Text of Article Contained in Newsday, August 25, 1996

Small-Business Tax Crusade | By Caryn Eve Murray

TAXATION WITHOUT representation hardly seems like an issue for modern-day business accounting. But by his own admission, tax attorney Barry Leibowicz has rarely been one to shy away from any kind of battle with injustice.

And so it is that the Queens College accounting professor – who fine-tuned his sense of justice in the 1960s, as a law student working with the Connecticut Civil Liberties Union – recently placed himself in the middle of a tax crusade on the part of struggling small business owners.

Leibowicz prodded two state lawmakers from Suffolk County to reshape a portion of New York tax law to extend business owners’ rights to a hearing when they believe the state has overassessed the amount of sales tax owed. New York last year collected some $13.5 billion in sales tax statewide, with the state’s share of that sum nearly $6.7 billion.

Signed by Gov. George Pataki last month, the new law takes effect in January, giving the state’s estimated 600,000 sales-tax-collecting businesses of all sizes the long-sought-after right to challenge their sales tax assessment beyond the present time limit.

Under current law, unless the business files its protest within 90days of receiving the assessment, it forever forfeits the ability to be heard before the state’s Division of Tax Appeals. Even if they are right. Even if they’ve been overassessed. Even if they can prove it.

“The idea,” said Leibowicz, “is to give a guy the right to show he doesn’t owe any money. Don’t bar him from the courthouse.”

In other words, “if the tax department said they underpaid their sales tax and they never had the time to make their case, they could lose a couple thousand here, a couple thousand there,” said Bruce Geiger, an aide to State Sen. Owen Johnson (R-Babylon), who sponsored the bill along with Assemb. Paul Harenberg (D-Bayport).

The new provision is expected to extend the rights already existing under state and federal income tax law to those businesses that are entrusted with the collection of state sales tax. That will make such hearings much more accessible to owners of such businesses as, say a small deli in Farmingdale, a stationery store in Flushing, a furniture outlet in Copiague or a gas station in Sunnyside – which, incidentally, was the very sort of business his father owned and operated while Leibowicz, now 48, was growing up in Forest Hills.

“This applies to anyone who pays sales tax in the state of New York, all stores,” said Stephen Liss, Harenberg’s counsel. “But the feeling is that Macy’s has the wherewithal to hire [accountants] and they can take care of this and protest in a timely manner. It is the small guy who gets caught in this. And it was an unfair trap. A period of 90 days is short, especially for small businessmen.”

Not surprisingly, it was the plight of one of Leibowicz’ clients, a Suffolk County small businessman besieged with a host of state tax woes, that led him to call for the new measure. Ironically, however, the 90-day protest window was not one of his client’s panoply of troubles. That thorny subject only entered the discussion after Leibowicz contacted state lawmakers on behalf of his client.

One tale of tax dilemmas led to another, “and then this subject came up in discussion,” Leibowicz said. “I said, basically, the state gets to keep this money right now because of this technicality.”

Worse yet, said Leibowicz, unlike most other tax debts, even owners of incorporated businesses, which have limited personal liability, remain liable for sales tax remittance – thus their personal assets can be seized, if necessary. Unlike income tax, sales tax is considered a “trust,” something a business collects on behalf of state and local government.

Intrigued, Liss asked Leibowicz to write a letter, then a first draft of the proposed legislation.

“Surprisingly, yes, legislation really does work this way,” Liss said. “You’re talking eighth grade civics, but it really does work this way. It can begin with a constituent who writes to you and says something and we say to them, `Well that seems odd.”

“Writing a letter is a powerful thing.”

The measure got added power through the business community’s united voice. Once the language took shape in both houses of the Legislature, it quickly gathered endorsements, including that of the Long Island Association.

“We were pretty involved in this one, it was a big concern for our membership,” said Valerie Zurblis Scibilia, communications director for the 3,000-member LIA.

Lately, the attorney with the lifelong sense of justice has been feeling a mixed sense of surprise along with satisfaction.

“It’s pretty exciting to me,” Leibowicz said. “I never thought one person could have such an effect on legislation.”

Thus, another era of taxation without representation was put to rest. And even if history doesn’t necessarily record this bloodless, quiet revolution, hundreds of thousands of New York businesses will surely take note.