shall be” the fixed rates described in § 1(a) & (b), i.e., $.25 to $2 per day depending upon the rent or charge for the room. (R.118). Those fixed-sum taxes are not the taxes that Local Law 43 impacted and are not at issue on this appeal. As to the 6% hotel room occupancy tax that is at issue on this appeal, the Enabling Legislation does not give the City authority “such as the legislature had or would have,” but only authority to impose a tax on the basis of “the rent or charge . . . for [the] room.” (R.118 § 1(1-a), emphasis added). And, even assuming there were any doubt as to whether the Enabling Legislation’s grant of authority to impose fixed-sum taxes could be read to transmute the same authority as to the separately enumerated percentage-rate occupancy taxes impacted by Local Law 43, such doubt must be construed in favor of the taxpayer. See, e.g., Debevoise, 80 N.Y.2d at 661; Good Humor, 289 N.Y. at 455. 2. The City Ignores That It Has Authority Only to Tax the Rent or Charge “For the Room” The City’s entire argument as to this point is ultimately a distraction, in any event, because the City concedes, contrary to its mantra that it has “broad” and “sweeping” taxation powers, that its authority is limited to impose the occupancy tax only on “the rent or charge per day for each such room.” See City Br. at 19 (referring to this limitation as “the Enabling Act’s mandate”); id. at 6 (conceding that this and other constraints are “general boundaries” on its authority). The City 28 repeatedly underscores and focuses on the “rent or charge” part of this provision, but it glosses over the critical next phrase, which limits the City’s authority to tax solely the “rent or charge for [the] room.” (R.118). Local Law 43 exceeded this boundary. Under Local Law 43, the City sought to re-define “rent” to go beyond “rent for the room” and to include charges for “services of any kind or nature,” including “any service and/or booking fees that are a condition of occupancy,” and then imposed a tax on all such fees. (R.121, N.Y.C. Admin. Code § 11-2501(7)). But fees to provide information about a hotel or to facilitate a reservation of a hotel room are not “rent or charge for [a] room” within the meaning of the Enabling Legislation. (R.118). They are fees for services provided outside the room, not amounts paid for use and occupancy of the room. The City contends that the “plain meaning” of the word “charge,” in isolation, supported its authority to enact Local Law 43. (City Br. at 16-17). As an initial matter, the City did not invoke its authority to tax a “charge” in enacting Local Law 43. Instead, it attempted to impose a tax on service fees by re-defining “rent” in a manner that contravenes its plain meaning of “[c]onsideration paid, usu[ally] periodically, for the use or occupancy of property.” BLACK’S LAW DICTIONARY 1322 (8th ed. 2004) (quoted in City Br. at 16). 29 The term “charge” also did not give the City the “broad authority” it claims it had. Refusing to even acknowledge the well-established proposition that tax laws are to be narrowly construed in favor of the taxpayer, the City instead cites a labor law case, Samiento v. World Yacht Inc., 10 N.Y.3d 70 (2008). According to the City, this case construed the term “charge” and ruled it should be “liberally construed.” (City Br. at 16-17). Samiento, however, did not construe a tax law, as the City misleadingly suggests in its brief by stating that the Court construed “enabling legislation.” (City Br. at 17). Rather, that decision dealt with a provision of the Labor Law that forbids employers from retaining any part of a gratuity to an employee. Provisions of the Labor Law are to be “liberally construed in favor of employees[,]” a maxim that the Court followed in Samiento by expansively construing “charge purported to be a gratuity” to include a mandated 20% tip. See 10 N.Y.3d at 78-79. By contrast, it is the “established rule,” ignored by the City, that a tax law must always be “narrowly construed” so that “any doubts concerning its scope and application are to be resolved in favor of the taxpayer.” Debevoise, 80 N.Y.2d at 661 (1993); see also Am. Locker Co., 308 N.Y. at 269 (in case of doubt, tax statutes are “construed strongly against the Government”). In light of the very different rules governing strict interpretation of tax laws, the Court’s treatment of the term “charge” in Samiento in favor of employees 30 provides no support for the City’s effort to construe that term adversely to taxpayers here. To the contrary, the Samiento decision only reflects that, in this case, the Court should apply the pertinent rule for construing tax laws and interpret the term “charge” narrowly to limit the scope of the City’s taxing authority and in favor of taxpayers. In any event, the definition on which the City relies, under which “charge” means an “expense [or] cost [and] the price demanded for something,” see City Br. at 16-17, underscores the City’s lack of authority to tax third-party intermediaries’ service fees. As this definition reflects, a charge has to be “for something.” And, here, the Enabling Legislation provided that, to be taxable, a charge had to be “for [a] room.” (R.118, § 1(1-a)). The City thus did not have the authority to impose a tax on “services of any kind or nature,” i.e., any charge, including “service and/or booking fees,” as provided for in Local Law 43 (R.121, N.Y.C. Admin. Code § 11- 2501(7)), because such fees are not consideration for a room; they are for services provided to assist travelers in selecting a hotel and making reservations. Especially in light of the maxim that tax laws are to be narrowly construed in favor of the taxpayer, the term “charge” may not be read apart from the limiting phrase “for a room” in the Enabling Legislation. Indeed, on the City’s reading that ignores this limiting phrase, any charge, of any kind, incurred by a guest to get to the room (e.g., cab fare) or leading to his decision to stay in a hotel (e.g., the 31 purchase of a travel guide) could be deemed subject to the hotel room occupancy tax because, as the City would have it, it may dispense with the requirement that the taxable charge must be “for the room.” That, however, was not authorized, expressly or otherwise, by the Enabling Legislation. 3. The Language of the Enabling Legislation the City Invokes Does Not Give It the Unfettered Authority It Asserts Finally, even under the inapposite phrase from the Enabling Legislation that the City erroneously invokes as its license to impose a “sweeping” occupancy tax, courts have repeatedly held that a City’s authority to tax is limited. See, e.g., Brooklyn Union Gas Co. v. McGoldrick, 270 A.D. 186, 191-92 (1st Dept. 1945) (holding local tax invalid and rejecting argument that enabling legislation allowing City to impose “any tax or taxes which the Legislature had or would have the power to impose” authorized City to tax “without exception or limitation”); City of New York v. Bernstein, 84 N.Y.S.2d, 139, 140-41 (Sup. Ct. Queens Cty. 1948) (invalidating tax imposed by local law despite enabling statue that allowed City to impose any tax “which the legislature has or would have the power and authority to impose”); see also Debevoise, 80 N.Y.2d at 661-63 (holding local law was unauthorized because it taxed on the basis of services outside the scope of the enabling statute); Soc’y of Plastics Indus., Inc., 326 N.Y.S.2d at 797 (holding local law invalid under broad enabling legislation because it selectively applied a tax to a particular class amounting to the “legislat[ion of] an entirely different tax” and 32 “exceed[ing] the authorization granted by the State Legislature”); U.S. Steel Corp. v. Gerosa, 7 N.Y.2d 454, 459-60 (1960) (holding that local law assessing a deficiency tax was invalid where it expanded the definition of the class to be taxed beyond the express provisions of the enabling legislation). So too, in People v. Cook, 34 N.Y.2d 100, 112 (1974), which the City cites as its leading case in support of its position, this Court made clear that the delegation of the State’s taxing authority is limited to the specific type of tax the Legislature has authorized. The enabling legislation at issue in Cook authorized the City to impose taxes “on cigarettes, cigars or smoking tobacco such as the legislature has or would have power and authority to impose.” Id. (emphasis added). Just as it did in the Appellate Division, when the City quotes the Cook decision in its brief, it omits—but with no signal to the Court that it has done so— the limiting reference to the actual subject matter of the authorized taxes, i.e., the Court’s reference to “cigarettes, cigars or smoking tobacco.” Compare City Br. at 15 (quoting Cook), with Cook, 34 N.Y.2d at 112. Indeed, when this Court in Cook held that “the statutory grant of power embraces the full panoply of State power,” the Court critically added “so long as the City exercises its grant in relation to a tax on cigarettes.” Cook, 23 N.Y.2d at 112 (emphasis added). But the City chose to leave that inconvenient part of the Court’s holding out of its discussion. 33 Here, the plain language of the Enabling Legislation limited the City to a particular type of tax. It allowed the City to impose the hotel room occupancy tax on only “the rent or charge per day for [a] room,” (R.118, Unconsol. Laws Ch. 288-C, § 1(1-a)); it did not give the City “the broadest authority to enact a tax on hotel room occupancy.” (City Br. at 15). Correctly quoted and properly read, Cook not only fails to support the City’s position, but eviscerates it. * * * In purporting to tax not only the rent or charge for a hotel room, but also a third-party intermediary’s service fees, Local Law 43 was well outside the scope of the Enabling Legislation and was invalid for the one-year period during which it was in effect. The Appellate Division’s Order should be affirmed on this ground alone. B. The Enabling Legislation Also Does Not Authorize the City to Hold a Non-Hotel Operator Liable for the Occupancy Tax The Appellate Division’s Order may also be affirmed on the separate basis that the Enabling Legislation did not authorize the City to require “room remarketers” to collect and pay part of the occupancy tax. The Enabling Legislation provided that the occupancy tax “shall be paid by the person liable therefor to the owner of the hotel room occupied or to the person entitled to be paid the rent or charge for the hotel room occupied” and that “such 34 owner or person entitled to be paid the rent or charge shall be liable for the collection and payment of the tax.” (R.119). Local Law 43 nonetheless purported to make third-party intermediaries liable to collect the occupancy tax and pay a portion of it to the City by creating a new taxable entity called a “room remarketer.” As noted, this term was expressly defined to exclude the hotel operator and did not require that the entity be entitled to be paid the rent for the hotel room. A “room remarketer” under Local Law 43 was [a]ny person, excluding the operator, having any right, access[,] ability or authority, through an internet transaction or any other means whatsoever, to offer, reserve, book, arrange for, remarket, distribute, broker, resell, or facilitate the transfer of rooms the occupancy of which is subject to tax under this chapter. (R.106). In other words, a “room remarketer” is any person who, like Plaintiffs, facilitates a hotel room reservation. The Enabling Legislation, which has no provision addressing a “room remarketer” or any other third-party intermediary, did not expressly permit the City to make such persons liable to collect and pay the occupancy tax. Under the Enabling Legislation, the only persons on whom the City had the requisite express authority to impose an obligation to collect and pay the occupancy tax were the “the owner of the hotel room occupied or . . . the person entitled to be paid the rent or charge for the hotel room occupied.” (R.118). Because a “room remarketer” is, 35 in pertinent part, neither the “owner[s]” of hotel rooms nor the “person[s] entitled to be paid the rent or charge” for a hotel room, the City did not, upon a proper application of the Enabling Legislation and the rules for construing taxing authority, have the power to require a “room remarketer” to collect and remit the occupancy tax. See U.S. Steel, 7 N.Y.2d at 459 (“[A]ny taxes imposed by the [City] must be within the expressed limitations” of the enabling legislation “and unless authorized, a tax so levied is constitutionally invalid.”). Here again, there is at least a doubt as to whether the Enabling Legislation gave the City the authority to do this; and that doubt must be construed in favor of the taxpayer. The City nevertheless contends it could properly require room remarketers to collect and remit a portion of the hotel room occupancy tax because “[a] ‘person entitled to be paid the rent or charge’ must be different from an ‘owner of the hotel room’ or it would render the statutory phrase superfluous . . . .” (City Br. at 25). But, as with its argument with respect to “rent or charge,” the City overlooks that it was allowed to impose the obligation to collect the hotel room occupancy tax only on the hotel owner or the person entitled to be paid “for the hotel room.” (R.119, Unconol. Laws Ch. 288-C, § 1(3) (emphasis added)). A “room remarketer,” as defined by Local Law 43, does not fit expressly within this scope.5 5 Plaintiffs and the Appellate Division also did not, as the City contends (City Br. at 24), “shift[]” the focus to Plaintiffs’ own “business models.” Local Law 43 purports to give the City the authority to require “room remarketers” to 36 For this separate reason—not addressed by the Appellate Division in light of its disposition—the City was not authorized to enact Local Law 43. The Appellate Division’s Order may be affirmed on this independent ground. II. THE LEGISLATURE’S ENACTMENT OF, AND PRIOR FAILURE TO ENACT, A NEW HOTEL ROOM OCCUPANCY TAX SHOWS THE CITY LACKED AUTHORITY TO ENACT LOCAL LAW 43 The Appellate Division correctly noted that, while the plain language of the Enabling Legislation makes clear that the City exceeded its authority in enacting Local Law 43, the Legislature’s recent efforts with respect to the hotel room occupancy tax underscore this conclusion. See R.363 (“To extend the tax to cover these fees requires action by the State Legislature, such as that taken in 2010.”). “In matters of statutory and regulatory interpretation, ‘legislative intent is the great and controlling principle, and the proper judicial function is to discern and apply the will of the [enactors].’” Nostrom v. A.W. Chesterton Co., 15 N.Y.3d 502, 507 (2010) (quoting In re ATM One v. Landaverde, 2 N.Y.3d 472, 477 (2004)). Statutory text is the clearest indicator of legislative intent. See id. But, “[a]dditionally, inquiry should be made into ‘the spirit and purpose of the legislation, which requires examination of the statutory context . . . as well as [] (continued…) collect and remit a portion of the hotel room occupancy tax. But room remarketers was defined to “exclud[e] the operator” and include those who “reserve, book, arrange for, . . . or facilitate the transfer of rooms,” regardless of whether they are the hotel owner or operator. (R.122, N.Y.C. Admin. Code § 11-2501(12)). That, on its face, was beyond the scope of the Enabling Legislation. 37 legislative history.’” Id. (quoting Landaverde, 2 N.Y.3d at 477); see also People v. Rice, 44 A.D.3d 247, 253 (1st Dep’t 2007) (“Generally, inquiry must be made of the spirit and purpose of the legislation, which requires examination of the statutory context of the provision as well as its legislative history.”). A. The Legislature’s Conduct Underscores the City’s Lack of Authority to Enact Local Law 43 Just two years before the City enacted Local Law 43, the Legislature had considered, and rejected, a proposal that would have authorized the City to expand the hotel room occupancy tax in the manner that the City later attempted to do on its own with Local Law 43. This proposed 2007 legislation would have “requir[ed] travel companies that rent hotel rooms online or by telephone to collect the sales tax on the markups and service fees charged to customers.” (R.155). It also would have “amend[ed] the New York City Administrative Code to conform the city’s hotel room occupancy tax to the bill’s changes in the State’s sales tax on hotel occupancy.” (R.164). The Legislature’s stated reason for proposing this bill in 2007 showed that it understood the City required broader authority than it had at that time. As the Legislature noted: “Under current law the travel companies are required to pay tax on the rent they pay the hotel operators but are not required to collect sales tax on their charges to customers because they do not qualify as operators of hotels under the Tax Law.” (R.163, emphasis added). The proposed 2007 legislation—if it had 38 passed—would have addressed this issue by authorizing both a hotel sales tax and an occupancy tax on the full amount a consumer paid to an online travel company as a so-called “occupancy provider.” (R.157). The net effect would have been to change existing law to allow for imposition of a tax on an online travel company’s service fees. Because this proposed legislation was not enacted into law, the authority it would have conferred upon the City was not in place when the City enacted Local Law 43 in 2009. On March 24, 2010, however, the Assembly introduced a bill that, once again, proposed expanding the scope of the sales tax and the occupancy tax to allow for taxation of online travel companies’ service fees. (R.266). A revised version of this legislation ultimately passed in August 2010 as part of the 2010-2011 budget. (R.348-52). That legislation modified not only the State sales tax but also New York City’s occupancy tax, so that the occupancy tax would “conform to the methodology of the State tax.” (R.348). Unlike Local Law 43, which was enacted by the City without legislative approval, the Legislature acted on its constitutional authority (see N.Y. Const. Art. IX § 2(a)(b)(1)) to directly amend the City’s Administrative Code. (R.349-52). The newly enacted legislation abolishes the terms “net rent” and “additional rent” that were the underpinnings of Local Law 43, and now defines “rent” to mean “[t]he consideration received for occupancy” and to expressly include “any service 39 or other charge or amount required to be paid as a condition for occupancy,” “whether received by the operator or a room remarketer.” (R.349-50 §§ 6-7). The Legislature also repealed the City’s definition of “room remarketer” and defined that term differently, as “a person who reserves, arranges for, conveys, or furnishes occupancy, whether directly or indirectly, to an occupant for rent in an amount determined by the room remarketer, directly or indirectly, whether pursuant to a written or other agreement.” (R.350 § 6.12). As the Appellate Division correctly held (R.363), it was only through these, and other, legislatively imposed changes that the Legislature gave the City the requisite express authority to tax services and other fees earned by “room remarketers.” B. The City’s Attempts to Cabin the Legislative History Here Fail The City tries to discount the Legislature’s efforts on the ground that “[l]egislative inactivity is inherently ambiguous.” (City Br. at 34). But what the City erroneously refers to as “inactivity” is, in fact, directly pertinent “statutory context,” see Nostrom, 15 N.Y.3d at 507, because it shows that the Legislature understood that, in 2007, the City did not have the authority to tax a third-party intermediary’s service fees. There is no other good explanation for the Legislature to have proposed this amendment to the occupancy tax if, in 2007, it believed the City already had the authority to impose an occupancy tax on room remarketers’ 40 fees.6 But, under the City’s rationale, the Governor and Legislature would have gone through the considerable trouble of drafting, proposing, failing to enact, proposing again, and then eventually enacting detailed legislation, notwithstanding that all along the Legislature really believed it had already delegated to the City the necessary, express authority. That is not sensible. The Court’s decision in U.S. Steel Corp. v. Gerosa, 7 N.Y.2d 454 (1960), is instructive. The enabling legislation at issue there authorized the City to impose a tax on a “financial business.” In a Local Law, the City defined a “holding company” as a “financial business” and tried to impose the tax on U.S. Steel Corporation, a parent company that conducted no business other than holding the stock of subsidiary operating companies. See id. at 458-59. The Court held that, because the enabling legislation listed the categories of taxable entities and a holding company was not on the list, the Legislature had not manifested the requisite express intent to authorize the City to tax a holding company. See id. at 459. “[A]ny doubt” on this issue was resolved by the “history of the Enabling Act.” Id. 6 See generally McKinney’s Cons. Laws of N.Y., Book 1, Statutes § 74 (“A court cannot by implication supply in a statute a provision which it is reasonable to suppose the Legislature intended to intentionally omit; and the failure of the Legislature to include a matter within the scope of an action may be construed as an indication that its exclusion was intended.”). 41 The Court reasoned that the Legislature had considered, but failed to enact, two proposals to add “holding companies” to the definition of taxable entities. Id. at 460. Contrary to the City’s argument here, so-called “legislative inactivity” is thus indeed pertinent in construing a tax statute. The Court further noted that the Legislature had expressly authorized cities with populations of less than a million people to impose a business tax on “holding companies,” id., which underscored (as the Legislature’s 2010 enactment does here) that a city required such express authority before it could impose an unspecified tax. As in U.S. Steel, the pertinent “historic background”—including both the Legislature’s failure to enact the 2007 proposal and the enabling legislation ultimately enacted in 2010—shows that before the Legislature intervened to give the City the express authority that it tried to claim for itself in 2009, the City lacked the authority to change the occupancy tax as it did with Local Law 43. See also Waste-Stream Inc. v. St. Lawrence Cty. Solid Waste Disposal Auth., 167 Misc. 2d 542, 547 (Sup. Ct. Lawrence Cty. 1995) (“The fact that the Legislature saw the need to add the word ‘collect’ alongside [a county agency’s] other powers is indicative that it previously lacked such power.”). The City relies on Roberts v. Tischman Speyer Properties, L.P., 12 N.Y.3d 270 (2009), but there the Court held that the Legislature’s silence in the face of a state agency’s interpretation of a statutory scheme did not indicate the 42 Legislature’s acquiescence to the agency’s interpretation. See id. at 287. Here, the Legislature manifestly has not been silent: it considered and rejected the 2007 proposal and then, in 2010, acted to give the City the authority that the City had improperly tried to confer upon itself one year earlier with Local Law 43. The Legislature did this in the most direct manner possible: by invoking its constitutional authority to enact provisions into the City’s Administrative Code and, in the process, repealing certain provisions of Local Law 43 at issue on this appeal. (R.348-52). This is not “ambiguous” silence, as the City would have it, but affirmative legislative conduct demonstrating that the State had to first act to give the City authority to impose a tax that it improperly tried to claim for itself. Finally, the City asks the Court to disregard the 2010 enactment as “largely superficial” because, according to the City, it was “intended to accomplish the same central goal” as Local Law 43. (City Br. at 36-37). But the Legislature should not be presumed to have made a “superficial” enactment. See, e.g., Nat’l Org. for Women v. Metro. Life Ins. Co., 131 A.D.2d 356 (1st Dep’t 1987) (court has an obligation to “not construe statutes so as to render one ineffective or a superfluous exercise in legislation”). More fundamentally, the City misses the whole pertinence of the legislative history. Even if the 2010 enactment did indeed accomplish the “same central goal” as Local Law 43 (one year after the City tried to take matters into its own hands), the very fact that the Legislature went to the 43 trouble to enact it shows that, in light of the limitations in the Enabling Legislation, the Legislature believed (correctly) that it had to take affirmative legislative action before the City could have the authority to tax an online travel company’s fees and require it to collect that tax. At a bare minimum, the Legislature’s actions show there was some doubt as to whether, in 2009, the City was authorized to impose a tax on a “room remarketer’s” service fees. Local Law 43 is therefore invalid under the rule that a tax law “must be narrowly construed and that any doubts concerning its scope and application are to be resolved in favor of the taxpayer.” Debevoise, 80 N.Y.2d at 661; see also Good Humor, 289 N.Y.2d at 455 (applying “well-established rule” requiring narrow construction of taxing authority). III. FOUR DECADES OF PAST PRACTICE FURTHER SHOWS THE CITY DID NOT HAVE AUTHORITY TO ENACT LOCAL LAW 43 For all the reasons discussed above, the Enabling Legislation applicable in 2009 was, at best for the City, ambiguous as to whether the City had the authority to impose a tax on a third-party travel intermediary’s service fee. Not only does that compel affirmance of the Appellate Division’s Order under the principles governing construction of taxation statutes, but it also supports affirmance under more generally applicable principles. “Where the language of a statute is ambiguous or uncertain, the construction placed on it by contemporaries, as in the case of a practical construction which has 44 received general acquiescence for a long period of time[,] will be given considerable weight in its interpretation.” McKinney’s Cons. Laws of N.Y., Book 1, Statutes § 128; see also Grimmer v. Tenement House Dep’t of the City of N.Y., 205 N.Y.549, 550 (1912) (“There is no question that the practical construction of a statute by those for whom the law was enacted or by public officers whose duty it is to enforce it, acquiesced in by all for a long period of time, is of great importance in a case of serious ambiguity.”); City of New York v. State, 282 A.D.2d 134, 144 (1st Dep’t 2001) (“[I]n those cases when a legislative enactment is susceptible to more than one reasonable interpretation, the practical meaning attached to it by the parties affected by it, when acquiesced to over an extended period of time, is highly persuasive.”) (emphasis added). Over a period of more than forty years before the Legislature enacted new enabling legislation in 2010, the City and the State have construed “rent” to mean only “the consideration received for occupancy” and have also required only a hotel “operator” to collect and remit the sales tax and occupancy tax. A. “Rent” in the Occupancy Tax Should Be Construed In Pari Materia With the Same Term in the Related Sales Tax Statutes which relate to the same subject matter are “in pari materia,” and “in accordance with general rules of construction, statutes which are in pari materia are to be construed together as though forming part of the same statute.” McKinney’s Cons. Laws of N.Y., Book 1, Statutes § 221(b); see also Plato’s Cave 45 Corp. v. State Liquor Auth., 68 N.Y.2d 791, 792 (1986) (“It has, however, long been held that statutes which relate to the same or cognate subjects are in pari materia and to be construed together unless a contrary intent is clearly expressed by the Legislature.”). The sales tax and the occupancy tax are in pari materia. They relate to the same subject matter—taxation on hotel room occupancy.7 Indeed, each time the State has changed the sales tax, it has made a corresponding change to the occupancy tax. For example, most recently the Legislature first attempted to amend both the occupancy and sales taxes in 2007 and, in 2010, in fact revised both of these taxes in parallel. The sales tax and the occupancy tax are sufficiently related that the term “rent” should not have been re-defined by the City so that it would have one meaning for the hotel sales tax and another, far more expansive meaning for the hotel occupancy tax. See, e.g., Siemens Corp. v. Tax Appeals Tribunal, 217 A.D.2d 247, 251 (3d Dep’t 1996) (construing two tax provisions that 7 See also BLF Realty Holding Corp. v. Kasher, 299 A.D.2d 87, 93 (1st Dep’t 2002) (“Since profiteering, in the context of both rent stabilization and rent control, constitutes an incurable ground for eviction, the same result should obtain under the Loft Law pursuant to the doctrine of in pari materia, since they speak on the same matter or subject.”); People v. Pagan, 76 A.D.3d 414, 416-17 (1st Dep’t 2010) (“Article 65 of the Penal Law and article 410 of the CPL are statutes in pari materia insofar as they both address the subject of probation. As such, they must be construed together . . . .”); DiBattista v. McDonough, 80 A.D.3d 936, 938 (3d Dep’t 2011) (“Since both Town Law § 155 and Civil Service Law § 75 relate to the discipline of civil service employees, they are in pari materia and are to be read in conjunction so that they complement one another.”). 46 both related to “interest” in pari materia because “[b]oth statutes deal generally with taxation and, more specifically, with taxing interest income”). Before the recent 2010 legislation, the Legislature had made clear that, for purposes of the State sales tax, “rent” was “the consideration received for hotel occupancy,” N.Y. Tax Law § 1101(e)(6), and included only those services that are “incidental to the occupancy of the room or rooms.” N.Y.C.R.R. § 527.9(b)(7)(i). The State also made clear, in a written Guide to the Sales Tax for Hotel and Motel Operators, that only those services arising directly from the use of a room and while the visitor is actually in the hotel are properly deemed “incidental to the occupancy of the room.” (R.213). For example, charges for services provided in the room—such as maid service, phone service, towel and linen service, “in room computer,” and “in room modem lines”—are properly deemed “incidental” to the room occupancy and part of “rent.” (R.213). But charges for services that do not directly relate to the use and enjoyment of the room and that are provided outside the room—such as laundry service, parking, and transportation—are not properly deemed “rent.” (R.214). A third-party intermediary’s services are not in-room services. They do not arise from use of the room, like maid service, but are provided to a customer before he occupies the room or even arrives at the hotel. Thus, the plain meaning of “rent” for purposes of the sales tax did not include a service fee paid to on an 47 online travel company. Nor was it so understood for purposes of the occupancy tax, because the City had previously defined “rent” in an identical manner to the State in guidance on the sales tax, e.g., a charge for a safe is “[n]ot taxable” unless it is “located within [the] room.” (R.274; R.286). The City disregards all of this past practice, reasoning that the Enabling Legislation starts with the phrase, “[n]otwithstanding any other provision of law to the contrary” and “in addition to any tax authorized” for a municipality. N.Y. Unconsol. Ch. 288-C § 1. This is, as an initial matter, a misreading of the statute. As shown above, those phrases relate solely to provisions which authorize the City to impose fixed-sum taxes, which are not at issue here. (R.118 § 1(1)). Moreover, although the occupancy tax is quite obviously “in addition to” the sales tax—the former is collected by municipalities and the latter by the State, among other things—there is no basis to suppose that the Legislature intended for the identical and fundamental term “rent” to have different meanings as used in these closely related taxation schemes. To the contrary, because the State has repeatedly manifested its intent that the sales and occupancy taxes must be treated in tandem, similar terms in these related taxation schemes should be construed and applied in pari materia. See supra n.7; see generally Kennedy v. Kennedy, 195 A.D.2d 229, 234 (4th Dep’t 1994) (“[T]here is a presumption that similar meaning attaches to the use of language in statutes of like import.”). 48 B. For Forty Years, Only a Hotel “Operator” Was Subject to the Hotel Occupancy and Sales Taxes The City’s and the State’s past practice similarly shows that they both understood, prior to the enactment of the new enabling legislation in 2010, that only a hotel “operator” could be required to collect and remit the hotel taxes. Before it enacted Local Law 43, the City had acknowledged that, for purposes of the occupancy tax, “[t]he law requires that upon every taxable occupancy, the operator shall charge and collect the tax from the occupant.” 19 R.C.N.Y. § 12-08(a) (emphasis added). And the City itself had defined operator to mean “[a]ny person operating a hotel in the city of New York, including, but not limited to, the owner or proprietor of such premises, lessee, sublessee, mortgage in possession, licensee or any other person otherwise operating such hotel.” (R.121). This definition would not reach, expressly or otherwise, online travel companies and other third-party intermediaries. The State, similarly, had acknowledged that an online travel company could not be deemed a hotel “operator” subject to the hotel sales tax. The State Department of Taxation and Finance stated in 2004 that “[t]he hotel operator is the person required to collect the tax” because “it is the consumer’s use of the room that constitutes a taxable occupancy and it is the hotel operator which provides such occupancy to the consumer.” (R.171). In this Opinion, which was provided to one of the Plaintiffs in this action, the State concluded that a third-party 49 intermediary is not an “operator of a hotel” for purposes of the Tax Law, and thus could not be held liable for the collection and remittance of the sales tax. The State reached this conclusion because a third-party intermediary does not “maintain any buildings or portions thereof for the lodging of guests,” and “neither maintains any inventory of rooms for rent nor has any financial responsibility for the rental or failure to rent rooms listed on its Web site.” (R.171). The State reiterated this determination three years later in its Guide for hotel operators: Travel agents or travel agent companies, or persons or companies that provide information and resources that are intended to replace the services provided by traditional travel agents, such as travel services, airline and cruise tickets, hotel room reservations, car rental reservations and vacation packages, generally do not fall within the definition of operator of a hotel. This is typically because such persons or entities do not maintain any buildings or portions thereof for the lodging of guests. (R.212). * * * As all of this shows, when the City tried to unilaterally expand the scope of the occupancy tax in 2009 without legislative permission, both the City and the State had consistently acknowledged for years prior that (i) “rent” was not sufficiently broad to include a third-party intermediary’s service fees; and (ii) only hotel “operators” could be held responsible for collecting and remitting the 50 occupancy and sales taxes. Though that ultimately changed by legislative enactment in 2010, the very fact that the Legislature deemed such an enactment necessary to alter these well-entrenched understandings only further underscores that, in 2009, the City did not have the necessary unambiguous authority to enact Local Law 43. C. The City’s Remaining Arguments For Disregarding This Long- Standing Practice Are Not Persuasive The City contends that this extensive history of in-tandem application of the sales and occupancy taxes should be completely disregarded because they are administered by the City and State, respectively. (City Br. at 33-34). This Court has not imposed such a rigid rule. To the contrary, in Guardian Life Insurance Co. v. Chapman, the Court applied the doctrine of in pari materia in construing an amended provision of the Tax Law by comparing it to a provision in the Insurance Law because both statutory schemes dealt with the same general subject matter—taxation of insurance companies—even though they were administered by two different agencies. See 302 N.Y. 226, 231 (1951). The Court reasoned “both statutes deal with the same general subject matter and are obviously in pari materia,” and that “[w]e need not concern ourselves” with the fact that administration of the schemes was divided between two agencies. Id. 51 Finally, the City argues, relying on a case that does not address a city’s taxation authority, that the above-discussed, decades-long course of conduct is “entirely irrelevant” because “a legislative body ‘may spontaneously change the law whenever it perceives a public need.’” (City Br. at 38, quoting Bingham v. New York City Transit Auth., 99 N.Y.2d 355, 359 (2003)). But that was not the City’s role here as a “legislative body.” The City may not rise above its subordinate station in the State’s constitutional hierarchy and “spontaneously change” its authority to impose the hotel room occupancy tax. Under the Enabling Legislation, the City had the express authority to impose a tax on the basis of only the “rent or charge for [a] room” and require only the hotel owner or persons entitled to be paid the “rent or charge for the hotel room” to collect and remit the tax. (R.118-19, §§ 1(1-a), 1(3)). The City’s practice before the Legislature acted to revise the City’s authority shows that the City understood “rent” to mean only the “consideration received for occupancy”—a plain-language interpretation on which taxpayers were entitled to rely—and that only a hotel owner or operator may be charged with collecting and remitting the occupancy tax. That past practice is not only relevant but “highly persuasive” in resolving the issues on this appeal. See City of New York, 282 A.D.2d at 144. At a bare minimum, the City’s administration of the hotel room occupancy tax shows—and the State’s parallel administration of the related hotel sales tax— 52 shows that the City did not, prior to the Legislature’s 2010 enactment, have unambiguous authority to levy a “hotel room occupancy tax” on a room remarketer’s service fees and require the room remarketer to collect and remit the tax. Local Law 43 is, accordingly, invalid under the “well-established” rule requiring narrow construction of tax statutes and resolution of “any doubts” in favor of the taxpayer. Debevoise, 80 N.Y.2d at 661. 53 CONCLUSION The Appellate Division’s Order should be affirmed. Dated: New York, New York March 29, 2013 JONES DAY 222 East 41st Street New York, New York 10017 Telephone: (212) 326-3939 Facsimile: (212) 755-7306 By: Robert W. Gaffey Todd R. Geremia trgeremia@jonesday.com —and— James P. Karen David E. Cowling JONES DAY 2727 N. Harwood Street Dallas, Texas 75201 Telephone: (214) 220-3939 Attorneys for Plaintiffs-Respondents Expedia, Inc., Hotels.Com, L.P., and Hotwire, Inc. /s/ Todd R. Geremia By: Lindsay M. LaCava MCDERMOTT WILL & EMERY LLP 340 Madison Avenue New York, NY 10173-1922 Telephone: (212) 547-5400 Facsimile: (212) 547-5444 -and- Catherine A. Battin Nathaniel L. Whalen MCDERMOTT WILL & EMERY LLP 227 West Monroe Street Chicago, Illinois 60606 Attorneys for Plaintiffs-Respondents Orbitz, LLC and Trip Network, Inc. (d/b/a Cheaptickets.com) /s/ Lindsay M. LaCava By: Joseph G. Tully ALSTON & BIRD LLP 90 Park Avenue New York, New York 10016 Telephone: (212) 210-9400 joe.tully@alston.com -and- Jon G. Shepherd ALSTON & BIRD LLP 2200 Ross Avenue, Suite 3601 Dallas, Texas 75201 Attorneys for Plaintiff-Respondent Travelocity.com LP /s/ Joseph G. Tully By: Thomas P. Lynch Jennifer Chavez LYNCH ROWIN, LLP 630 Third Avenue New York, New York 10017 Telephone: (212) 682-4001 Facsimile: (212) 682-4003 tlynch@lynchrowin.com Attorneys for Plaintiff-Respondent Society of Travel Agents, Inc. /s/ Thomas P. Lynch