Eric Creizman Examines Arbitrability Limits in New York Sales Tax Disputes in New York Law Journal Article

Partner Eric Creizman authored an article in New York Law Journal titled, “The Joinder Problem: When Sales Tax Claims Are Not Arbitrable,” examining whether vendors may use arbitration to recover unpaid sales tax or seek reimbursement from customers. The article analyzes New York Tax Law § 1133(a), which grants vendors the right to recover unpaid sales tax from customers, but conditions that right on joining the New York Department of Taxation and Finance (DTF) as a party. Courts and the Tax Appeals Tribunal have treated this joinder requirement as a substantive condition precedent to recovery, reflecting the State’s central role in administering and determining sales tax liability.

Because the New York Department of Taxation and Finance (DTF) cannot be compelled to participate in private arbitration, the statutory framework suggests that vendor-initiated claims seeking recovery of New York sales tax are not arbitrable.

Although the New York Court of Appeals has not resolved the issue, the statutory framework and existing authority suggest that contractual arbitration clauses cannot override mandatory requirements governing New York sales tax collection and enforcement.

For businesses and litigators confronting New York sales tax disputes, forum selection should be evaluated at the outset, as it may shape the trajectory of the dispute.

A PDF of the article is provided below and is available here for Law.com subscribers.