On appeal from the Superior Court, Appellate Division, whose opinion is reported at 178 N.J. Super. 263 (1981).
For reversal -- Justices Pashman, Clifford, Pollock and O'Hern. For affirmance -- Chief Justice Wilentz and Justices Schreiber and Handler. Wilentz, C.J., and Schreiber and Handler, JJ., dissenting.
We reverse the Appellate Division's, 178 N.J. Super. 263, judgment substantially for the reasons expressed by the former Division of Tax Appeals and incorporated by reference in Judge Allcorn's dissenting opinion below. We hold that N.J.S.A. 54:32B-8(cc) does not exempt bus repair services from the sales tax imposed under N.J.S.A. 54:32B-1 et seq.
Respondents Body-Rite Repair Company, Inc. (Body-Rite) and Peter Picardi, t/a M & P Sales Co. (Picardi) are both in the business of repairing public transport buses owned and operated by regulated bus companies. The Director of the Division of Taxation (Director) performed audits on and issued notices of assessment against Body-Rite and Picardi in 1974 and 1976 respectively. The deficiencies revealed by these audits corresponded to the sales tax on bus repair services that respondents had failed to collect and forward to the State.
Respondents filed separate appeals from the deficiency assessments to the former Division of Tax Appeals. Their principal argument was that N.J.S.A. 54:32B-8(cc)*fn1 exempts repairs of public transport buses as well as replacement parts. The Director argued that the "repair and replacement parts" language in subsection 8(cc) should be interpreted as an exemption for parts only. Respondent Body-Rite presented the additional argument that it should be relieved of liability for any deficiency because it accepted exempt use certificates from its bus company customers in lieu of sales tax.
The Division of Tax Appeals rendered decisions affirming the Director's assessment against respondents. On the taxpayers' appeal, a divided Appellate Division reversed, holding that the subsection 8(cc) exemption encompasses all elements of bus repair, including labor and parts. Judge Allcorn, dissenting, would have affirmed the determination of the former Division of Tax Appeals. The case comes before us on the Director's appeal as of right. R. 2:2-1(a).
This appeal presents a question of statutory construction. N.J.S.A. 54:32B-8(cc) exempts from taxation "[s]ales of buses for public transportation, including repair and replacement parts therefor. . . ." [Emphasis added]. If the word "repair" in subsection 8(cc) functions as a noun, then the exemption encompasses repair services. If, however, "repair" functions as an adjective modifying the word "parts," then the parts, but not the labor, involved in bus repairs are exempt from the sales tax.
Respondents rely on the expert testimony of a linguistics professor and a bus repair technician. The professor testified that "repair" cannot function as an adjective in the phrase "repair and replacement parts" and that the term "repair parts" is not common usage in the English language. The technical
expert testified that the term "repair part" has no technical meaning and is not ...