On appeal from the Tax Court of New Jersey, Bergen County.
Approved for Publication April 29, 1997.
Before Judges Stern, Humphreys and Wecker. The opinion of the court was delivered by Humphreys, J.A.D.
The opinion of the court was delivered by: Humphreys
The opinion of the court was delivered by
The New Jersey Division of Taxation audited the plaintiff. A deficiency assessment was imposed which included sales and use taxes imposed on labels. Plaintiff paid the assessment. Plaintiff later learned that the Division had changed its policy and no longer imposed sales and use taxes on labels. Plaintiff's claim for a refund was denied by the Division on the ground that the claim was filed too late. The Tax Court affirmed the denial by summary judgment on basically the same ground. Plaintiff appeals.
After a careful review of the record and the arguments presented, we conclude that plaintiff may have equitable grounds for tolling the statute of limitations. We reverse and remand for a hearing on this issue.
Plaintiff affixes labels to its goods before shipping them to its warehouses and its retail stores. Additional labels, which specify the price, size and style of its goods, are affixed in plaintiff's retail outlets.
A field agent of the Division conducted an audit of the plaintiff's records in 1990. The period of the audit was from April 1, 1985 to September 30, 1988. As a result of the audit, the Division on February 28, 1991 assessed plaintiff some $743,000 in additional taxes. This assessment was reduced on April 8, 1991 to $463,000. The taxpayer paid the assessment on or about April 15, 1991. Apparently $99,000 of the additional tax liability was attributable to taxes imposed on the sale and use of labels during the audited period. This is the sum plaintiff seeks to recover.
The State sales tax is imposed upon "the receipts from every retail sale of tangible personal property, except as otherwise provided in this act." N.J.S.A. 54:32B-3. However, an
exception is made for identification and price labels. N.J.S.A. 54:32B-8.15. That statute provides:
sales or use of wrapping paper, wrapping twine, bags, cartons, tape, rope, labels, nonreturnable containers, reusable milk containers and all other wrapping supplies when such use is incidental to the delivery of any personal property are exempt from the tax imposed under the Sales and Use Tax Act.
The New Jersey State Tax News is a bi-monthly newsletter published by the Division. Airwork Serv. Div. v. Director, Div. of Taxation, 97 N.J. 290, 295, 478 A.2d 729 (1984), cert. denied, 471 U.S. 1127, 105 S. Ct. 2662, 86 L. Ed. 2d 278 (1985). In the March/April 1981 edition of the State Tax News, the Director of the Division set forth the following interpretation of the exception:
subsection 8.15 of the New Jersey Sales and Use Tax Act (N.J.S.A. 54:32B-8.15) concerns wrapping supplies and exempts from taxation, "sales or use of wrapping paper, wrapping twine, bags, cartons, tape, rope, labels, nonreturnable containers, reusable milk containers and all other wrapping supplies when such use is incidental to the delivery of any personal property." Labels upon which the ultimate user will imprint prices and other descriptive information relative to the product are subject to tax since such use is not incidental to the delivery of the product. Exempt labels are of a sort which may wrap the tin or carton in question and are delivered with the product as an aspect of the item's packaging.
[State Tax News, March/April 1981, at 35 (emphasis added).]
The field agent relying on the above opinion took the position that the labels used by ...