On appeal from the Tax Court of New Jersey whose opinion is reported at 3 N.J. Tax 164 (1981).
Milmed, Morton I. Greenberg and Furman. The opinion of the court was delivered by Milmed, P.J.A.D.
[188 NJSuper Page 110] The Director of the Division of Taxation (Director) appeals from a judgment of the Tax Court which, in essence, reversed his determinations that plaintiff Del Val Pennysaver, Inc., and its printer Custom Printing, Inc.,*fn1 were liable for sales taxes on purchases by plaintiff from the printer of certain printed materials. This appeal and two other appeals pending in this court involving the same issues were heard together.*fn2
The essential facts may be briefly summarized. Plaintiff publishes, in ten editions and under the name Pennysaver, printed shoppers guides which it distributes to the public without charge. The editions are designed to serve designated geographical areas in Burlington and Camden Counties. They contain mainly advertisements from local businesses, some classified advertisements and some news of local events and services. Plaintiff's revenues are derived from the advertising fees charged to advertisers.
From 1972 through the assessment period, i.e., July 1, 1974 to June 30, 1976, plaintiff used Custom Printing, Inc. (Custom Printing) then an independent printing firm, to do all of the printing involved in producing the Pennysavers. That firm supplied the printing and materials. Defendant Director determined that the printer's sales to plaintiff were subject to the tax imposed by the State's Sales and Use Tax Act (N.J.S.A. 54:32B-1 et seq.), particularly N.J.S.A. 54:32B-3(a) which imposed a tax of 5% on "[t]he receipts from every retail sale of tangible personal property, except as otherwise provided in [the] act." A total of $15,819.65 in taxes, interest and penalty, was assessed against plaintiff*fn3 and paid under protest. Plaintiff sought a refund and appealed from the Director's determination.
The appeal was heard in the Tax Court with but one witness, the president of plaintiff corporation, testifying. The parties stipulated that the subject of the sale from Custom Printing to plaintiff constitutes tangible personal property within the meaning of the statute. The Tax Court judge who heard the matter found, in an opinion reported at 3 N.J. Tax. 164 (Tax Ct.1981), that "the event claimed to be taxable by defendant is a sale of tangible personal property for the purpose of resale and exempt from sales tax under the New Jersey Sales and Use Tax Act." A judgment was thereupon entered in the Tax Court holding that "the transactions in dispute were sales for the purpose of
resale and exempt from sales tax," and this appeal followed. We disagree with this holding of the Tax Court. We reverse the judgment under review and reinstate the determinations and assessments made by the Director in this matter.
The Tax Court judge examined and commented on three of plaintiff's contentions. Its claim to exemption from the sales tax by reason of N.J.S.A. 54:32B-8(e) (repealed,*fn4 now N.J.S.A. 54:32B-8.5*fn5) which exempted receipts from sales of "newspapers, magazines and periodicals," was properly rejected since that exemption was intended to apply to receipts from the ultimate sales of these items to the general public, not to the receipts from transactions between printer and publisher. Also properly rejected by the Tax Court judge was plaintiff's claim that the subject transactions constituted sales "of advertising to be published in a newspaper" and thus were exempt pursuant to N.J.S.A. 54:32B-8(ee) (repealed,*fn6 now N.J.S.A. 54:32B-8.30*fn7). He pointed out that
It is the Tax Court judge's analysis and determination of plaintiff's claim that "free distribution of the Pennysaver to its readers constitutes a resale and thus the transaction between Custom Printing and Del Val is a sale for resale and not subject to tax," that defies logic, flies in the face of both the statute and our determination in Princeton Phone Book v. Taxation Div. Director, 145 N.J. Super. 589 (App.Div.1976), certif. den. 73 N.J. 66 (1977), and mandates a reversal of the Tax Court judgment
under review. Despite the fact that plaintiff distributed the shoppers guides to the public free of charge, the Tax Court judge reasoned that since the cost of circulation is one of the factors involved in plaintiff's determination of the charges to be paid by its advertisers, these advertisers pay for the ultimate distribution of the Pennysavers to the reading public. From this he concluded that the subject transactions between Custom Printing and plaintiff were sales of tangible personal property for the purpose of resale and therefore exempt from the Sales Tax pursuant to N.J.S.A. 54:32B-2(e), "the consideration for the resale [coming] from someone other than the consumer." In so concluding, he failed to take into account that plaintiff was performing an advertising service and that the transfer of the printed matter to the public was part of that service and not a "resale" of the materials themselves.
The Sales and Use Tax Act provides, among other things, for a sales tax on "[t]he receipts from every retail sale of tangible personal property, except as otherwise provided in [the] act" and on "[t]he receipts from every sale, except for resale," of ...