The opinion of the court was delivered by: Rimm
This is a state tax matter arising under the Sales and Use Tax Act, N.J.S.A. 54:32B-1 to 54:32B-29, in which plaintiff seeks an exemption for the price paid for his boat, Venture III, under N.J.S.A. 54:32B-8.12 (§ 8.12). The statute which is the subject of this litigation reads as follows in pertinent part:
Receipts from sales... of... vessels primarily engaged in commercial party boat (head boat) sport fishing [sic] and subject to annual inspection by the United States Coast Guard... are exempt from the tax imposed under the Sales and Use Tax Act.
Plaintiff purchased the Venture III in Galveston, Texas on May 1, 1989 and paid $65,000. No sales tax was paid to the State of Texas. Shortly after the purchase, plaintiff brought the Venture III to New Jersey, and it has been in New Jersey since that time. As a result of the boat's use in New Jersey, defendant imposed a use tax of $3,900 by a final determination dated August 11, 1993, and plaintiff paid $7,965.10, the imposed use tax, interest and penalties.
Claiming that the use tax imposition was invalid, plaintiff filed a timely complaint in the Tax Court alleging that the Venture III is a commercial sportfishing boat, operating as a party boat, or head boat, and that it is exempt from use tax under § 8.12. Plaintiff also claims that the imposition of a use tax on the purchase of the Venture III is a violation of the Equal Protection Clause of the Fourteenth Amendment of the United States Constitution and of the Constitution of the State of New Jersey. In a third count, plaintiff alleges that the actions of the Director, Division of Taxation, constitute a violation of 42 U.S.C.A. 1983 entitling him to relief in accordance with 42 U.S.C.A. 1988.
At the time of trial, the parties stipulated that plaintiff's vessel meets the requirement of annual inspection by the United States Coast Guard under § 8.12 and that the vessel is "Coast Guard certified."
The Venture III has an overall length of forty-four feet. It has a walk-around handrail, two bathrooms, five or six benches in its cabin with a seating capacity of twenty-four, two tables, a step up wheelhouse, three radios, two radar sets, depth recorders, fishfinding equipment, a boarding ladder or T-ladder used by persons wearing fins to gain access to the boat, a bench on the aft area of the boat, a main bench in the center of the boat, and racks for scuba tanks. It is weatherproof, and there is fishing equipment on the vessel consisting of light tackle, bluefishing equipment and trolling gear.
The boat is docked in Belmar, New Jersey, and is put to several uses. It carriers fishermen or anglers, that is, persons who fish with rod and reel. It takes scuba divers who spearfish and take crustaceans by hand. It also engages in commercial trips. In plaintiff's own words, the primary use is by scuba divers. Plaintiff's letterhead contains the name of the boat, Venture III, and the statement "Charter Boat."
The primary use of the boat is by scuba divers. This use is accomplished by plaintiff's establishing a schedule for an entire summer season for use by divers' clubs or by shops engaged in the business of selling diving equipment. The club or dive shop arranges for the trip with plaintiff and pays for the trip for all the divers with one check made payable to plaintiff. The schedule of trips and brochures describing the boat's uses are distributed at the beginning of each season to dive shops, to dive clubs and to persons interested in scuba diving. Anyone interested in scuba diving from the Venture III contacts the dive club or the dive shop scheduled to use the boat on the given day, but would not contact plaintiff. Each such interested person then pays the dive shop or the dive club a fee, and the dive club or the dive shop then pays plaintiff with one check for the use of his boat for the day scheduled. "The individuals are paying their fares to whomever is using the boat for the day, and I get paid by one check." In effect, the boat is chartered by a specific dive club or a specific dive shop on each given day in accordance with the schedule.
The maximum number of divers that plaintiff takes on a trip is twenty-four if there is to be a one-tank dive by each person, that is to say, each diver will have one tank of air and when the diver uses up the air in the tank, the trip is at an end. If the trip is a two-tank trip, the maximum number of divers on each trip is eighteen. Accordingly, the activity involving plaintiff's boat is geared to diving and the use of diving equipment. An instructor, an assistant instructor or a representative of a dive club or a dive shop accompanies each group of divers.
The fee for the use of the Venture III is $700 per trip on weekends. Normally, there are two trips on Saturday and two trips on Sunday, one in the morning and one in the afternoon on each day, for a total of four trips at $700 for each trip. If a dive shop or dive club is unable to arrange for a full complement of divers for an afternoon trip, plaintiff may vary the fee. The dive shop or dive club then pays him a fee based on the number of divers over a minimum; but the dive club or dive shop still collects the money from the divers for the particular scheduled trip and pays plaintiff with one check. The check is payment to plaintiff by the dive shop or dive club for all the persons going on the trip scheduled for the particular dive shop or dive club. The dive club or dive shop also selects the destination for a given trip.
The schedule provides for only two-tank dives on Saturday and Sunday mornings, and the fee is $700 even if there are less than eighteen divers. One-tank dives are provided for only on afternoon trips, and the minimum charge is $300. A club or shop may arrange for a two-tank dive on a Saturday or Sunday afternoon and the minimum charge is $360.
Trips with less than the maximum number of divers are more common on weekday afternoons. In any event, this all depends on the shop's customers or the club's members and what arrangements the shop or the club makes with plaintiff. It is up to the dive shop or the dive club to make the arrangements for a two-tank dive or a one-tank dive and to advise plaintiff accordingly.
The dive shop charges the divers $60 or $65 per trip, and, depending on the number of persons going on the trip, the dive shop makes a profit by keeping whatever it collects above the fee it pays plaintiff. The dive shops also make money on each trip by selling the divers equipment and providing instructions for them.
By virtue of his method of operation, plaintiff rarely takes individual divers who come to him at the dock and offer to pay a fee for themselves, but he does occasionally have "open" days during the week on which "walk-ons" call him directly. According to plaintiff, by far, the bulk of his work involves the schedule that he makes up at the beginning of the summer.
When the boat arrives at the location selected by the club or shop which has arranged the trip, the divers "buddy up" with another diver and dive to a spot they select. Each diver makes his or her dive depending on what he or she wants to do. If a diver wants to take fish, the dive will be above the "bottom," or "right on the bottom" for lobsters. Most of the divers take crustaceans by hand.
According to plaintiff's testimony, the brochure which he uses to advertise his boat indicates three types of activities: scuba diving, fishing and commercial use. When asked why he makes a distinction between scuba diving and fishing, since many of his scuba divers catch fish or take crustaceans, plaintiff indicated that he does not take anglers when he takes scuba divers, and he does not take scuba divers when he takes anglers. In his words, scuba diving and fishing "don't mix."
The maximum number of persons who fish by rod and reel, or who are "angling" as plaintiff put it, is eighteen on a trip, and groups are usually arranged for by local businesses which pay $700 per day for a group of anglers. This is done on weekdays only. Plaintiff does not provide for individual anglers who come to his boat to pay an individual fee to go fishing.
Plaintiff also does commercial work on weekdays. This work consists of sewer pipe inspections by video; transporting persons for sewer pipe repairs; side-scan sonar surveys; video tapes of sunken ships for insurance companies; recovery of dead bodies; and artificial reef inspections and deployment of materials on artificial reefs.
During the course of plaintiff's cross examination, defendant had an exhibit marked which indicates the income plaintiff received from the operation of the boat, Venture III. The exhibit is set forth as follows:
YEAR AND SOURCE AMOUNT ...