On appeal from the Tax Court of New Jersey, whose opinion is published at 9 N.J. Tax. 345 (Tax Ct. 1987).
Furman and Brody. The opinion of the court was delivered by Brody, J.A.D.
Plaintiff, a commercial photographer, contends that he is entitled to a statutory exemption from the payment of a sales or use tax on the color film used in his business. The Tax Court rejected his claim when he challenged assessments for the period April 1, 1977 to March 31, 1980. Another part of this court affirmed that determination substantially for the reasons given by Judge Andrew in his published opinion. Hospital Portrait Service v. Taxation Div. Director, 6 N.J. Tax. 305 (Tax Ct.1983), aff'd o.b. 7 N.J. Tax. 431 (App.Div.1984), certif. den. 101 N.J. 235 (1985). The present appeal is from a Tax Court judgment entered by Judge Andrew again denying plaintiff's claim, this time raised in plaintiff's challenge to assessments for the later period January 1, 1982 to December 31, 1984. Judge Andrew's opinion is published at 9 N.J. Tax. 345 (Tax Ct.1987).
Plaintiff's main argument is that his first case was wrongly decided. The Taxation Division Director's main argument is that plaintiff is barred by the doctrine of collateral estoppel from renewing his contentions. Judge Andrew agreed with the Director and also reaffirmed the correctness of his rulings in the first case. We affirm on the ground that collateral estoppel bars the present action.
The doctrine of collateral estoppel is generally applied against a taxpayer when he challenges the same kind of assessment that he previously challenged unsuccessfully when it had been levied for a prior period. See e.g. Bass River Tp. v. Hogwallow Inc., 182 N.J. Super. 584, 585-586 (App.Div.1982). The doctrine is not applied where there has been an intervening change in significant facts, or there has been an intervening change in the statutory, regulatory or judicial law that favors
the taxpayer, or where there are "other special circumstances [that] warrant an exception to the normal rules of preclusion." Montana v. United States, 440 U.S. 147, 155, 99 S. Ct. 970, 975, 59 L. Ed. 2d 210, 218 (1979). Those exceptions are justified because it would be unfair to treat one taxpayer differently from others of the same class solely because he had once suffered an adverse determination when the facts or the law were different. Thus, ". . . if the very same facts and no others are involved in the second case, a case relating to a different tax year, the prior judgment will be conclusive as to the same legal issues which appear, assuming no intervening doctrinal change." Commissioner v. Sunnen, 333 U.S. 591, 598-602, 68 S. Ct. 715, 720-721, 92 L. Ed. 898, 906-908 (1948).
The operative facts in the present case are identical to the operative facts in the first case. Plaintiff purchases substantial quantities of color film which he uses in his New Jersey business. His representatives take photographs of newborn infants at hospitals throughout the country and in foreign countries. A contractor develops the film in New Jersey and makes photographic prints from the negatives. Plaintiff sells the prints, retains the negatives for three years and then destroys them.
Now, as in the first case, plaintiff contends that his purchase and use of film are exempt under two provisions of the Sales and Use Tax Act, N.J.S.A. 54:32B-1 et seq. Those provisions are:
Receipts from sales of materials, such as chemicals and catalysts, used to induce or cause a refining or chemical process, where such materials are an integral or essential part of the processing operation, but do not become a component part of the finished product are exempt from the tax imposed under the Sales and Use Tax Act. [ N.J.S.A. 54:32B-8.20.]
Receipts from the following are exempt from the tax imposed under the Sales and Use Tax Act:
a. Sales of machinery, apparatus or equipment for use or consumption directly and primarily in the production of ...